Good morning, ladies and gentlemen, and welcome to the Simon Property Group third quarter 2017 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host for today's conference, Mr. Tom Ward, Senior Vice President, Investor Relations. Sir, you may begin.

Thank you, Bridget. Good morning, everyone, and thank you for joining us today. 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; Andy Juster, Chief Financial Officer; and Steve Broadwater, Chief Accounting Officer. 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 the risk factors relating to those forward-looking statements. Please note that this call includes information that may be 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 website at investors.simon.com. For our prepared remarks, I'm pleased to introduce David Simon.

Good morning. The last couple of months obviously have been challenging as the country has endured the devastating impacts of natural disasters and tragedies, which have impacted millions of people across the country including many of our Simon employees and their families. Our thoughts and prayers go out to all affected. There has been significant disruption from Texas to Florida, Puerto Rico and California. And due to the dedication and heroic efforts of our field team members, thankfully, all of our personnel got through these events. Across all of our platforms, we closed 45 of our centers for combined 412 days due to natural disasters including the one that occurred in May at Colorado Mills due to a hailstorm. All of our centers in Texas and Florida had been back to normal. Our centers in Northern California now back to normal, operations as well after the horrific wildfires there. And we expect Colorado Mills, which has been closed since May to open in time for the holidays. Our two centers in Puerto Rico are currently not open and we are in the process of making repairs where possible. We expect full restoration of these centers to take some time given the damage to Puerto Rico's infrastructure and availability of building materials. We are fully insured for this event including business interruption insurance. We currently expect the closure of Puerto Rico centers to impact our FFO by approximately $0.03 in the fourth quarter of 2017 and this reduction is currently included in our guidance. I couldn't be more proud of the Simon team who have demonstrated courage, resilience, perseverance and how they professionally responded to these unprecedented events. Now, let's talk about the third quarter. We had another very productive quarter and are very pleased with our financial results. Results in…

Thank you. Our first question comes from the line of Alexander Goldfarb with Sandler O'Neill. Your line is open. Alexander Goldfarb - Sandler O'Neill & Partners LP: Good morning out there.

This is not that far out there. We're in the Midwest. It's not like we're way out there, okay? Alexander Goldfarb - Sandler O'Neill & Partners LP: Well, that would be...

There is activity for all of those investors, west of the Hudson. I just wanted to point people, I want you to point that out. Alex, what can I answer for you? Alexander Goldfarb - Sandler O'Neill & Partners LP: Well, thank you for that. So two questions. First, just in Puerto Rico, can you just tell us sort of a breakout number of tenants who are paying, or said differently, the number of tenants who aren't paying? And then on the business interruption insurance, maybe for there or elsewhere, what the impact is and if we should expect anything into next year or if the $0.03 is really just in the fourth quarter this year and next year we shouldn't expect any impact?

Yeah. I'll give it to you, really very high level. So, we've taken a deductible. We had a deductible expense that went through the P&L in the third quarter for Florida and Puerto Rico. After that deductible, we're fully insured. In the fourth quarter, there is nobody paying rent at this point. We don't collect business insurance until all of that is resolved. And they won't begin to pay rent until we restore the building. And I wish I could give you a sense of that, but it's really going to depend on the next couple of months because there is a lot going on down there and power needs to be restored permanently. And as I said, we're doing our repairs and restoration work concurrently, but it's going to take some time to get it going. So, that $0.03 is what we expect. That would have been essentially our net operating income for those two properties in the fourth quarter. It could drag into 2018. However, if it does, we would expect some of that eventually to be recouped through the BI, but we can't book the BI until it's actually cash collected. And so, when we do our earnings and 2018 guidance, we'll have a better idea of exactly the impact. Again, I'm more focused on the tragedy at Puerto Rico. At the end of the day, if you extrapolated the $0.03, that's less than 1% of our business. So, it's obviously immaterial. But we're more interested in what's going on there. If you take out our redemption here, you know that we earn well over $11.50. So if we're at $0.11 or so, that's basically less than 1%. Even you, Alex, can do that math, right? Alexander Goldfarb - Sandler O'Neill & Partners LP: Yes, although I do have a colleague for backup if need be. Then the second question is, in the other income breakout, the lease settlement income jumped and then marketable securities gains. Could you could just provide a bit more color? And then on that lease settlement, was any of that from Teavana, or is that still outstanding?

None of that is from Teavana and there's been a little bit more lease settlement income this year. Again, that's not in our comp NOI. As you know, we did own Seritage stock. We did sell that. And I would only point out for those of you that – I would hope most people would study our P&L without making statements, is that we also had more than offsetting what I'd call unusual expense on the expense line, all of that you can see in our 8-K, in our P&L. So I think like this is all washes. If anything, it's a little bit more negative, but that's up for you guys to determine. And we outperformed even with the deductibles, even with the extraordinary expenses that we incurred that were higher than what I'd call the higher than normal lease settlement income, and obviously the Seritage marketable securities gain. It's a gain by the way, not a loss. Let's keep that in mind too. Alexander Goldfarb - Sandler O'Neill & Partners LP: Okay. Thanks, David.

And our next question is from Christy McElroy with Citi. Your line is open.

Hey, good morning. It's Michael Bilerman here with Christy. David or Rick, can you just talk about occupancy in terms of the trajectory as we move into the fourth quarter and into next year? And right now in the third quarter, you're sitting about 100 bps over last year, which was a record high. You got to 96.8 bps by the fourth quarter, you're at 96.3 bps in the third quarter. How should we think about the trajectory into the fourth quarter relative to that spread, and how does that line up as we move into next year from an occupancy perspective?

We should have improvement in the fourth quarter. That's number one. We're not going to give you a number. Number two is we give you guidance in 2018 in February, but the reality is the only reason why it's down is we've had some extra bankruptcies this year. We had a bunch in 2015. We had less in 2016. We had a bunch in 2017. The portfolio is in excellent shape. So, we'll continue to improve upon that. And we've done more leasing this year. I don't have the exact number. Rick might have the total number. But we've leased a lot of space this year, what, over...

7 million square feet.

No, it's more than that, but the point is – and we're dealing – the issue with bankruptcies is you're at the whim of the court. So you have a lease, they can cancel it at a moment's notice, and it does take time to lease. But we've leased over 10 million square feet this year. That's a lot of leasing and we'll continue and improve. And like I said, I think we'll have an uptick in the fourth quarter.

Right. I was wondering whether that year-over-year spread is going to continue to widen. So you've gone from 40 basis points, 70 basis points to 100 basis points relative to last year given some of the bankruptcies. How we should think about how the fourth quarter is shaping up, whether that 100 basis points stays flat or whether it narrows as people start to take the space?

We had a lot of bankruptcies go through the third quarter. You can't lease space in a month or two. It's certainly harder to lease space to open up for the fourth quarter once you get that space back in the third quarter because you have build-out and so on. But like I said, we have an uptick, and it's essentially all on the margin the way I look at it.

And then second question in terms of capital, and you talked about how strong the balance sheet is and how much liquidity. I noticed that you didn't buy back any shares in the third quarter. Can you just elaborate a little bit about why that was the case and how that differed relative to what you did in the first half?

The simple answer to that is we've got – we're very close to some significant redevelopments that we're excited about, and we are very conservative. So we're creating a pile of financial power that we want to take advantage of, and we've got a little bit more redevelopment that you'll see in the next, I don't know, month or two. That's really exciting for the portfolio, and we figured we might as well hoard some cash. And actually, we also love raising the dividend. I love raising the dividend 10% a year. I really like that. So between the redevelopment, raising the dividend, having a balance sheet that cannot be compromised, with significant firepower, I know it's all ignored right now, but I don't ignore it, and I'm going to rely on my judgment that that's stuff that I shouldn't ignore. So I know no one wants to pay attention to it. I know nobody cares. But raising that dividend 8%, 10%, 12% a year, having a hoard of cash to put back in the portfolio of accretive returns is really exciting, and having a balance sheet tried, tested, ready to go to work is really a competitive advantage that I really like, and that's what we're going to do. So this dividend is going up, the earnings are going up, the balance sheet is going to get stronger. That's the model we got. That's what we're doing.

Okay, all right. Thanks, David.

Sure.

Our next question is from Craig Schmidt with Bank of America. Your line is open.

Thank you. I noticed on the development activity report that the Edmonton project is listed under Mills. I wondered if this indicates a different leasing approach that maybe is broader in value scope than just outlets?

It will be. It's always been designed as Mills. Our partner there actually owns The Mills in Toronto and in Vancouver. And this has always been organized as a Mills. It's enclosed. It's what I'd say bigger in size. So it's always been kind of – we consider it more Mills like with the boxes and the outlet and the entertainment uses.

Okay.

So our partner is the owner of Vaughan Mills and the one that they've just opened in Vancouver as well.

Great, that's encouraging.

Yes.

And then it seems like you may be taking a change in direction on the new redevelopments, maybe more densification, or is that something that I just need to wait the next couple of months for?

I think we've got a terrific portfolio set to do. So, the answer is yes, Craig. I think you'll see more and more stuff from us along those lines. Obviously, we're not going to do it just to do it. The idea is to increase the value of the portfolio. But Rick and I went over plans yesterday at King of Prussia. King of Prussia is basically a $2 billion asset. We had a Penney that just didn't fit there with Neiman and the Nordstrom and the Lord & Taylor and the Bloomingdale's at all. You know the center very well. It's very big. We didn't need another department store. They've closed their store there. We could have done traditional, but the fact of the matter is the pivot of what's the front and what's the back of that center has evolved over time. And we have the ability for a hotel, apartments, office, and complementary retail with outdoor work and play space. That's going to be unbelievable for that community and, listen, we've got to do it. We got to get it done. We've got to open it. But I think that a lot of folks are missing those kind of opportunities and are kind of – you cannot, one thing you cannot do is replicate the real estate that we have and that's unique unbelievable opportunity. It's going to be a significant investment. It will be our Hudson Yards version for suburban, but wealthy King of Prussia. It's a great market. It's a growing market. That's what having good real estate is all about and it's underappreciated, but I get it. We've got do it. We've got to prove it. But if you've seen some of the mixed-use stuff that we've done over the past few years, you've seen that our core competency is increasing in this area. So again, we will devote capital to those kind of projects that are very exciting and we'll take that $2 billion asset to, I don't know, $3 billion, $3 billion plus, why not, right?

Sounds good.

Thank you.

Thank you.

Sure.

Our next question is from Steve Sakwa with Evercore ISI. Your line is open.

Hi. Good morning.

Hi.

Hi. Just a couple of quick things, David. One, I think you mentioned that you did have a deductable hit in the third quarter, but I don't think you quantified it. Could you give us that number?

$2 million.

Okay. Thank you.

It's $1 million per occurrence. The flood in – Harvey and all the flooding did not reach the deductible expense. We had other expenses, but not up to that number.

Okay. Thanks. And then I also noticed on that other income page and expense page, professional service fees were up quite significantly, and I also noticed that the regional and home costs were down. I just don't know if you can provide any commentary around the large jump from professional fees in the quarter?

Well, it's mostly associated with legal expenses. As you know, we had this situation with Woodbury. You know our point of view in terms of how we felt about that, but they were significant, significant expenses. That, to me, is a one-time expense. And then obviously we're going to be – we're running our business as efficiently. We have the highest margins in the business. We've got the best overhead percent of revenue in the business. We take pride in that, that we have the highest margins. We take pride that we have the lowest overhead, again something that's underappreciated, and we'll continue to do that. We did not have an LTIP for the senior dudes because we knew this year would be a little bit tough. It's actually coming out better than we thought. We're hitting every number. We've got best growth in the industry. We've got the best balance sheet. Our operating metrics are – sales were up. All of that is pretty good. But you know what? We thought it might be a little tough. And so we tightened the screws, and that's what I like about my team. They're willing to tighten with me, and we tightened.

Okay. That's good. And then I guess just lastly on that 10 million feet that you talked about leasing, I don't know if you or Rick could maybe provide a little detail, just broadly by category. Presumably, a lot of that was other things besides apparel. But can you just kind of help us give a breakdown of maybe how much was traditional apparel, how much was home, food, and just some of the broad categories to show the diversity of leasing?

This is Rick. In our new leases that we have been signing, the percentage devoted to apparel is down about 20%. The percentage devoted to food and entertainment is up about 20%, and the number is over 11 million square feet this year over our three portfolios, which is malls, mills, and premium outlets.

Okay, thanks. That's it for me.

Thank you.

Our next question is from Jeremy Metz with BMO Capital Markets. Your line is open.

Thanks. Hey, guys. I just want to say being from the Midwest, I agree, it's actually not that far out there.

Right.

I had a question for Rick. I was just wondering if you can give us some high-level color here on the sales and traffic trends of the premium outlets versus the malls. And then maybe, just as a follow-up, can you comment on your watch list and any changes there? Maybe digging in a little bit, are you worried that we could get another bankruptcy or adverse retailer event here late in the year, whether it's a Charlotte Russe or anyone else of the troubled retailers out there?

We're not going to comment on individual retailers. That's not our place. Our premium outlet traffic is up. The mall traffic is stable. We're not seeing the kinds of trends that have been publicly reported by all these algorithms and black box things that have been out there and talked about in the trades. It's very stable and frankly, again under-reported, 2017, yes, there was a lot of bankruptcies. But frankly, we're also having many of our tenants get reorganized; emerge with very, very good balance sheets, and in the last several months, you've had Gymboree, Payless, rue21, all come out with restructurings with very stable balance sheets and growth strategies.

Yeah. On the occupancy that Mike Bilerman asked which I probably should have mentioned, I mean part of the dip in occupancy that we have is also we've added new product to the portfolio. So, they obviously, both in redevelopments, expansion space as well as new developments, they are never up to or 95% and I don't know what that number is...

About 30 bps impact.

Okay. So it's about a 30 basis point impact and I probably should have answered that when Michael asked in any event. So part of that is just the portfolio is expanding and you tend not to be initially at 100% occupancy when you open. But yet, once the space comes in, the space comes in our number and it is what it is.

Okay, I appreciate that. And I guess, David, I was just wondering if you could just kind of talk about your appetite here for disposition, specifically kind of the lower end of the portfolio. You've talked about NOI-weighted results. So obviously further highlights how much of the revenue and value is really driven by the top. So as I think about the 13 – I think you have about 13 assets in the other bucket and maybe just more broadly some assets where, for whatever reason, the market or maybe demographics are moving against it. Does it make sense to sell those sooner versus later, or just how are you thinking about pruning the bottom from here?

Look, I think it's a question of your assets that don't fit with our portfolio, we generally have been a seller or spinner-offer of assets. The market is not great. On the other hand, I think we'll have at least a sale potentially by yearend or early next year. But it's a very simple – there's no asset here that we lose sleep over or that we have consternation over. And it's a function of – if we get the right price, we'll sell. If we don't and the present value of those cash flow is greater than the price, I mean – to me cash flow is still – there is nothing to be embarrassed about. I know this world doesn't want to focus on cash flow, but there's nothing to be embarrassed about cash flow. And I can take that cash flow and invest in something that's higher growth and that's okay. I mean, that's kind of what I think people like me should think about. But we'll continue to prune the portfolio. We're in pretty good shape, if the value is right, but we're not going to do anything that's a fire sale because we really have no need to – we can operate effectively. The thing about us is we can operate effectively from luxury centers to terrific suburban malls, west of the Hudson, to outlet centers, to the Mills product, to Europe, to Asia, to mixed-use properties. I mean, we have the ability – I mean, the fact – if you had only seen how this company dealt with these devastations, our multiple would go up, okay? You don't see it, but I see it. We had crews of people. We chartered plane. We had crews of people go down to Puerto Rico. We had…

Thanks for your time.

Thank you. And our next question is from Vincent Chao with Deutsche Bank. Your line is open.

I think he called uncle. Next.

And our next question is from Caitlin Burrows with Goldman Sachs. Your line is open. Caitlin Burrows - Goldman Sachs & Co. LLC: Hi. Good morning. I was just wondering if you could talk about on the sales side, you guys did have a nice 3% increase this year year-over-year which is the strongest since 2013. So I was just wondering if you could comment where in the portfolio that was, if it was more the international tourists, high volume centers coming back or if it was across the board?

Simply put it's basically across the board. And you've got to remember, September, we've dealt with a lot of crap. So I mean I was really pleased with that number. It's across the board. And I think that there's definitely been a pause with all these natural disasters, but I mean unfortunately they hit us hard from Texas to Florida. Don't underestimate the Las Vegas impact. Thankfully we had nobody involved. But it's a tragedy that changes the psyche of the consumer for a period of time. I think I heard from Southwest Airlines that their flights down to Vegas are down. It will come back, but we had to deal with that. And unbelievably, I mean we've never had malls where we had to shut because of fires. The untold natural disasters, what's happened in Northern California, it's been unbelievable. We had our partner in a mall there whose own home burned down. I mean just tragic, tragic stuff. And then obviously, the Puerto Rico situation is at another level. So, even with all that said, our sales came in pleasantly surprised. I think the consumer mood is better. Look, we can talk online or not online, the reality is, I saw something interesting, how physical books outperformed. Electronic books, who knows, but maybe that's a trend. I think you'll see that as well. People get bored despite all of the rhetoric out there, you would expect me to say that. But generally sales and traffic are not bad, pretty good absent obviously these things going on and the tragedies of this unfortunate circumstances that we've had to deal with. And again, I wrote a letter to the company. I can't tell – and I don't know how many people listen from the company on the call, but I can't tell you how people have stepped up in this company dealing with these crazy, crazy events. Proud of the organization. Caitlin Burrows - Goldman Sachs & Co. LLC: Thanks for that response. And then I was wondering on recent outlet development projects. Denver is under construction. It opens about a year from now. I'm wondering how the pre-leasing is going there and how that trajectory kind of a year from opening looks at this point versus I know Norfolk opened earlier this year and others of the past.

Great. I think that's going to be great. Denver is a great city. The growth there is phenomenal. It's a great site right on I-25. We are ahead of the outlets, took a bunch of retailers there last month. I think, we've got a great design. I think, it will be a great addition to the community there.

And I would say to you that there is still considerable demand in the outlet sector. Those tenants are growing and are actively looking for new opportunities. So, Norfolk now is performing very well and has got everyone open. And it's a lovely physical plant right on the water. We incorporated outdoor dining there. I mean, the – I would hope you go visit our product, Clarksburg, because the level of design and customer amenities is substantially elevated along with the tenant mix in these properties. Caitlin Burrows - Goldman Sachs & Co. LLC: Oh, that's great to hear. Thanks.

Thank you.

Our next question is from Michael Mueller with JPMorgan. Your line is open.

Thanks. Hi. David, I think you said your NOI-weighted spreads were 17% in the quarter. When I look at my notes from last quarter, you talked about 14% spreads. Is that an apples-to-apples methodology so they actually increased in the third quarter?

Yes, sir.

Okay. And I guess on the development pipeline, about $1 billion right now. Where do you see that number trending over the next two years or three years?

I think it's got the potential to go up, frankly, because, as you know, we're going to have some opportunities like the King of Prussias of the world that are going to be really dramatic and change the face of some of these great pieces of real estate. So I think you'll see more from us in this area, even this year, that would tend to suggest that that number could be higher. Look, we are very focused on the redevelopment part of our business, investing in our product. We're actually in very good shape there. We've done a lot, as you know, since 2010. And we're still very optimistic on – we'll announce at least one more expansion of a material asset this year yet, Rick, probably, right...

There should be.

...with really good tenant demand. We'll announce another major mixed-use development at some point along the lines of King of Prussia that I talked about. So I think we've got good stuff working.

Got it. And I guess maybe for a second going back to the first question in the spreads again, going from 14% to 17%, does anything jump out over the last three months in terms of what would have caused that increase?

No, we have such a large portfolio that they would have to jump really high to change a number.

Got it, okay. That was it, thank you.

Yeah, no worries. Thank you.

And our next question is from Vincent Chao with Deutsche Bank. Your line is open.

Hey. Good morning, everyone. I think I had a little headset technical issue there before. But, David, you talked a lot about the dividend and the importance of the dividend, and obviously you increased it this quarter and alluded to increases in 2018. I know a lot of this has to do with taxable income and REIT rules and things like that. But I was just curious. As the markets continue to not really pay attention to the discount between the private market values versus your own stock, would you consider increasing the dividend more than you otherwise would in 2018 to continue to give back some of that return to shareholders?

I think the simple answer to that is yes. If you look at where we are versus what we paid, obviously to keep increasing that level off a bigger base, that's a pretty big number. And I think the simple answer is yes. We have the ability to continue to grow our cash flow. And like I mentioned, I just encourage people to look at our operating income for the third quarter. It was $1 billion – operating income essentially being FFO, net income plus depreciation, more or less. It's $1.035 billion. Nobody gets excited about that number, but guess who does?

Guess who does?

I do. And you put it in comparison to other companies and some of their multiples, we are I think truly undervalued. But I'm not going to – Mr. Market is Mr. Market. We can only – I think a good way to demonstrate that is by raising our dividend on a consistent basis. We'll continue to do that.

Okay, thanks. And then just maybe going back to your comments about the psyche of the consumer, obviously there's been a lot of unusual things going on in the country here and with the natural disasters and Las Vegas, as you mentioned. Overall traffic sounds like trends are stable. But I'm just curious if the traffic trends in Florida, Houston, and Vegas as well, sounds like maybe not Vegas, but Florida and Houston, have they returned to normal?

It's interesting. What happens – unfortunately, we've seen this before. What happens it does – and I will say this to you. Prior to this like string of natural disasters, the business was actually – sales and traffic were up. They were good. And what happens generally is you lose the week before because there's the preparation and then you lose two, three, four weeks after because obviously people are not yet back to normal. Houston, having just visited Houston, we didn't really have that much property damage, but there was unbelievable amount of damage to that city. Now, give it to Houstonians and Texans, they come back fast and hard. Florida probably is wild because it was East Coast, West Coast, East Coast, West Coast. That hurricane couldn't make up its mind where it was going to hit. But the reality, it does slow traffic and sales. Florida is back a little bit more normal. I think Houston took a little bit longer to get back to normal given the amount of devastation there. Vegas, we were having a great September in Las Vegas, great. I think that's going to take some time. What happened there is horrific. But we'll see. It's so hard to predict, but these things, they don't just snap back day one. It does take time for people to get in their normal pattern. And I don't blame them, frankly. They've got other things to worry about.

Yes, I agree. Okay, thank you.

Sure.

Our next question comes from the line of Nick Yulico with UBS. Your line is open.

Thanks. David or Rick, going back to your watch list and some questions about that, I was hoping that your early read on whether 2018 will be a better or worse year for store closures and bankruptcies based on what you've seen with tenants dropping off the watch list and reselling this year.

Look, I know we all want to talk about 2018. As you know, we don't talk about 2018 till our year is done. You're more than welcome if you would like next week, you can come to Indianapolis, spend. We go through space by space 200 properties, so it's mind-numbing. But we're doing our business plan for next year. If you want to burn a day or two or three or four or a weekend, come on in. We'll show you how we run the business. But we'll tell you about 2018 when we tell you about 2018. All I can tell you is that we've got a great real estate operating model that has historically worked over many years and many cycles. We've weathered lots of storms one way or another. We'd certainly love a better natural retail environment. It's not quite there, it was headed there. We'd like a more stable retailer environment. We're diversifying away from the have-nots to the haves. That takes time, but you can't duplicate our real estate. You can't duplicate our balance sheet. You can't duplicate the fact that this company can operate across this country as well as in many parts of the world. And we put it all together. We put it in a blender. We pull the right triggers, and lo and behold, we grow our earnings, and that's what we're all about. I don't expect 2018 to be any different than the history, but I've got the next two, three weeks of planning for the execution of 2018. But like I said, we planned for 2017. We're doing a good job in 2017. We're overcoming a lot. Whether it's retailer bankruptcies, natural disasters, changing market conditions, we did the same thing in 2016, 2015, 2014, 2013, 2012, 2011, 2010, even in 2009. It is what it is.

Okay. I appreciate that. And then just going back to that second question, going back to re-leasing spreads, which I know is one of your favorite topics, you talked about the NOI spreads getting better, value weighted spreads getting better this quarter, yet the ones on page 23 of the supplemental, that spread got a bit worse this quarter versus last year.

I think that's a simple – the simple thing is that we had more. We put everything in there, so we had more box deals, so that tends to damper down the spread for the entire portfolio as opposed to the ones that don't have as much box activity in the NOI weighted. It's as simple as that. It's not always like that, but...

Okay. And you – but just – yeah. No. Yeah. Just to be clear here though. If we're thinking about the impact to your cash, same-store NOI, are the numbers, the spreads that are on page 23 more important or the ones that you're citing on the NOI weighted spreads?

Look, the reality is there's so much that goes into NOI spreads is just one element of it. So, I think, you put it all in the blender, and – look, we've been operating with our NOI with the strong dollar with our overage rent down significantly, yet we've produced pretty damn good NOI – comp NOI number growth. So there's so much that goes into it that it's hard. I would tend to look at – if I had to look at it, it's probably more important to look across the board, but they're both metrics for you to Q1. I don't – honestly, I've never run my business for metrics other than one, and guess what that is?

It's dividend growth.

Well, no, no, no. Cash flow growth, okay. Okay.

Thanks.

That's the only metric I worried about, okay. So it is what it is. Thank you.

Our next question is from Linda Tsai with Barclays. Your line is open.

Hi. On Puerto Rico, sorry if I missed this, what's the basis point impact of Puerto Rico on SS NOI in the fourth quarter?

Well, it's $0.03 FFO all-in because we don't anticipate any BI and/or those centers right now to be opened by the end of the fourth quarter. But they might be, but we don't anticipate it.

So you wouldn't quantify it from a basis point impact on SS NOI?

Well, it's less than one – it's out of NOI. It's completely out. There is no NOI that we're going to be booking in the fourth quarter. Is that your question?

Yes. Well, okay. I guess maybe from an NOI impact, what would it have been? Or how much is the take away?

Less than 1% essentially.

Okay. And then in your lease negotiations with some of the retailers that have been challenged, if you look at you've handled them this year, I realized that's retailer by retailer and location by location. But are there any takeaways you can share from this process on how you might approach the leases that are coming up for renewal next year?

It really – I think, you answered it best. It really is space by space, retailer by retailer. I mean, I think, we really don't – we do across the board account, client-oriented leasing as you might imagine, but it is space-by-space, lease-by-lease.

And I would also tell you that, we're already working very significantly on next year's activity and we can evaluate now where we think market rents are going to be for the spaces coming up and we're doing everything that we can to have alternative users. So we'll have incremental bargaining power in that renewal process. If we don't get a rent we like, that tenant is going to be gone and we're going to bring in a new more productive tenant that's going to pay us more rent.

Thanks.

Thank you.

Our next question is from Haendel St. Juste with Mizuho. Your line is open.

Good morning. Thank you for taking my question. So, a couple. First, I guess David, the percentage of NOI from U.S. malls has continue to drift down over the last couple years, the spin of WPG a few years back certainly accelerated a piece of that. But now you're at below 50% for the first time in your corporate history, so I'm curious what you think the right balance of U.S. mall exposure is going forward in light of the new retail paradigm. And then also as part of that, curious if you're seeing any interesting acquisition opportunities out there. Anything that might be – that might fit your quality spectrum and are you sensing any change in the psyche of any of the owners of those quality assets?

Well, on the last question, not really. We're really not looking externally to – if we get approached, we'll certainly consider something but we're actually not looking that much externally. As you know, the big focus has been on the redevelopment, new development and that continues to take up most of our time. Look, I don't – we're not running away from – I just simply – the math is the math. The opportunities are the opportunities. The fact that we – we have always considered ourselves as a retail real estate company. I think, as things have changed, we now consider ourselves as a – we're going to have more mixed use opportunities. So that's going to change the mix a little bit on the margin, but we're not running away from the mall business, or running away from the U.S. business because literally, we look at opportunities, so granular. Like the previous question about how you look at leasing, it's space by space, mall by mall. I mean that's how we look at the opportunity set that we have here. And because of that, we may – the U.S. may go down – U.S. malls may go down, but it's really because we saw opportunities elsewhere not because we're running from the mall business. We went in the outlet business in 1998, and I made a – we built – it's a funny story if you got a minute. We built a mall for $4 million of equity in Orlando. It shows you how just stupid I am. But at the same time, we spent this money on the Internet and we lost – remember – by the way, we were ahead of our time. Some of this stuff today probably will be worth $100 billion, but okay.…

Certainly does. Certainly. I appreciate the perspective. And also I guess, speaking of opportunities, I'm curious on your thoughts on JCPenney this morning. Not asking for you to comment on them specifically as a retailer. I know you don't do that. But was more curious about how you might be thinking about potentially buying back some of those boxes, maybe re-tenanting opportunities. And are there any natural expirations or store closures on the horizon that you might be concerned about?

Well, we really – I haven't really studied the Penney numbers, obviously. I know they weren't that good. We have confidence in JCPenney. I mean, obviously they had a – they're still recovering from the activity that occurred when they had a different shareholder base. And I have – I think that Marvin Ellison has done a very good job. We think they serve a real need to the consumer. I do think there's still unfortunately dealing with some of the traumatic events of their different shareholder base. That's taking time, but it's cash flow generating company. We'll study the number, see what they all mean, but I think they definitely have a loyal consumer base and have a business that generates operating cash flow and I don't expect anything too radical there. But I think over time, we are going to want to get some space back from the department stores and we may get some space back but it's all going to be on the margin. They don't pay any rent even at places where they pay rent. So, the opportunity to re-tenant those buildings on an accretive basis is pretty, pretty significant for us. And to the extent that they're not investing in their store and we are investing in the mall, there is a disconnect to the consumer that we hope to – potentially, we can modify that disconnect by having a better or different use. We're poised. We're focused on it. We spend a tremendous amount of time assessing what we want back, what we might give back and I think the opportunities are a lot more significant in what we want back than what we might get back.

And just with respect to your question on their leases in 2015 and 2016, they had 14 options, all were exercised. In 2016 and 2017, they had seven; all were exercised. In 2018, they have 6, 4 have already been exercised and we expect the other 2 to be exercised. So we've not been experiencing any closures through lease actions with Penney.

Got it. Got it. Thank you for that. And one last more, if I can squeeze one in, I'm not sure if I missed it or if you didn't specifically mentioned what drove the year-over-year decline in that home and regional office costs? Is it just that you're right-sizing the organization given the smaller asset base and does that flow through same-store NOI? Thank you.

No. Primarily, the reduction in our incentive comp and LTIP primarily.

Got it. And then, is it – thank you.

I mean, we're really not reducing, I mean – we're really not reducing any kind of overhead on that kind of base. So we're just – you get us for a cheaper price. Some may think that's good; some may think that's bad. But it is what it is. As I've said...

We're always down. [00330F-E Steve Hilton: We're on sale, so good point.

I agree, I agree. Thank you.

Good point.

Our next question comes is from Rich Hill with Morgan Stanley. Your line is open. Richard Hill - Morgan Stanley & Co. LLC: Hey. Good morning, guys, and given that my family is from Kentucky, I can assure you in the end it's not that far out there.

All right. Richard Hill - Morgan Stanley & Co. LLC: Hey. I want to talk a little bit about your same-store NOI. I'll preface this. I know you focus on cash flow and you look – we do as well. But how much do you think that same-store NOI might be being helped or might be helped by the development pipeline? The development pipeline obviously looks like it's a really big growth engine for you now and you started putting dollars in there...

It's not in the comp NOI number, so until it's open for a year. Richard Hill - Morgan Stanley & Co. LLC: Right. And, David, what I was trying to think about was last year, you put up 2.2% in 3Q 2016 prior to...

Let me just reinforce this – and I've made this statement, Rich, historically, we do not look at our comp NOI on a quarterly basis. We do not look at that. Never have, never will. We look at it over a year. We told the market that we hope to do 3%. I think that's without lease settlement income, without new development, kind of a pure number, and we're on our way to do at least that. And for that, given all the complexity in the world today, that's pretty good. That's what I focus on. I do not focus on third quarter number. I don't focus on the second quarter number. We give you the facts. We tell you and we look at it on holistic year basis because when overage rent comes in and out, it's variable, it's when they hit it, they could hit it in the third quarter, they could hit it in the fourth quarter. Third quarter tends to be the lower end of our comp, if you're Interested in that, I don't really look at that. I don't know what else I can tell you other than how I think about it, and that's how I think about it, okay? Richard Hill - Morgan Stanley & Co. LLC: All right. So let me ask the question maybe a little bit different way. 3% same-store NOI guide for the year. I think at midpoint, how much do you think your development pipeline is influencing that versus your core portfolio, or is that just not something that...

I answered that. That's not in the number. Okay? Richard Hill - Morgan Stanley & Co. LLC: Okay.

Thank you. It's all in the 8-K. You can see the components of comp NOI, and you can see the other new development which is not in the comp NOI. We've made that clear for a long period of time. Okay? Richard Hill - Morgan Stanley & Co. LLC: Got it. Thanks, David.

Thank you.

Our next question is from Jeff Donnelly with Wells Fargo. Your line is open.

Good morning.

Good morning.

I'm curious. You guys produce obviously a lot of cash. You've been talking about that today. But you didn't repurchase shares in this quarter. Can you speak more broadly about how you're thinking about capital allocation in the next 12 to 24 months, and do you think you'll be using a greater share of your capital for redevelopment and expansions and where do repurchases factor into that?

You probably were bored, which I don't blame you, right? We answered that question earlier, which is basically we've been – because of some of these mixed-use opportunities like King of Prussia that I've mentioned before, we think our redevelopment pipeline is going to potentially increase. So we're being very judicious on that. In addition, the more I think about it, I just love raising this dividend 10% per year because the cost to carry on that is increasing. And I think that's more meaningful to long-term investors than episodic buybacks here and there. But it's in our arsenal. It's in our capital toolbox. We'll take it a step at a time. But we've got some really big mixed use opportunities and I just love having a powerful balance sheet. I just can't tell you how it excites me every morning.

I guess I should have asked it differently. I guess the question is it's not off the table then.

It's never off the table, no. We have authorization and it's ready to go to work if in fact we're ready to go. And I would take that authorization seriously. Otherwise, we wouldn't have it.

And maybe this is a joint one for you and Rick. But I'm curious how are lease terms evolving in this environment and specifically around percentage of rents because frankly, I'm wondering if you think landlords get a fair shake on the accounting for retail sales because it strikes me that given the way consumers shop today, buying online, maybe returning in store, the reporting optics maybe favor the online channel of a retailer versus the bricks-and-mortar, and I'm just curious if you think leases need to adapt for that.

Our leases are very well positioned to cover that point, and we are very focused on making sure that all the sales that are required to be reported under our leases are being reported.

Jeff, I will tell you this. And I think you point out a really important point is that we are absolutely unequivocally underreporting sales. We can only give you what we get from the retailers. But we've done enough work to know that there is an issue there and I think our sales that we report to you would be higher even – and we have very interesting leases that deal with the point that Rick is making. But I am absolutely convinced that our productivity is much higher than what's being reported, even though the lease requires them to do so. So I don't want to get into that, it's a complicated matter, but what you point out is very, very interesting. Now the market rewards – let's face it, the market rewards an online sale more importantly than it does a brick-and-mortar, so the market is trying to get retailers. The retailers would rather prefer an online sale to a bricks-and-mortar regardless of the possibility. But it's a very interesting point. And I will tell you today, in my humble opinion, there is absolutely an underreporting going on. But I don't want to say anything other than that. Okay?

Understood. Do you think they have the systems? Most retailers have the systems to be able to handle whatever the new form of reporting would be? Like you said, they don't really have an incentive to adapt. But again, I'm just curious of these new leases you talk about, if you think they could be more broad-based in the future?

Generally, they know what they should be reporting, I would say so. And again, I want to leave it at that. Let's leave it at that. It's a good point. But I will tell, I do think it's safe to say that the numbers we have are underreported, absolutely underreported. It's a very astute point. And by the way, we're not giving that up on future leases. So because it's all melding, but you bring up a very interesting point, and I prefer not to talk about it after this.

Okay. I have just one last question. I'm just curious. I'm sure in this environment you've been contacted by private capital sources maybe to look at JV-ing properties and whatnot. What sort of returns do you think they are looking for when they approach you guys? Are you able to speak to that?

I'm not sure. To do something new or to buy? I'm not sure I...

To buy interest in your existing properties.

We've had this discussion. I'm not really – I don't – that doesn't do much for us. So it's not something we really are pursuing.

Okay. Thanks, guys.

Sure.

Our next question is from Jeff Spector with Bank of America. Your line is open.

Good morning, thanks. And sorry to you longer today, but just a couple follow-up questions. On the department stores, just given overhang on the stocks, on the mall stocks, are you seeing any initiatives that you're more positive on, or anything you could share from what you're hearing from your mall managers on some of the things we're reading about or seeing, because I would have thought, given your dominant properties, a lot of these initiatives would be occurring in your properties at those department stores.

That's a big question. Look, I don't want to really get in too much about having a discussion with our clients. Look, I think ambiance, service, speed of execution is really important in today's consumer-oriented focus. I do think there are things that can be done at the store level that will improve that. I think as simple as a fast checkout at a store would improve sales and productivity dramatically. And there has been a huge focus on technology investment towards their online activities. I'd love for that to shift towards the store environment, because that's a real advantage. And I think if they did that in a more comprehensive way, whether through checkouts, service, styling. There are so many things you can do today, much like Apple does when you go to their store and town squares. If the focus were to shift a little bit there, I think they would see a pickup in their in-store sales environment. And it's all over the board, Jeff, frankly. I do think it could improve. And just like what we need to do, we need to improve our in-store experience on the stuff that we can -the in-mall experience on the stuff that we can control. So I think it needs to be a greater focus. It's around the edges. I'd like a little shift in that, but we'll see if that happens.

Okay, and then another follow-up. Just listening to the comments on mixed-use earlier in the week, we received a lot of questions on the WeWork and L&T purchase, upper levels and...

Right.

Rick and I were thinking okay, that's just a unique situation. Maybe there are a few other properties like that in the country. But I'm listening to your mixed-use comments. Do you think that a WeWork type of format, do you see that entering suburban malls or your malls, or that's not what you're talking about?

No, that's included in what we're talking about. Just so you know, we did a WeWork steal in Clearfork in Fort Worth, Texas. So no, I do think that environment will absolutely accelerate in the – again, I don't know that I would call these suburban. It's where the good demographic people live outside an urban area. There are still 330 million people, okay.

Urban and suburban.

Okay. I know New York City and San Francisco is urban environment, but there are lots of places outside of those where people live and work and play and be entertained. So the answer is yes, I expect us to do more and more with WeWork both directly like we did at Clearfork and through our relationship with Lord & Taylor. We know those guys. We like them. I've spent time with them. They're very creative. Both companies are very creative. L&T or HBC in that case as well as WeWork, good people too. I like them.

Okay. And then my last question, I was just curious with the Amazon-Whole Foods merger. Are you more or less interested in adding grocers to your malls?

No real chain. Chain, I think we've always liked it where it made sense for both parties, and the Amazon acquisition of Whole Foods doesn't change our thinking. I don't know if it's changed their thinking, Whole Foods' thinking, but it certainly hasn't changed our thinking. We'd love to have them in the properties where it makes sense for them and for us.

Great, thanks so much.

Thank you.

And our next question is from Christy McElroy with Citi. Your line is open.

Hi, good morning.

Good morning.

Just regarding The Edit @ Roosevelt Field, how are you connecting with and choosing these digitally borne concepts to participate in this effort? How are you leveraging your venture capital business in this? And is there a plan to roll this out further to more of your centers as you think about this as an incubator for new retailers?

The answer is absolutely. Assuming this has legs, this will be rolled out throughout our network, and you have to look at our platform as a network and this will absolutely roll out. The great news is we've got a team dedicated to up-and-coming new retailers that may start digitally and then go online. Like MeUndies is a good example of that where we're opening a pop-up store in Stanford. So we have a team wholly dedicated to that. We also appear here which is a network where we're both an investor and a player. They actually started in London and have a number of – basically a platform that connects real estate owners with brands that want access to a portfolio in a very seamless way. They've also been instrumental in identifying up and coming retailers or concepts. And so, it's a big effort on us to do that. And not only that but also lease, not just through what we're doing at The Edit, but also through just normal deals like the UNTUCKits of the world. I mean there's a lot of that new business out there that is exciting for us because we are bringing in the up and coming retailers or food operators that know how to connect directly through the consumer, but also have a little different spin on how they connect with the consumer in the in-store environment. I think they're very smart, digitally savvy, speaks to Millennials, we love them as part of our platform and our properties.

And then just given the natural seasonality of retailer income, how should we be thinking about the impact of Aeropostale, the Aeropostale investment in Q4? So what's in your guidance?

Well, we don't break out that. It's in our guidance. We're pleased with the business. We bought it very – we're weighing the money. They're performing according to plan. I don't give out quarterly numbers, but there's a little more volatility in the fourth quarter like a lot of retailers, even tech companies have a lot of volatility in the fourth quarter. There's a little bit more of that than what we have, since it's our first fourth quarter. Let's see what goes on. But we're weighing the money. We basically bought in at one time's cash flow. I kind of like those deals. If you have a few more of those, send them my way.

Hey, David. It's Michael. If we can just come back to the professional fees and other, it's like a $34 million, $35 million increase in the quarter. I thought the settlement on Woodbury was just under $1 million. So that would be a hell of a lot of legal hours even at $1,000 an hour. So can you just break out just the big chunks of that $35 million because it's not an inconsequential number and I think (1:23:16).

Well, I think it's actually almost irrelevant because it's a one-time number and it is what it is, okay. So I'd actually argue that there's no reason to focus on it because it's out of the ordinary and it's not going repeat. And unfortunately, this is a very expensive scenario that we have to deal with. The fee was nominal which reinforces what we – the fact that we, again, we made an announcement how we felt about it. I don't need to relive that. It's behind us. And so I'd actually argue the opposite of that just like the Seritage sale. It goes through the numbers but I wouldn't count – we're not going to replicate that gain either.

Right. I didn't know where it was coming from. That was just all legal expenses (1:24:22).

We have other things that run through that. We actually had a write-off. And again, not to get in minutia but we actually also took a write-off in one of our European outlet development projects that also flow through that, that's a one-time number, but the delta is one-time including that write-off, okay? So that's the important message to send here, okay? I wouldn't worry about it too much. I mean I don't like it. Believe me, I don't like it. I'm not happy with it.

It's a big number, right? It's a big number, but...

I'm not happy with it, but like I said, we had a European development deal with McArthurGlen that flows through that other number as well.

Okay, thank you.

But it's non-repeating, and I appreciate your question. It's non-repeating. It's out of the ordinary. And that's all I can really add to it.

Okay. Thanks.

Yeah. No worries.

Okay. We've exhausted everyone including myself, and for that, please join us next week as we go through space-by-space. Rick Sokolov will set up the appointments, and have a great weekend.

Ladies and gentlemen, this does complete the program. You may now disconnect. Everyone, have a great day.