Good day, ladies and gentlemen, and welcome to the Simon Property Group Q4 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. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Tom Ward, Senior Vice President, Investor Relations. Mr. Ward, you may begin.

Thank you, Katrina. 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 IR website at investors.simon.com. For our prepared remarks, I'm pleased to introduce David Simon.

Okay, good morning. We had strong results to wrap up a very good year. Our FFO for 2017 was $11.21 per share which includes a $0.36 charge for the early redemption of our senior notes. On a comparable basis full year FFO per share was $11.57 an increase of 6.4% year-over-year which without question will be at the high end of our peer group. To put our FFO per share in perspective, the $11.21 is more than $4 billion in total funds from operation which is the highest amount we've ever reported and the highest in the industry. Through active portfolio management, disciplined investments, relentless focus on leasing and property management operations, our annual FFO has increased almost $1 billion since we completed the spinoff of Washington Prime Group less than four years ago, yes $1 billion. We have achieved a compound annual FFO rate of 8% over the last three years and more than 12% over the last seven years. Our growth rate has outpaced the growth rate of all equity reached by more than 400 basis points over the last seven years and has been more than double the rate of earnings-per-share growth for the S&P 500 over the same time period. For the fourth quarter FFO per diluted share was $3.12 an increase of 7.2% year-over-year on a comparable basis and as a reminder our fourth quarter results were impacted by the closure of our two Puerto Rican centers due to continuing restoration efforts of those centers. We continue to report solid operating metrics and growth of cash flow. Our malls and premium outlets occupancy at the quarter ended at 95.6% an increase of 30 basis points compared to the occupancy at the end of the third quarter. Our ending occupancy was impacted by the bankruptcies processed…

Thank you. [Operator Instructions] And our first question comes from Caitlin Burrows of Goldman Sachs. Your line is now open.

Hi, good morning.

Good morning.

Good morning. Since 3Q earnings, we all know that M&A has been in the headlines for the industry and you didn’t touch on it in the prepared remarks. So I was just wondering, well first, as far as we know you didn’t put in a counter bid for Westfield and GGP, so I think your stock might be lower based on conversations we've had. But second, you said in the past that you're out of the big deal business and my question is more just around why, what's different now versus in the past when acquisitions like [indiscernible] DeBartolo and Prime made sense, is it that the math doesn’t work out at current share price, could it work with more leverage, but you don’t want to go there? Is it operation where you get less out of it than in the past? Just wondering what's different now versus in the past?

Well, I means that's – I think I need a written, I need that listed in a written way that I answer all of them. Look, I think, here's what's ironic and funny about all this M&A activity. The market was dying to have a mark on a portfolio. Okay? Dying. Well, my God we don’t know what the value of regional malls are. Unibail as you know has agreed to acquire Westfield and they did it at a very healthy evaluation and yet the market yawned on it. So I just find the whole thing ironic. We continue to be out of the big deal business. We're not involved in any of the activity there. And your best asking you know those participants how they feel about it. We've got a lot to do to continue to grow our company. Nobody has our growth, I mean high to sit back and think about we grew our FFO, we spun off by the way with WPG I think if I remember right about $200 million of FFO more or less. We made a billion two back and did not with a lot of M&A activity frankly. So we've got a lot to do. We don't need to do anything. I think all of this activity reinforces the strategy that we've had that I think scale in any and all industries is important. Our balance sheet is underappreciated. I think if you look at the Unibail Westfield transaction and compare their debt to EBITDA and compare to ours at 11.5 to 5.5 with the same ratings, you will see the amount of firepower that we have. But right now that firepower is on the sidelines and we're not involved in any of the activity. But anything that we do I'm pretty sure that will add value to including, you know including you know buying, remember when the market puked all over Rio [ph] Postell [ph] I am happy to tell you it had a record year OPCO [ph] did over $40 million of EBITDA. We bought it for 1 times cash flow and it's alive and kicking. So you know, whatever we do we're hoping to add value to and we wouldn’t do a transaction including any redevelopment or development that wouldn’t add value to, but the market's got it's mark and I think the market should be pleased that it's got its mark.

Thanks for that and I guess just on that topic of staying on the sidelines, I just want to hear your thoughts on does that mean though that Simon as the company is still in touch with discussions that are going on, deals that are occurring and it's a deliberate decision to stay in the headlines? I've heard some concern from others that by staying in the sidelines Simon might be missing out on some rare opportunities. So I just want to hear your take on how I'm assuming that's not actually the case?

Well, again I say we're not active, but I can and that's activity, but I would venture to say we typically be, we're typically buyers when no one else is, and we're typically not buyers when everybody else is. And that's just the way it's been and that's why we have $12 projected this year of earnings which is way ahead of everybody. That's why we have the balance sheet that we had that's way ahead of everybody. And you know we're a little bit different than most. I hope you accept it and appreciate it.

Got it and then just one on a different topic if I could. You mentioned the firepower that you guys have in terms of your balance sheet. Just looking at your development pipeline, the portion that's in process now, it is down from last year and the year before. So I was just wondering what the outlook is to getting this up again? I know you mentioned a few upcoming transformational projects that would suggest that they weren’t yet in process as of the end of the year or is that the amounts that have been completed just haven't been able to be replenished?

Well, look we - for whatever reason we don't put a – you know we don’t – I don’t know, the word fabricate is a bad word, but we don’t put our shadow pipeline in numbers. What Tom does is show you what deals we've approved and basically are under construction. So as an example, the Sears transaction that I spoke about, none of that redevelopment activity is in that number, nor is Phipps, or is King of Prussia you know and I'll go down the list. So what we do is we tell you the truth. When we approve it and we're about to spend money on it and it's been approved by our appropriations committee, it goes into the 8-K and we spit it out to the market. We don’t think we need to do a shadow pipeline because you know I don't know it's a waste of energy to try and do it. We have plenty to do and we'll be as aggressive as ever, but on the other hand one of the hallmarks of our company is our return on investment and return on equity, because without that you can't grow your earnings. And we are about growing our cash flow. Cash flow growth leads to dividend growth which ultimately or discounted cash flow model leads to more value in the company. Operating metrics do not. Okay? Operating metrics do not. What leads to valuation growth in my opinion and certainly in the real community there may not, may be not as a technology area, but is cash flow growth, return on investment, and you know, so I - so the long answer to your question is, we have a lot to do and a lot of these projects are in the process of being finalized in terms of scope, scale, pricing. And once we formally approve it, it feeds into our 8-K and you'll see that number go up.

Got it, thanks for that and yes I work hard. If you want know that I noticed that the rate of return did increase to 9% so that's great to see. Thank you.

Thank you, thank you.

Thank you. Our next question comes from the line of Craig Schmidt with Bank of America. Your line is now open.

Good morning, it's Jeff Spector here with Craig.

Hi guys.

Hi, good morning. Just a clarification on the guidance. I believe David, you said that portfolio NOI growth over 3%. Can you provide a little bit more detail on that? Is that – that's not same-store correct that you're just talking about the prior…?

That is not same-store, same-store the way we define it will be slightly less than that. We're trying not that I want to like name companies, I've already named one. It's probably not a good idea to keep doing it. But we want – you know we see what others do like Federal where you focus on the NOI growth. We're trying to get you know as our company gets bigger, you know the impact of the expansion and a new project becomes less and it's easier for us to describe it just in terms of our total portfolio NOI so we're trying to get folks to start thinking about like that like they do with federal and again I'm not criticizing great company. I'm jealous, much higher multiple, and it seems to like the way they do it and so we're focused on that. But it will be slightly less than the 3% based on our numbers today.

And can you provide any of the details behind that in terms of let's say occupancy expectation or…?

We are doing it exactly the way we did the last year and one year after. We do not provide leasing spread forecast. We do not provide the occupancy forecast. We've never done that Jeff and I have no real desire to do it. You know, again we can - we can - we can just be obsessed with metrics, I'm obsessed, we're continuing to grow our company, make our company better. I'm not obsessed with metrics and I think unfortunately you know we can - we can get into that the rabbit hole. But the reality is I'd encourage you to look at $12 compared to the peer group, look at our multiple, look at our dividend yield and then come up with your investment recommendations.

Okay thanks. I think Craig has a followup.

Sure.

I just want, great – I just wondered as the project is changing in some degrees that lets you go from 7% to 9% in the stabilized returns for the malls?

There's always a mix change. We are excited. You know, and again Craig, we are - we are excited about, you know the redevelopment efforts that we've got on the drawing board, you know from Phipps to King of Prussia to the Sears transaction. So there's going to be, I can't tell you how excited we are to get, you know to get these spaces back, where the media likes to make it as the beginning of the end, we think it's the rebirth. Okay? And I can't tell you how excited we are to continue to do our - you know, our varied redevelopments. You know the biggest issue for us is just managing all the activity. It's not from an investment point of view. You know, again if you look at our business, people can grow their company if they increased their leverage. Right? Now technology companies, if you looked at their quarter-to-quarter increase in debt you'd be really surprised by how much you know maybe they are buying growth, we're actually trying to keep our balance sheet relatively flat because we know that there's a lot to do. So in that sense if you look at our net debt it's relatively flat year-over-year which is still kind of remarkable given that we've had all this activity.

And Craig I would just say, you just followed our NOI has been increasing every quarter, projects roll off and new ones roll on. The beauty of our redevelopment positioning is that we are able to manufacture new redevelopment projects to continue to enable us to grow our cash flow.

Great, and then just of the 12th that you have started did you gain control, how many will be under construction in '18?

Well, that's hard to say. I mean we still have permitting to go through. So I – let's put it this way, all of these are well advanced in terms of plans and we're all through – we're going through the permitting process, but I would hope to begin a handful this year.

Okay, great, thanks.

Sure.

Thank you. Our next question comes from the line of Michael Mueller of JPMorgan. Your line is now open.

Yes, hi. Good morning. I have three questions here. I guess first, what was the NOI weighted weakened spread compared to the 11.4% you reported? Second, can you kind of talk about 2018 store closure expectations versus what we saw last year? And then third, it's little bit more of a technical question, curious why the Edmonton Outlets are considered a Mills project on the supplemental as opposed to an Outlet project?

Well, I'll try to take them in the reverse order. So it's basically, if you know [indiscernible] they basically own the Mills up in Toronto, Vaughan Mills. They built one in Vancouver, South Vancouver. And if you look at Edmonton it's really enclosed. It's got a lot of the big boxes and it's really more of a mills type of physical product than it is in outlet center where the outlet centers tend to be open air and village settings. So it's got – I don’t know off the top of my head, but 12 to 13 boxes at least, you know similar to what we would have here in our mills and what they would have there up in their Canadian mills. So it really is - it's really a Mills project. Second is, you look – if I remember the numbers 90 and 2015 we lost 900 some odd thousand, 2016 we lost 300,000, 250 to 300, 000, 2017 we lost a million too. Right? Good numbers see? Okay, so my memory is still with me. And we – look, it's hard to predict, but I would think that it's going to be significantly less than 2017 and that's the good news. And the opportunity is look we – you know, it is much as you and I want it more than you want it, okay? So let's just be clear. I want it more than you want it for that lease have to occur when you lose a million two. You know, it does take time and if you miss the season, you know it’s a process. So and that's why to some extent our occupancy dropped in addition to some of our adding some new space that basically is over 2.5 million square feet in new space between the new centers and the expansions. So the reality is we got work to do to get our occupancy up. I expect that number to be down. And then on your final, the rent spread on the weighted is slightly less than that number, I don’t have it at the top of my head which is I know surprises you, surprises me as well, but we can certainly work on that and get that to you.

Okay, thank you.

Sure.

Thank you. Our next question comes from the line of Alexander Goldfarb of Sandler O'Neill. Your line is now open.

Good morning.

Good morning.

How are you?

Good.

And I guess I'm fired up. So two questions from me.

Do you want me to be depressed, what do you want me to be Alex, talk to me, tell me how you want me to be?

You are always in a good upbeat mood, so I'll leave it there. And I assume you're going to Minneapolis in a few days.

Actually I'm not. I'm going to be watching my, no I am not going to be going to the Super Bowl.

Okay, two questions David, the first one is on the tax cuts, the retailers themselves you know corporately are among the biggest beneficiaries on tax rate and yes there were north of 30% effective. So obviously you know they stand to benefit big time. We've seen wage increase, bonuses, what are you seeing from the retailers themselves as far as reinvestment in their stores, in their brands, in their platforms, and how do you think it plays out at your centers?

Well, I'll let Rick answer, I'll just be very, less wordy. You know, in my prepared remarks I said improving. So I think the fourth quarter sales were improving. Not every retailer, I mean some retailers yes, no, I mean but generally improving. The mood is improving. And obviously the tax – given where retail started with the board or adjustment tax to where it ended up, you know, I think is good for the general retailers and I think they've all concluded. Thankfully you know, some are in a better position to do it and then others that reinvesting in their store is not such a bad idea. Rick, you can add to that.

And we would obviously like to see them invest more because the physical atmosphere that we can provide in our stores is going to be very important. All three of our platforms were up year-over-year in sales. Happily we also found some firming in the tourism markets where several of the markets that had been down are now showing some strength, so that's helping as well and we are encouraged about the trends there.

Okay and then the second question is, David, between the impact on Puerto Rico and I'm not sure what you guys are now recovering on business interruptions during…?

Well, Alex let me interrupt you there. We don’t recover anything on that because I won't go through the arcane which I could, but I'll leave the accounting arcane treatment to the side. Reality is we cannot book business interruption insurance until we get so there is no - there is no income whatsoever when it comes to Puerto Rican assets okay? And we explained that to you last time. Even with that said when we started our guidance and put the redemption cost aside when we started our guidance I left some of these headlines about guidance short, guidance this, guidance that, yet no one, I'd never see the headline that says, highest growth in the industry. I’m waiting for that, Alex you could probably start that trend. But even with losing Puerto Rico and the bankruptcies that in a lot of cases were unforeseen, we did beat our guidance that we laid out for you and this time last year okay? And not like our normal you know crush beat, but we beat it by $0.03, $0.04 something like that, and Tom I'm looking at Tom. So again, I just hope you appreciate that. I mean it's not - it just doesn't - we don't roll off the log here. We grind it out. We did beat our earnings when you take out the redemption charge despite Puerto Rico not being in the numbers and then obviously the decrease in the NOI loss from Puerto Rico which is not a crazy number, but it's few cents.

Okay, well just to finish the question David. Just curious how the rise in interest rates but the benefit on FX, how those two netted out as you guys laid out your 2018 is it than that wash or is that favorable or unfavorable one way or the other?

Yes, it’s basically a wash.

Okay.

We're not that levered with that much floating rate debt for that to really hurt us that much and then obviously our international business is about 10%, so when you put it all together it's not going to - it's on the margin.

Thank you.

Sure.

Thank you. Our next question comes from the line of the Omotayo Okusanya of Jefferies. Your line is now open.

Hi, yes. Good morning everyone. Just following up on Alex's question about FX, could you just talk about the impact of FX on same-store NOI in ’17 where I believe there was a bit of a drag versus in ’18 way to put it that consensus estimates and FX would actually be a positive to same-store NOI growth?

It's basically flat and again there's a good thing about it, it may help tourism in the U.S. which we get a benefit of. So we'll see, but so it's not material in a sense and I – and again remember that international, you know that's why we try to guide you toward portfolio NOI, but international is not in our comp NOI, you know that, right?

Yes.

Okay.

Okay. That’s helpful.

Okay, so the only benefit that we will see from the domestic which is what we do for same-store NOI is what impact the weaker dollar will have on the tourism spend okay? Not the foreign exchange number. You're with me, right?

Yes, correct.

Okay, okay, just want to make sure.

Okay, that's helpful. That makes a lot of sense. Second question, you have a kind of an expansive list of densification projects here that’s kind of good to see. Just curious with your partner in that densification project, are you participating in any of the upside associated with these upcoming hotels or office buildings or anything of that nature? I'm just trying to understand and I'm trying to understand the relationship to how it works.

Well, yes of course we’re partner - if we don't do it ourselves and we're partners of course we participate as a joint venture. A lot of these deals that we've done are 50-50 straight up deals. We get the value of the land which in some cases is higher than what our book basis is, it's never been lower and then we share in the upside absolutely. You know, and then I think with time there will be a trend for us to do more and more of these on our own. As an example at Fifth we plan on doing a hotel, the Nobu Hotel on our own. The office building that's programmed in that at this point is on our own. We may or may not bring a partner in, but although - if we do bring a partner we'll certainly have upside, if we don't just sell the opportunity at a premium and then let them develop it.

And I would point out that this densification is not new for us. We've been doing this for a decade and we've been reaping the benefits as we decide when we want to asset managing, we've sold a number of these densification projects and make a lot of money doing it. So we've been doing this for a long time and we're just going to come up with incremental opportunities.

Okay, so I guess the expectation has I mean, in ’18 we should see decent increase in the income from unconsolidated entities from all these JVs?

Well, it's - a lot of these are under construction, so I don't think ’18 is a big year for that, but they'll be you know there'll be some, I think you will continue to see more and more projects being added in our portfolio. We had a substantial increase quarter-over-quarter in the number that we included in the CAG.

Got you. Okay, just one more from me I appreciate the patience. There have been press releases about the Tijuana situation has been resolved between the two parties. Is there any color or commentary you can just kind of provide about lessons learned through that process?

From us?

Actually from both sides, because I’m just kind of curious how was it settled, what's the ultimate decision? But does it give you confidence about system supporting your lease structures and I’m just kind of curious?

I don't think it's fair to ask us. The last thing we want to do is get into an argument with one of our clients. However, if we feel like it's not and this is a generic statement, if we feel like it's not being appropriately dealt with we have no choice but to do what we did. It's not what we want to do. We're not in that business, but if we feel like we have to protect our position we will and it - but it took a lot of took – you know generically when you have these situations it takes a lot of judgment what to do and not something I'm excited about doing, but if we have to we will.

Fair enough. Thank you.

Sure.

Thank you. Our next question comes from the line of Steve Sakwa of Evercore ISI. Your line is now open.

Thanks, good morning.

Good morning.

I guess David, on the buyback, I noticed that the volume was much, much lower in Q4 than in Q3 and I’m just wondering was there anything that maybe precluded you from doing buybacks and was there something about the share price or just your liquidity obviously is in very good shape, so I just thought maybe some comments on the buyback and how you're thinking about that in 2018?

Well, we – well, I guess, I think as I look at ’18 and I look at and I really study other credits that are like ours or that at least rated the same as ours, I shouldn’t say like ours but rated the same as us, I see a lot more firepower than they do and that - it's important for us to maintain that rating. But I think we're underappreciated by how they evaluate things. So it is - a long story short, it gives me more – a stronger position to continue to be more aggressive than we were in the fourth quarter. The fourth quarter is just kind of an anomaly in that it wasn’t anything legally precluding. There was a period of time when the stock really got hit. And we went in and then it jumped back up, so we and then before you know we're in the blackout period and then we can't do much more. So it's really more on that front, nothing other than that. But you know when I look at ratings of companies that are the same as ours, we have a lot more firepower and that gives me more confidence to be more, perhaps more aggressive here.

And just to be clear, you're not assuming within the earnings for next year that there's any buyback activity, so there's no benefit from potentially using the firepower on the buyback.

That is 100% accurate.

Okay and then just this is a little bit more of a medusa [ph] question, but when we look at kind of the income statement, home and regional costs as well as G&A were down substantially '17 over '16. And I'm just trying to figure out are the ’17 numbers you think, sort of good starting points in run rates to think about ’18 or was there something abnormal in ’17 that brought us down versus ’16.

No, I think they're pretty consistent. That's a new run rate. What I – at the beginning, you know the executives here did not have - and again you can get me going philosophically, but we decided not to take any long term incentive for ’17 and take and express to the market that we're going to do what it takes to continue to run our business as we've also retired a couple of people that we're that we haven't replaced at those kind of levels. But I think those are pretty close to the run rate sort of more or less. If it's up it's more inflationary up than anything else, but I would look for that to be more the new normal, maybe slightly up just from an inflationary point of view.

Okay and then maybe just a touch back on lease and I know you sort of circled this a couple of times and your commentary about good and improving and maybe just get Ricks commentary, but as you sort of sit here today and kind of survey the landscape in the leasing environment versus a year ago, it much feel better but how many, if you just help us kind of quantify or think about kind of the environment today and the discussions with tenants versus say six months or twelve months ago?

It's Rick, Steve. It is clearly a firmer environment. The tenants are more constructive in their view of their store platforms. If you looked at all of the comments that the tenants had coming out of ICR, I think all of them basically were saying that we have made progress getting our portfolios right side. David has already commented. We view ’18 as hopefully going to be a less debilitating year in terms of reworks and bankruptcies and we're doing a lot of refit. We have made substantial progress on the bankruptcy space. We got back. We're leasing it on rent. That for the most part are higher than the rents that the bankrupt tenants had and we are encouraged and frankly it doesn't hurt that we have a great portfolio of properties that tenants want to be in.

And there seems to be just one other small point on that is there seems to be a lot of the, and without naming names, a lot of the folks that are, that were a little sketchy last year seemed to stabilize their business a little bit more. So again, that doesn't mean there's not a shoe to drop with you know one retailer versus the next. But it does seem – there does seem to be a sense that some of the folks that we're – could have gone left or right are kind of stabilizing their business.

Okay, great thanks. That's all from me.

Thank you, Steve.

Thank you. Our next question comes from the line of Christy McElroy of Citi. Your line is now open.

Hi it's Michael Bilerman here with Christy. Maybe Rick or David, just sticking on the leasing these, as you think about the pace of your openings, this year been a sub page 23 you are at 6.7 million square feet, you had been a little bit over 8 million the year before and consistently in that 7.5 million to 8 million type or range. You have almost 8 million square feet expiring in ’18. Can you talk sort about that actual pace and if you feel like there's going to be an increase in the opening pace or what may have held back some of the openings in terms of back selling the higher amount of bankruptcies this year?

Well, let me first address in terms of our renewals. We are right on pace on our ’18 renewals today as where we were in ’17 with our renewals. And we as David indicated we're still seeing a relatively strong volume coming in. We have a large portfolio and as we work through we have to a degree a lumpier process because we deal with our tenants on all their expirations. So it's a little lumpier, but we do not expect that we're going to have any significant diminution in activity this year as compared to last year as we saw our average rents were up and our spreads were around.

Going back to the same-store NOI David, on page 19 you lay out pretty clearly that components of that growth and so are you going to not provide that information now that you're not providing the guidance from comparable and a total perspective?

No, no, no, that number will be the same. I mean that page will be the same and I've provided, somebody asked me the question I provided the same guidance we provided last year, so we've given you the guidance. And that page will continue to be the same and we'll continue to report both same-store and portfolio NOI we just are trying to explain to you we think one's better than the other. But you'll get both numbers and you'll be able to decide what's relevant.

Right, and I guess the question is just trying to define slightly and people, different people may have different views the spread this year between comparable and total was 130 basis points. I don't know, if 130 that’s again more…

All right well, okay, I mean we don't have to get into semantics too much, but it's fine Mike well our – we expected to be above 2% in same-store but it, but again our business is, it's a little bit more difficult to and again we thought we'd be at 3% last year and we beat it. We like to beat our numbers as you know. We have again another unrivaled history on that, you know, an unrivaled earnings growth, unrivaled dividend growth, unrivaled balance sheet, also unrivaled beating earnings expectations. And obviously as you - and Tom and I spent a lot of time looking at comp NOI over a long, short periods of times, long period of time and it's safe to say we've outperformed that both from a complete real estate point of view as well as within the retail sector. So put all that aside, we would hope to continue to do that, but it's a little – you know our business is not as - it's a little bit more of an art and science just more levers, a little bit like the hotel business as opposed to say the office business or even the apartment business. So that's why we always try to guide you towards this kind of range as opposed to that kind of range because there is all lot more moving pieces then some of those others. But it's expected to be about 2% and our portfolio NOI is expected to be about 3% and that's exactly what we told you last year and we'll provide the same. I think you'll find page 19 helpful, is it Michael.

It is.

We will continue to provide page 19.

And then just a strategic question, as you think about running a company a lot of times status quo has more risk in it and pursuing some sort of transaction de-risks the company in some ways and you think about your history in terms of going into the outlet business, buying mills, expanding internationally, spinning off WPG in each of those the resulting entity was stronger, relative to the status quo. And I'm just curious how you think about the status quo today in terms of your three divisions and your geographical exposure and you can translate a little bit of what Unibail is doing with Westfield right? They have a status quo of being a predominately European, French focused company may have had more risk and diversifying their entity into the U.S. small business to them was the attractiveness wealth of the status quo. So how do you think about the go forward as Simon sit here today in terms of having those three divisions in your geographical exposure?

Well, I would say we are without question in my opinion perfectly positioned to continue the success that we've had over the last 20 plus years. So there is absolutely nothing that I think we are not appropriately position for future opportunities. We don't, I don't feel - the only thing I feel compelled to do is to make our existing real estate better. That I feel with a complete unmitigated, unrestrained passion. I also think we need to without question work our tails off to figure out how to connect with the consumer in lots of different ways. But I certainly don't feel that we need to be better positioned or that I'm losing out on the M&A activity. I just don't, I don't beat to that drum and I don't think we need to and in fact I think most people are catching up with what we've already done, so I don't get out that I don't worry about. I worry about absolutely making our existing real estate better and I worry about how we continue to want to connect with the consumer and we'll always find interesting things to do. I mean, the market Michael, you know we gloss over what we do, but we did open an outlet in Kuala Lumpur okay? We do have a great presence and I don't think anybody other than tab and I guess has a presence in China. We do have an international business. We do have diversity in product type. We do have a great balance sheet. Our people are good at what they do. I'm not that shabby. So I don't know, I think we're okay, but the passion here is how do we make our existing real estate better and if there's external deal to do that we think is opportunistic for our shareholders then we'll take advantage of it. But I don't, I really, really, don't feel compelled that we have to do that to continue our leadership position. That's right, I don’t feel that all that. I will say this, I mean I think these folks are catching up with us. We'll see if they are successful. I've lived and breathed this. It isn't that easy, it not - it doesn't happen, well you're going from a piece of paper to cash flow is a different leap of faith and so we'll see.

And how do you feel just about your appeal, you obviously have the stake in [indiscernible] to [indiscernible] a number of years ago. There's been some M&A activity in that marketplace. How do you sort of feel about owning a 20% stake in the public security, you're chairman of the supervisory board with a lot of control, but just, how do you sort of think about Europe in that context with activity going on there as well and what you could do?

Well, listen I think we bought opportunistically as you know that it's interesting Europe. They're all excited about the growth there that's finally catching up with the U.S. I am very comfortable with our investment there. And what the job, they're doing we've done a lot with that company. We'll continue to make it better, but again I don't feel from that standpoint that they are missing out some of these M&A activities the shareholders of the acquirer you know are pretty much beyond if not puke and it's somewhere in between. Right? So we at Klepierre have a lot - I think a lot to continue to do to improve the company and they're doing a very good job of it and I feel very comfortable with that investment and I'm pleased to see that there's, that there's green shoots in France and their starting to growth and the entrepreneurial spirit is coming back to an area that truly needs and deserves it.

Great, well I appreciate all the color and keep growing cash flow.

Yes, that’s what we do.

Thank you. Our next question comes from the line of Haendel St. Juste with Mizuho. Your line is now open.

Hi, good morning.

Good morning.

Thank you. I wanted to follow up on an earlier question about sales. Curious about actually the 2% sales growth to the fourth quarter, is there anything positive I think the fourth consecutive quarter of sales just were include growth. But most are a bit surprised that sales per square foot worked up a little bit higher. After all you had pretty easy comps given to on '16 week holiday season last year and the fourth quarter I think you did -1%. So adding that plus all the hype around how great to see holiday season was from the media. May be you can reconcile that and add a bit more color on which categories maybe weighed down your growth and maybe some of the out performers?

Well, this is, I mean the number is, the number is that the retailers report to us. They're in the retail business there's always winners and losers every quarter. There's no extraordinary insights that I have that will help you, help me answer that question. And I don’t know Rick if you, the numbers to number is all I could tell you, but Rick if you have some insights.

The only thing I can tell you is that just in terms of categories the entertainment women's better and moderate and kids' shoes were better, regions of the mountain at Atlantic Pacific and Florida were stronger. I think again reflecting the point that David made earlier that tourism is back a little bit and I agree with David, our sales number is a derivative number from our retailers. We're certainly doing everything in our power to draw more people to our properties, but ultimately the retailers have to convert them once we get them there.

Okay, fair enough I appreciate that color Rick and perhaps do you guys also have a NOI weighted sales per square foot growth figure year-over-year? I'm trying to get a sense of…?

Whatever that number that we had last time, I don't know, and Tom can follow up.

Yes, it’s in fact it's up a little higher than it was, it was up almost 2.4%.

Okay, thank you for that. And one more I guess on the transaction market, I’m curious if you're maybe think few more assets in the marketplace, have you noticed that change in perhaps seller sentiment for the quality assets that you want, given the recent transaction marks provided. And I guess understanding not, that you're watching but not necessary intern participating in the M&A going on around you. Is it fair to assume that you are interested in high assets should they become available? I guess what I'm trying to figure out you have as you outlined 8 billion-ish of liquidity, 2 billion of cash what you're planning to do with it? Thanks.

Well, I mean I kind of, we work kind of hard to build that up, so I mean it's - I view it as an opportunity not and I said look, I think at the end of the day. We're going to be focused on good real estate in terms of our external activity. We're going to be focused on good real estate that we could add value to priced right and if we can't find that, we won't buy it. And if you look at our track record, we've done that. So let me repeat, good real estate one, two is where we can add value and three is appropriately priced for us and somebody may have pricing view that's different than ours and we may be right or we may be wrong. The only thing I can point you to is our track record and I will assure you that every time that we did an M&A deal, we were wildly criticized from CPI to when the Barlow was so long ago and I mean people remember, right? I barely remember it. I mean…

And suddenly Rick showed up at the office one day and I go, how did you get here?

But you know, CPI to buying Chelsea to buying Chelsea to buying the Mills, I mean that was not one deal that the market said, boy, you guys got a good chance. So now that the concern is we're not buying anything, it is what it is. We find those three metrics we'll do something. If we don't, we won't.

Okay, I appreciate the thoughts, but disconnecting the dots it sounds like there isn't anything more incremental in the marketplace that perhaps you're noticing a shift in sentiment or perhaps a change in the quantity of quality assets available?

Well, look I think the good news for you are a market participant and the good news for you is that you've had a couple of companies that are obviously very thoughtful smart companies from Brookfield to Unibail that have given you a mark, Unibail has given you a great mark in terms of you want to value U.S. real estate. And I know the market really was dying for that and there it shows up. Yet, it's not enough. Okay? But I would say to you that's a pretty healthy mark, if you're looking at wanting to understand what existing pricing is today.

Okay, next question.

Thank you. Our question comes from Vincent Chao from Deutsche Bank. Your line is now open.

Hey, good morning everyone. May be just a follow up question on this liquidity. You talked about firepower quite a bit and the strength of the balance sheet, but regardless of what the investment is whether share buybacks or M&A at some point in the future or developments, I guess how comfortable are you in taking up your leverage? It sounds like you think you're not getting the credit for your leverage, that some of your similarly rated peers are, so and then I guess would you be comfortable going to 6.5, 7?

Well, I don't was to pick a number on, but I would encourage you to look at who is rated the same as us in the retail space and look at - it to me the most, nominal line guy, I'm so old that I ice go cold, private equity leverage buyouts okay, that's the pure definition of how old you are right, whether you say private equity or leveraged buyouts. I’d encourage you, Vincent to look at this in retail real estate really look at debt-to-EBITDA ours versus the peers rated in our category and you can see there's a wide really shockingly big spread. So we're trying to assess that, what does that mean for us or why is it that way we don't have really good answers and so it's a work in progress, but we're paying attention to it. There shouldn't be that big a spread.

Okay, thanks and then I think we've touched on this in the past, but of the $1.2 million square feet that you referenced from 2017 bankruptcies, how much of that is expected to come back on line in 2018?

We’ve already brought back on line almost 50% of it and we're making really good progress on the balance and the tenants that are coming in are frankly great productive growing tenants that are going to be more productive in the tenants that closed and they're paying higher rents. So it is a very productive process, but it certainly does have an impact while we're going through.

Got it and just one last one just in terms of your contractual rent bumps, what is that currently on average for the portfolio?

In terms of what we're doing in our leases?

Right.

Typically they are 3%

Okay. Thank you.

Our next question comes from the line of Rich Hill from Morgan Stanley. Your line is now open.

Hey good morning. I think this question is for David and Rick maybe together. From our perspective and I think probably yours as well, the retail narrative was really strong in 4Q with sales improving. So I was a little bit surprised to see overage rents, look to be down maybe around 13% year-over-year and I was wondering if there's anything that maybe drove that you had mentioned Puerto Rico being closed in the fourth quarter.

So, yes the simple answer is yes. Puerto Rico we did have overage rent from Puerto Rico that we have to take out, but also remember that. And you see this in our average base rent going up, so it's our job to take that overage rent each and every year when leases rollover to put that in the minimum rent, right? So you know, as the lease rolls are over let's say they’re paying $10 of base rent, $10 of overage rent it's our job to get that to 20 bucks at base rent, right so we can take out the volatility. So part of our job is to always even do that and in a robust sales environment historically you've had folks that even though we've eaten into their overage with increases in base rent, there's a whole slew of others but since sales have been kind of flattish over the last couple years you're seeing the impact more of us converting the overage into the base rent and you're seeing that in the average base rent increase.

Got it. That type of the numbers that's all I have. Thank you very much.

Yes, no worries.

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

Hi everyone. Couple questions on occupancy, in the third quarter you mentioned you had a 30 basis point negative drag on total occupancy from new centers, what was that impact in the fourth quarter?

Similar.

Okay, so I’m just trying to understand why the year-over-year occupancy dropped more in the fourth quarter than third quarter?

We processed a lot of bankruptcies in the fourth quarter. Again remember they tell you when they're going to close and just a function of the bankruptcy processing.

Okay and then just lastly on in terms of your occupancy I guess in the fourth quarter and over the past year, hoping to get a break down of long term versus short term tenants and how that trend has changed in the past year?

It's the way, our definition is that it is hasn't changed, so the numbers are the numbers. Okay? We only include it if it’s a year. And then if it's less and it is not in our numbers, so it's all in it's a year-over-year comparison is appropriate the number hasn't changed or the definition hasn’t unchanged.

Okay, thanks.

Sure.

Thank you. Our next question comes from Floris van Dijkum with Boenning. Your line is now open.

David, a quick question for you on, sort of touching upon fall off on other questions you've had as well, but with the Westfield comp out there at a relatively low cap rate compared to where consensus is for eight more guys there seems to be 75 basis points certainly relative to where you're trading at today, why aren't you more aggressive or will you become does that make you become more aggressive about share buybacks heading into ’18?

Well, first of all you can't buy stock back in a blackout period unless you have a - what's the word I’m looking for? 10B5 okay. So and you said guidelines on the 10B5, so unless those guidelines are met we can't buy it, but the reality is, I think I intimated that yes it's something we're thinking more and more about.

Okay, another question I had regarding your 12 Sears boxes that you now control. Presumably there not in your redevelopment pipeline as you mentioned earlier.

Well, that presumably they’re not, they're not, you can take out the word presumably.

Right, there not, no but I’ll ask as but presumably the returns on those 12 boxes would be in excess of your overall portfolio and based on what certainly what [indiscernible] has been able to achieve on their space right now. Any ideas of or any advance thoughts on any of them that you can share in terms of maybe turning some of the space into enter small shop space or is it mostly going to be doing your anchors, how you…?

Yes, it's a legitimate question. It's all over the board. As these transactions are permitted and approved internally, then you'll see exactly and it will be some are just box for box. A lot of them are torn down and redo like what we did in Macau and Texas. And like what we're going to do with King of Prussia with Penny or like what we're going to do with the bulk [ph] department store at Phipps. So it's really all over the board and we'll obviously, for us as we get all of that done permitted, priced out, approved, that will flow into our 8K and you’ll see exactly specifically what we're going to do there.

Okay, great thanks. Last question I guess is, maybe if you can make a comment broadly on TIs. I think one of the concerns that people have its TI packages certainly in some of the script companies but also in some of the other mall companies has been raising a little bit. Are you seeing any sort of trends there in terms of what you're having to offer your tenants?

If you go back over our TIs over the last five or six years, they've been in a very tight range. So I think it's important we very rarely give any TIs on renewals it's only for new leasing activities when we have a slightly elevated TIs because we've been able to do more restaurants or design your tenants, but it's been in a very tight range and we're not seeing any material increase in what we need to give tenants in that area.

Great thanks. That’s it from me.

Thank you.

Thank you. Our next question comes from Linda Tsai with Barclays. Your line is now open.

Thanks. Good morning. Following up on Floris’s question on the future Sears redevelopments are you thinking about these spaces any differently as in would you be less interested in letting apparel tenants fill the boxes, just given how competitive the space remains even if some brands had a better holiday?

We are focused on making our properties better. As David said we've got very defined plans for all 12 of these. We are far down the road in our approval and leasing process. We have apparel tenants, we have restaurants, we have mixed used elements. We've got boxes, health clubs, theaters all over the board, but in every instance there is one thing each of these projects has been common and that is when we're done our project is going to be substantially stronger, higher NOI, higher total sales and more attractive marketplace serving its trade area.

Thanks. This probably sounds minor, but the occupancy cost ratio increased to 13.2% where as it's been it was it's been in the 13% to 13.1% range for the past several quarters is there anything to highlight here?

No.

Okay.

No, it's immaterial really.

All right and then what was traffic like in the quarter at the Mills versus the Malls, versus the Premium Outlets.

All generally positive enough and I think traffic and sales are painting a more robust picture than the narrative out there is suggesting.

Have you seen some of that traffic follow through in January?

Yes, I think January has been a very well it's anecdotal, we don't have January sales, yet it's we get from the retailers 20 days after the month but anecdotally we hear January is very strong across the board. So again, I mean I wouldn't bank on that, but that's at least from a anecdotal point of view we're hearing that.

Thanks.

Sure.

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

Hey guys question for Rick, I just wonder if you could talk about the pace of activity or momentum kind of in the junior box space some of the fashion retirees that have been a huge focus here in recent years. It seems to be losing a little bit of steam, so just wondering what the pipeline looks like on that front relative to maybe a year ago?

Yes, it's in fact very strong ironically if you look at 12, 31, 16 we indicated we were going to have 34 boxes that could open in ’17 and beyond and in fact in ’17 we opened 34 and we now have 40 additional ones on the schedule for 18 and beyond. So there is still a very robust market out there for our properties and as we have said in the past, you're seeing that in our portfolio. Tenants that are operating in the mall contacts and than have operated in the power center contact which we can provide better sales, better traffic, so robust pipeline that is continuing to grow.

All right, I appreciate that and then just one quick point of clarity here in Puerto Rico and I know it’s not hugely material impact nearly $12 of earnings this sounds like guidance includes no insurance recovery, but the continuation of that call it $0.03 quarter we had from loss income, so is that the right way to look at it, so $0.12 drag in 2018 more or less?

Well, it’s I don't want to really point to that because we've got actually collected, so we're still projecting kind of a tough environment in Puerto Rico, so not completely the end of the world there, but we've got the properties are slowly opening, so it's I would say the drag is in the $0.03, $0.04, range somewhere in that range, but there's still a drag but where in fact Puerto Rico outlets just open that's further along and then the mall is it's getting closer to getting up to where it was. I mean it's open as well, but there's still a number of tenants lagging, so we still have some drag there and then we can't really book that be until we get it so it's dilutive to where we would be if we didn't have the hurricane but that's kind of the number in that range that's hurting us absent that.

Okay, thanks guys.

Sure. Operator Thank you. Our next question comes from the line of Ki Bin Kim with SunTrust. Your line is now open.

Thanks. So you guys talked about better traffic sales and maybe overall better mood across the industry. When you think about your guidance for next year are . Are to better malls in your portfolio improving versus last year or is a bottom picking back up, I was wondering if you can provide a little more color on that?

It is across the board, but obviously our stronger properties are getting incrementally stronger and growing a little better and that hasn't changed in 50 years.

Okay and what is the average vintage of leases that are coming due in 2018? And how you describe you know what happens after the value of vintage starts to wear off going forward, and what is that kind of your…?

I don't know the reference damage. I mean we provide you the expiring rents and I think that gives you a pretty good road map when you compare our average base rent of leases that are expiring with our opening rents that we use in our spreads, so it shows you we still have for the next seven or eight years considerable runway to be able to roll our rent based on what we're doing to that.

Yes, I mean there's a little bit of discrepancy and understanding that because I believe the expiring are exclusive of cam, so it's not exactly comparable, versus what you're signing, but if you compare the average base renI personally are signing but…?

No, but if you compare the average base rent expiring and our average base rent today that has all of the lower rents, we're still our average base rent today is still an excess of our expiring rents.

All right, thank you.

Sure.

Thank you. This concludes today's question-and-answer session.

Okay, thank you ma'am. Oh thank you and again we apologize for the length of our calls, but we want to have everybody given the opportunity to ask whatever questions that they do. So I do apologize and also later than people want, but that's why we're here happy to answer questions, so thank you. Have a good day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes today's program. You may now disconnect. Everyone have a great day.