Operator: Thank you for holding, and welcome to the Taubman Centers' First Quarter Earnings Conference Call. The call will begin with prepared remarks and then we will open up the lines for questions. On the call today will be Robert Taubman, Taubman Centers' Chairman, President and Chief Executive Officer; Lisa Payne, Vice Chairman and Chief Financial Officer, and Barbara Baker, Vice President of Investor Relations.
Now, we'll turn the call over to Barbara for opening remarks.
Barbara Baker - VP, IR: Thank you, Martina, and welcome everyone to our first quarter conference call. Yesterday we released our first quarter results and our supplemental information package. Both are available on our website, www.taubman.com.
As you know, during this conference call, we'll be making forward-looking statements within the meaning of the Federal Securities laws. These statements reflect our current views with respect to future events and financial performance, although actual results may differ materially. Please see our SEC filings, including our latest 10-K and subsequent reports for a discussion of various risks and uncertainties underlying our forward-looking statements.
During this call we'll also discuss non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release and in our supplemental information. In addition, a replay of the call is provided through a link on the Investor Relations section of our website. When we get to questions, we ask that you limit them to two and then if you have more, queue up again. That way everyone will have the opportunity to ask a question.
Now, let me turn the call over to Bobby.
Robert S. Taubman - Chairman, President and CEO: Thanks Barbara, and welcome everyone to our call. This was another excellent quarter with outstanding fundamentals. NOI up 9.3%, sales per square foot up 13.3%, now nine quarter of double-digit sales increases and trailing 12-month sales at $659 per square foot. Net income, FFO, average rents per square foot, and occupancy all up. We made significant progress on our external growth initiatives.
On March 22, we were delighted to celebrate the grand opening of City Creek Center in Salt Lake City Utah. It was truly a fantastic event with thousands and thousands of people present. We handed out over a 100,000 directories just in the first day as the entire community embraced this project enthusiastically. With 92, eventually 100 tenants opening, and the rest of the space either leased or committed, the Center has opened beyond our wildest expectations.
We have invested $75 million. In 2012, the Center will be accretive and will likely add about $0.05 to the year, which was in our guidance. For 2013 our first full 12 months we're expecting a 12% return. City Creek Center has captured the shopper's imagination. It's much more than just a shopping experience. People have commented they feel like they're on a vacation at the Center. The design is as much an attraction as the outstanding lineup of retailers. The roofs that opens that enables an outdoor experience in Utah's amazing arid climate, the streams stocked with trouts that meanders through the entire shopping center, the two 18-foot waterfalls, and the sense of urbanity as the center has been designed to be in the umbilical cord to the greater downtown.
Almost universally we're hearing from our tenants that initial sales performances well exceeded pre-opening expectations. Five weeks after opening, traffic continues unabated. We're really proud of this asset and feel speaks volumes about our team and our sponsorship of similar developments around the world. We welcome all of you on this call to come to Salt Lake City and see it as we believe you would be very impressed with this product.
Our U.S. projects continue to move forward, with construction underway in Chesterfield and imminent in Sarasota and San Juan. We've now begun to capitalize our investments in these three projects. Together, they represent over $600 million of capital at our share that will create that will create NAV.
Let's talk for a moment about each project individually. In Sarasota, the zoning is complete for the mall at University Town Center. We finalized our agreements with the landowner, Benderson Development, and will each own and fund 50% of the project. We'll be responsible for development, management, and leasing of the center. The $315 million two-level enclosed shopping center will be anchored by Saks, Macy's and Dillard's. This site has terrific visibility and regional access as it is right on Interstate 75 at the interchange of University Parkway. The Greater Sarasota market has over 1.2 million people and nearly 5 million tourists a year, with limited upscale shopping opportunities. We think this is a tremendously underserved market, so much so that more than half the small shop space will be new to Sarasota. The nearly 900,000 square foot center will be the first upscale mall in Puerto Rico, and the first location for both Nordstrom's and Saks on the island. We're expecting to be in site work this summer and are targeting a late 2014 opening. We will own at least 80% and up to a 100% of this center depending on the election of the land owner later this year. The land owner is developing a casino hotel that we'll connect to and is expected to open with the center. The anticipated unlevered return is 8% to 8.5%. For both Sarasota and San Juan, we expect tenant sales performance in the top half of our portfolio.
Taubman Prestige Outlets Chesterfield, our project in the St. Louis market is on schedule. We've secured all of our necessary local state and federal approvals, including from the Army Corps of Engineers and Department of Transportation, which allowed us to begin grading the site in early April. We expect to secure our final site improvement plan approval in June, the culmination of a year-long intensive process, which includes receiving many sequential approvals. This will allow us to complete grading and begin full construction in early July.
The response to our sites from tenants has been tremendous. We have nearly a mile of visibility on Interstate 64, Route 40 and a full (indiscernible) interchange Boone's Crossing right in front of our site. The open-air center will be about 450,000 square feet and feature more than a 100 stores. We're expecting to open in fall 2013. We own 90% of the $150 million center and expect to achieve an unlevered 8% to 8.5% return.
Now moving to Asia, the integration of Taubman TCBL is going well. We continue to be very pleased with their capability, knowledge and reach. We're working on several significant investment opportunities and hope to be in a position to have an announcement this summer. IFC center in Seoul, South Korea is nearly 100% leased and on track for its third quarter 2012 opening. IFC is a 5 million square-foot mixed-use project which includes three Class A office towards ranging from 29 to 55 stories of Conrad International Hotel and about 400,000 square feet of retail space. The center will include over 80 retailers, including H&M, ZARA, Uniqlo, Gap, Banana Republic, and the first Hollister store in Korea. We expect to receive the second installment of our leasing success fee in late 2012.
In the meantime while all this development activity is underway, the core is continuing to perform extremely well. NOI excluding lease cancellation income was 9.3%, one of the largest quarter-over-quarter increases we have ever seen. This was driven by rents, recoveries and percentage rent, sponsorship income and lower bad debt expense also contributed positively.
Sales per square foot climbed 13.3% for the quarter and as I said, now an unfrequented nine quarters of double-digit. Once again, even excluding Apple, sales per square foot was up double digits. Electronics and shoes have performed especially well, with Apple and Foot Locker leading the way. Abercrombie, Aeropostale, American Eagle, H&M and PacSun are all posting exceptional results in the unisex category.
All the LMVH brands, Louis Vuitton, Fendi, Bulgari, Christian Dior have seen remarkable starts to the year in luxury category. Z Gallerie in home furnishing, Zales in jewelry, all of the limited brand concepts, all of these stores have seen outstanding results thus far. As a result, we continue to build momentum in our centers and leasing is going very, very well. Occupancy on March 31 was 89.5%, up 160 basis points from March 31, last year and better than anticipated for this quarter. This is largely due to an unprecedented low level of unscheduled closings we've had to-date in 2012.
It also suggests that our occupancy through the year which we expected to be up on average about 100 basis points could now be up as much as 150 basis points. We also had 4% occupancy in temporary tenants, our highest levels in first quarter since we begin tracking the statistic. This brings the total occupied space to 93.5% at March 31.
Average rent per square foot of $46.14 was up 2.1% from last year and 2.6% sequentially from the fourth quarter of 2011. We continued to believe that average rent will be up about 3% for the year. Finally, we had only one tenant to declare bankruptcy during the first quarter, so our bankruptcies statistic was essentially 0%.
Now, I would like to turn the call over to Lisa. I'll return at the end of the call with a discussion of our guidance and closing comments
Lisa A. Payne - Vice Chairman and CFO: Thank you, Bobby. This quarter our FFO per share was $0.75, a 19% increase over our first quarter 2011 FFO per share of $0.63. Here are the items that changed year-over-year and they're listed on Page 8 of the supplemental; first, minimum rents, up $0.05 from the prior year primarily due to higher occupancy and increased rents per square foot supplemented by revenue from temporary tenants.
Next, percentage rent, up $0.015 due to increased sales, net recoveries favorable by $0.045. This unusually large variance was due to higher occupancy and lower expenses in the quarter than the prior year. We benefited from reduced snow removal cost because of the mild winter. While net recoveries were a very positive impact to NOI growth this quarter, we expect net recoveries for the year to be very close to last year. Obviously, this means that we will have volatility quarter-over-quarter due to the mismatch between fixed CAM revenues and CAM expenses.
Net revenue for management leasing and development services, down $0.03 in the quarter, this is primarily due to a one-time collection of past due development fees in South Korea last year. We now expect our share of net third party income for the full year to be between $5 million to $6 million.
Next, is lease cancellation revenue down $0.01 from 2011. As we have said, lease cancellations income is difficult to predict and can be widely variable. We are maintaining our estimate of $3 million to $5 million for the year, even though there could be some risk in this forecast. Other income is favorable by $0.01. This is primarily due to an increase in national sponsorship revenue.
Other operating expense favorable by $0.025. This is primarily due to a reduction in bad debt and pre-development expense compared to last year, general and administrative expense was favorable by $0.015 primarily due to an increase in compensation and interest expense excluding the impact of the debt assumed on the Green Hills and El Paseo acquisition was unfavorable by $0.025. This was primarily due to our loan on International Plaza, which was refinanced in November of 2011. The new loan is fixed and had been previously been floating at very favorable rates.
In addition, we had an increase in the spread on our revolving credit facility, which was refinanced in July of 2011. Operations of The Pier Shops and Regency Square which were transferred in the fourth quarter of 2011 were favorable by $0.05. The variance was due to both the decline in NOI and compounding default interest at the centers during 2011.
Now, turning to our balance sheet, we paid off the $281 million of installment notes that were part of the Green Hills, Gardens and Village and El Paseo acquisitions. Due to our strong stock price, our debt-to-market capitalization stands at 33.3%. Our interest coverage is 2.7 times and our fixed charge coverage is at 2.2 times. The execution of our 2012 financing plan is going very well. We are close to a commitment from two insurance companies to refinance Westfarms as 79% unconsolidated JV. The current $180 million matures in July and its pre-payable without penalty. Our share of this loan is $142 million.
The new 10-year $320 million loan is expected to generate approximately $137 million of excess proceeds. Our share of these proceeds is expected to be approximately $110 million and is a strong tribute to the NOI growth that we had in this asset. At the current treasury rate, the loan would be at an interest rate of about 4.5%, which is anticipated floor. This is a 180 basis point reduction in the effective interest rates from the current loan. Later this year we expect to refinance Sunvalley, our 50% owned center in Concord, California. Several lenders have expressed interest in refinancing this asset, both the current $160 million Sunvalley loan and the $30 million loan on the land mature on November 1. We do believe we will secure excess proceeds from these loans as well.
Also in April we extended our smaller revolving credit facility for a two-year term and increased the facility to $65 million. The new rate is 140 basis points over LIBOR.
And with that I'd like to turn the call back to Bobby.
Robert S. Taubman - Chairman, President and CEO: Thanks Lisa. As we said in the release, for the full year 2012 we are increasing FFO guidance to a range of $3.18 to $3.25. We have one quarter behind us and it was a great one. Our comp center NOI is now expected to be up about 4%. Offsetting this is dilution related to our strong stock price performance. In conclusion our nine quarter of double-digit sales growth have created a halo over our business, which is impacting all fundamentals in a very positive way and likely will for some period of time. We're also delighted with City Creek's very successful opening. And the hard-work and perseverance that have enabled us to launch three new development projects.
One final comment. According to Morningstar, as reported by (indiscernible) in his column Taubman ranked number one in total return to REIT and real estate operating company shareholders through the 15-year period ending March 31 with a 18.4% compound annual total return. We also ranked number four over 10 years with a 22.2% compound annual total return. We thank all of you on the call for those numbers.
Now we'd like to open up the call for questions. As Barbara said, please limit your questions to two. Martina?
Operator: Craig Schmidt, Bank of America.
Craig Schmidt - Bank of America Merrill Lynch: The Sarasota project, will you be clubbing fees for the responsibilities you have in terms of management and leasing?
Robert S. Taubman - Chairman, President and CEO: Yes, Craig.
Craig Schmidt - Bank of America Merrill Lynch: Then the second thing, you touched on this but maybe a little bit more about your caution to guiding to the 4%, I mean, given your 9% in the first quarter that suggests about a 3% same-store NOI for the next three?
Lisa A. Payne - Vice Chairman and CFO: Yes, Craig. What I said on the call I want to emphasize that this was very much driven, the 9% by the recoveries and we look significantly better in the first quarter than frankly we've expected. There is a lot of volatility in CAM expenses and we would say that when you look at the fact that we're expecting CAM recovery to be flat for the year, I think it will show you why we are really at a 4% level.
Operator: Christine McElroy, UBS.
Christine McElroy - UBS: With regard to percentage rents, can you talk about what's been driving the meaningful year-over-year increases that you continue to see in that line? Can it be attributed to any specific tenant segments, and do you have any percentage rent deals with Apple.
Robert S. Taubman - Chairman, President and CEO: I don't think we can comment on one tenant, and what our deal is with them. I would say that historically all of our small tenant shops pay percentage rent. Percentage rent typically is always a small group of tenants that end up making up the balance of the majority of that percentage rent line item. Our sales have been unbelievable, and that group of tenants is doing very, very well. And I would say that over half of our categories of merchandise continue to perform at double-digit, and we've been saying that sort of quarter by quarter that we have a lot of categories of merchandise, not just one, is performing well. So, you're getting different tenants beginning to pop their head up above the fixed rent lines and get into percentage rent. But percentage rent as a whole line item has always been modest. It's always been about 4% – between, say, 3%, 4%, 5% at most over in our history, all percentage rent. So, one of the things we always try to do is especially with our shorter lease terms is to try to have the highest possible base rents so that in essence that guarantee puts the pressure on the tenant and puts less risk on the landlord, given volatility or time over the economy and individual retailer performances.
Christine McElroy - UBS: Then just with regard with Puerto Rico, just wondering if you could provide a little additional color on how the economics could potentially work with the landowner. If they elect to own up to 20% of the project, how would that work in terms of equity contribution to the construction cost and ultimately the cash flow distribution from the center, and will this be on a ground lease or does the $405 million cost include any expectation to buy out the land?
Robert S. Taubman - Chairman, President and CEO: No, it's a CDO. We will own the land regardless of the 80% or 100% and the election to any of their interest will be on a pari passu basis. Their equity will have requirement for – their ownership will have requirement for equity and they'll take their beneficial interest in debt as well.
Lisa A. Payne - Vice Chairman and CFO: There is a provision though that we may fund a portion of their investment, which we do in many of our deals, but if we do that we get a preference on that – a very good preference, and get our capital back on a priority basis, but that's yet to be determined.
Operator: Alex Goldfarb, Sandler O'Neill.
Alexander Goldfarb - Sandler O'Neill: Lisa, you guys in the past have spoken about doing construction lending on any developments. Just sort of curious what level of pre-leasing or what are the parameters that construction lenders are looking for as you guys roll out the next round of projects?
Lisa A. Payne - Vice Chairman and CFO: I think this is going to be – I think we will be going to the market, I think for one of the first construction loans on a regional mall project that leads in many, many years. So, we have very, very preliminary begun discussions, and I think your question is when we're going to find and figure out. I will say that in the past what we did in prior development is we found – we would get construction loans without any pre-leasing, but we would have a targeted level of leasing a year before opening that we would have to achieve, and then if not, we would have to stop borrowing or bring an extra collateral. We never had to, we always made those hurdles. So, obviously, that's worked very well for the banks and that would be our expectation. Having said that, it is a different world, a different market, but we do think these are exceptional projects with great market dynamics and we believe we will be able get somewhere in the range of 65% to 70% of cost on these loans. I do want to say that this kind of business is very good for banks, they are decent spreads, obviously, we want to get a very competitive deal, but the banks make good money on these construction loans, we provide a complete repayment guarantee. So, we are pretty bullish and we think the bank groups that we have excellent relationships with, will find this business attractive. I want to end though by saying, we have a significant line of credit and are prepared to fund these for period without doing construction loans for quite a while, but don't expect that to be what ends up happening.
Robert S. Taubman - Chairman, President and CEO: We have done an Alex, that if construction financing just simply wasn't available, our existing lines, the excess cash we get from other normal refinancing, cash flow of the business, we can easily meet all of the obligations that we have for the needs of these new projects and frankly, for others that we are contemplating, we can meet all of those obligations without construction financing. It is preferred to have construction financing , but we will see what we find as we get into the market as Lisa has explained.
Lisa A. Payne - Vice Chairman and CFO: Or we can wait until we actually get leasing and put them on. So, we have a lot of financial flexibility is the main message.
Alexander Goldfarb - Sandler O'Neill: Lisa, just following up on that, as lenders look at Puerto Rico, just given the real estate issues down there, do they look at Puerto Rico as being different from the underwriting for mainland or they view it as you are the sponsor and therefore their underwriting Taubman's sponsorship as opposed to Puerto Rico real estate?
Lisa A. Payne - Vice Chairman and CFO: I think it will be a combination, but I think our sponsorship and our track record and the story in this asset which is truly a phenomenal story when you see the anchors and the lack of really high quality retail there, but clearly Puerto Rico will be, I think, more complicated than Sarasota to get done. I will say though that a very significant insurance company, one of the big four, is doing a big loan on a mall down there, and so very clearly institutions have gotten comfortable with Puerto Rico and we believe that will be the case here as well.
Alexander Goldfarb - Sandler O'Neill: Second question, Lisa, can you just give us what you expect capitalized interest overhead to be for the balance of this year and then also what the China success fee is that we should be modeling for the back half of the year?
Lisa A. Payne - Vice Chairman and CFO: I think what we have given guidance on is in the management – well first of all on the fee side, we've given guidance on management and leasing which is included in, is that fee is included in there and that's as far as what we're going to provide. With regard to capitalize expenses, we do give guidance on our developments, our predevelopment costs, which is what can we expense. We really are not giving separate dollar amount on capitalize interest on all these projects. Number one is very dependent on timing on when we start and we've run last the scenarios, but that's not a number that, I think frankly, what matters to you is what we're expensing and we had given you guidance on the amount we're expensing is in predevelopment in total, which is $21 million for the year.
Alexander Goldfarb - Sandler O'Neill: So basically guidance could come up as you start capitalizing those items?
Lisa A. Payne - Vice Chairman and CFO: Well we gave you the $21 million number for pre-development expense that we expensed. We had in our model what we thought we were going to capitalize, that may or may not. We gave you our best judgment in the $21 million.
Operator: Paul Morgan, Morgan Stanley Research.
Paul Morgan - Morgan Stanley Research: Could you talk about any regional variations in the sales trends that you've seen in particular maybe Detroit relative to the portfolio and other markets?
Robert S. Taubman - Chairman, President and CEO: Number one, Detroit on average has been pretty much equal to the portfolio over the whole nine quarters that we're talking about here. We've also said in previous calls it's still consistent now that Florida luxury centers and tourism oriented centers have been sort of at the better end. Beyond that, I would say that our two value centers in Dolphin and Great Lakes have also had a very good run.
Paul Morgan - Morgan Stanley Research: On the development side, you've had strong sales and generally speaking 'A' quality properties have echoed that and yet we're not apart from Sarasota, we're not seeing that much in the way of development you had. I mean you obviously have been working on Sarasota for a long time before hand, but is there are a reason to think that we might see more near term given the strength or are the anchors still not that focused on new stores and we may not see the type of growth of new developments you might expect given the type of performance that the portfolio is presenting?
Robert S. Taubman - Chairman, President and CEO: Paul, first of all sales helps everything. When you see sales like you are experiencing, not just with ours, but with others in our industry, especially the upper moderate to luxury end. That encourages expansion thinking. There is growth in the United States. Every year there is about 1% growth in the United States, so 3 million people a year being added in their economy. There is a wide view that there is significant supply of retail space out there and that generally demand is sufficient to meet the existing supply. We have said publically that while there were 40 shopping centers built in the last decade, in this decade we think maybe 15 to 20 are going to get built. Now I maybe the only guy out there that thinks there is going to be that many built. There is a lot of people who think that, if we get to 10, it will be a lot of shopping centers. But I think the combination of growth of people in America, sales increases that are really extraordinary and improving economy will lead to more expansion thought and more supply of space being built. Now what we set is over this decade, we hope to build four or five projects and of those 15 to 20 that I estimate only about half of those 7 to 10 are projects that we would want to build. So we are hopeful to build at least half of the projects that we would want to build. We started out strong with Salt Lake City which is a sensational asset and when you look at Sarasota and San Juan, we said very clearly we expect these two assets to be the top half of our portfolio and by the way our portfolio is at $659 a square foot. So that's a heck of a strong statement. So we think we're going to find that fourth and fifth project in the existing pipeline that we have and certainly sales of the kind that we've had that momentum will encourage the thinking of the anchor stores that you mentioned.
Operator: Steve Sakwa, ISI Group.
Steve Sakwa - ISI Group: I guess two questions. You guys never mentioned the word equity I guess Lisa when you were talking about financing the $600 million of capital cost for the development projects and I'm just wondering how you're thinking about layering in equity over the next couple of years to help fund that?
Lisa A. Payne - Vice Chairman and CFO: Well I think based on the ones that we just announced we feel that the proceeds from refinancings in our pipeline from our existing assets, the equity we raised last year we're really in a very, very good position right now for these. I think the real question is what happens in Asia, what happens on other outlet potential centers, the next round of pipeline. Clearly if we really take off in Asia, there's more equity required in Asia private projects that do not have as much debt. They actually are a much more conservatively financed industry over there than they are in the U.S. and we will likely than have to consider preferred stock or equity at an appropriate time. I will say Bobby will agree with me that we are very committed to a conservative balance sheet as we enter a very big development pipeline.
Robert S. Taubman - Chairman, President and CEO: (indiscernible) publicly on the phone.
Steve Sakwa - ISI Group: And then secondly I don't know if you can talk about the Chesterfield project and the competition with Simon, but obviously both projects are sort of heading to the finish line or at least maybe the starting line kind of at the same time and I am just wondering how you guys think about the tenants; and one, can the market support both projects? And how do you sort of think about that competition there?
Robert S. Taubman - Chairman, President and CEO: Well, there's no question, it's a very competitive environment in outlets generally across the United States. We've said publicly – I think Simon has said publicly that there's only going to be one project built in St. Louis. We are way ahead on a much better site, with much better access, much better visibility. As we outlined in our comments, we spent a year getting very complicated approvals that are sequential in the way they come, and we are under construction and we will be under full construction by the first of July. So, to us it's very clear as to which project's going to be built and there can be a lot of conversation about it, but it's very clear to us.
Operator: Todd Thomas, KeyBanc Capital Markets.
Todd Thomas - KeyBanc Capital Markets: Jordan Sadler is on with me as well. Question, back on to percentage rents, Bob, I think you mentioned that there's often a small bucket of tenants that contribute 2% rent, is there any opportunity to revisit and renegotiate those leases in any way to extract more permanent rent or any of those leases expiring soon?
Robert S. Taubman - Chairman, President and CEO: Well, as they roll that is the objective of the leasing group is to try to get commitment at least at the level of percentage rent that's already being paid. Remember, when you give somebody new term, they also have the opportunity now invest more capital in their store and remodel the store, and typically with remodeling in the store, they then get a boost in sales. So, we will argue with the tenant that, look, how much business you're doing, you're paying us good percentage rent and when you have an opportunity to remodel and put in your best look and all the rest of that, you'll end up doing even more business and paying us even more rent, and therefore, you should guarantee it even a higher level than your percentage is already suggesting. So, as tenants roll, we increase rent – the guarantee rents, and I think the long history of us being in the mid 90% of all rentals being guaranteed, I think that suggests that we do a pretty good job of securing those percentage rents into guaranteed rent as they roll.
Todd Thomas - KeyBanc Capital Markets: So, would you expect to see a similar type of positive variance continue throughout the year?
Robert S. Taubman - Chairman, President and CEO: Positive variance in what…?
Todd Thomas - KeyBanc Capital Markets: Percent; in percentage rent?
Lisa A. Payne - Vice Chairman and CFO: Back-ended. Yeah, we would expect percentage rent to add to – one of the reason we've increased guidance is we do expect percentage rent to be very good this year and it would be more back-ended.
Robert S. Taubman - Chairman, President and CEO: We originally talked about budgeting sales increase this year, remember coming on the heels of eight quarters of double-digit. As we're looking at 2012, we set a 4% to 6% increase – comp increase year-over-year. When we start the first quarter at over 13%, 4% to 6% looks pale, but we don't know what's going to – when there is a lot of risks out there, you guys could talk endlessly as I could about Europe and all the things happening around the world right now. There is an election going on right now. So, I don't know what really is going to happen. So, you made 4% to 6% as conservative, we hope you're right. If it is conservative, then percentage rent will be greater in the fourth quarter.
Todd Thomas - KeyBanc Capital Markets: And then just lastly on Forever 21 this quarter jumped up. It's just under 5% of your mall GLA. Where do you see that going long-term and what level are you comfortable with?
Robert S. Taubman - Chairman, President and CEO: Well, Forever 21 is a wonderful tenant and we love the fact that they have little or no debt and they have been expanding on a very careful pace and very successfully. Over the years we've had tenants as high as almost 10% of the space of our shopping center when you look at all their combined concepts. So, when you think about a shopping center of 400,000 to 500,000 square feet, a 5% number is 20,000 to 25,000 square feet of space. It's still a limited number in the context of the number of tenants, the number of store fronts, the number of separate income streams that are there, and this particular tenant, as I said, is very, very well capitalized. I mean, literally, I don't think they have any debt. So, we are very comfortable with the risk and very pleased with the tenant.
Operator: Michael Mueller, J.P. Morgan.
Michael Mueller - J.P. Morgan: I guess, looking at the three development projects at 8%, 8.5% returns it's still a pretty good spread relative to your costs, but it's I guess considerably below what you got on City Creek. Can you talk a little bit about, is there anything weighing on the returns or is this just where returns are (tussling) out these days?
Robert S. Taubman - Chairman, President and CEO: Well, I think City Creek was a very unique situation that was really a structured deal that we negotiated over a period of time. And I think it was wonderful for both parties to achieve the result that we did. With respect to the traditional returns, we have always said, regardless of where cap rates have been, regardless of where debt costs have been, that we're looking to find about a 300 basis point spread on both value and yield. So, if you think about today those last nine projects that we've build in the last decade, on average we are producing sales better than our portfolio. We've announced today with Sarasota and with San Juan two assets that we think will be in the top half of our portfolio. Our portfolio today is trading at about 5 cap rate according to consensus. We just bought two high-quality assets that were below what that consensus is in our Company. So, if we're able to achieve 8% to 8.5%, we will meet that 300 basis point spread on value, and on interest rates today, easily we will meet that number. Hopefully, we'll do better, but the range that we've talked about is 8%, 8.5% and we will produce significant net asset value for this Company if we achieve those levels of return.
Michael Mueller - J.P. Morgan: Second question, just given staffing in the organization, how many projects do you think you can have underway in any given year at any one point in time?
Robert S. Taubman - Chairman, President and CEO: Mike, we've spent a lot of time on the question of execution and we feel that our people, the processes that we have in place and really all of the thought we put into that question, give us straight comfort as we look throughout every single department from development, construction, leasing, all of the finance, accounting areas, all the support areas, we have spent a lot of time looking individually, at individual department and we do have a great deal of confidence. There is risk, obviously, and we've tried to reduce that risk as much as humanly possible.
Lisa A. Payne - Vice Chairman and CFO: I think as Bobby said it well. I also would add that as you compare – because I'm sure there is look-back in 2001 when we turned out – a lot of those projects have turned out fabulously for this Company, but we did bite off a lot. I think the difference here if you look at the scale and the size of these assets and the amount of leasing required, significantly less than what we had taken on in 2001. Hopefully, there is not going to be 9/11 and we're going to have an improving economy, but for sure the size of leasing that we're taking on, scale of it, is significantly less.
Robert S. Taubman - Chairman, President and CEO: The overall asset size that we are putting on versus our asset base today versus what we were doing in 2001 is dramatically different.
Operator: Ben Yang, KBW.
Benjamin Yang - KBW: Just going back to Mike's question on development. I understand the 300 basis point spread, but still interesting to see that you have the same return on all projects even though there are all clearly very different. Is that just coincidence or are you basically telling us that 8% is the new hurdle for new development going forward?
Robert S. Taubman - Chairman, President and CEO: First of all, it's a range, and we don't know where they're going to end up. It is coincidental. It's not manufactured I can assure you. We are hopeful that we'll do better, but these are the first projects being built, the first two mall projects in many, many years, retailers have come off a very difficult period of time. They're doing well now and we're delighted to have the wind at our backs as we are going into these leasing programs. We got two years to do it and we're very excited about these projects and we've got an incredible retail response to them in preliminary discussions. So, we'll see, but it is coincidental, it is not manufactured that all three are 8% to 8.5%.
Benjamin Yang - KBW: Okay. Is there any reason you're expected return on St. Louis is so much lower than maybe what other outlet developers seem to be able to get on their project. Is that the finding competition that's pushing the rents down on your projects or is there anything else going on there?
Robert S. Taubman - Chairman, President and CEO: Well I can't speak for the others. I do know the announcements they make. It is a very competitive marketplace today and I think that that is reflected in our numbers.
Operator: Ross Nussbaum, UBS.
Ross Nussbaum - UBS: I had the same question that Steve Sakwa had with respect to the funding for this next round of development and I guess my angle on it would be the Company is trading right now at an all time high valuation whether one wants to define that as where the implied cap rate is or the AFFO multiple is. You could in theory issue equities here at a lower AFFO yield than where you could get permanent debt on those assets. Why not pre-fund them all with equity at the best valuation you've ever had in the history of the Company?
Lisa A. Payne - Vice Chairman and CFO: Would you like me to take that Bobby or would you like to that?
Robert S. Taubman - Chairman, President and CEO: Go ahead.
Lisa A. Payne - Vice Chairman and CFO: No, why don't you. So, I would start and then Bobby can add. Obviously with equity, there is a long-term dilution that you are not taking into effect with that initial AFFO. You're right. The stock price today is – we issued stock what was – what was it..?
Robert S. Taubman - Chairman, President and CEO: 56…
Lisa A. Payne - Vice Chairman and CFO: And I thought I was brilliant at that movement and it looks like if I waited a year, I would have been more brilliant. Clearly we love where our stock price is, but there is the question of long term dilution because we think this company has a lot of great potential to it.
Robert S. Taubman - Chairman, President and CEO: I really think you have to think about the long term dilution. We absolutely believe in both our core growth as well our four prongs of external growth. I think as you look at that and look at what we believe our growth rate can be, even though our stock price is at an all time high and we are very proud of the way that market has reacted to our business. We still think that finding ways to creatively manage our balance sheet and keep the kind of prudent balance sheet management that we have had, we think we can do both. At this moment in time issuing equity is not the right decision.
Ross Nussbaum - UBS: The second question I have is on your sales, I'm trying to get a handle on what percentage and I'm sure you don't have the exact number, but ballpark, what percentage of your tenants are now reporting sales above the levels that they had back in '07?
Robert S. Taubman - Chairman, President and CEO: I don't know that the percentage is but, our peak sales productivity in 2007 was $555 a foot, we are now a $100 higher than that. My guess is that it's the vast majority of tenants and we said consistently this is not just about Apple, people have tried to say that, but each quarter we keep telling you that it's also double-digit without Apple. So at some point that may shift a little or one way or another, but the fact is that this growth has been very strong across the board, across geographies and it's a very high percentage would be my guess.
Operator: Cedrik La Chance, Green Street Advisors.
Cedrik La Chance - Green Street Advisors: Just one question on market rent in relation to the sales growth, if you were going to lease space last year at the 50-yard line in one of your centers and you will have leased that space for $100. Given that sales are up 13% over the last year, can you now lease that same space for $113 today or are there any other issues at play in regards to how market rents are changing?
Robert S. Taubman - Chairman, President and CEO: I think there all kinds of reasons why an individual tenant deal is what it is. It can be the type of merchandise, the size of store, it can relate to the store front, it can be the absolute location, it can be the other competitors up there in the shopping center at that moment, it can be other locations that we're talking to them about, it can be any number of things. But on average as you look at the portfolio, we are consistently trying to lease around 17% of the trailing 2-year sales and that's what we try to do. During the great recession, that was impacted. We were not able to lease at 17% and we talked quite a bit about the fact that that number had fallen probably to about 15% of trailing sales, because tenants were uncertain what was going to happen to their sales volumes and they were unable to commit that there would be a growing trend or positive momentum. Obviously now that has shifted more towards the landlord and we are seeing some advantage. We had good growth on top of a year that had 13% growth a year ago. So we're very pleased with what our rentals are and how we're doing and we feel that generally the sale, that halo that we talk about is impacting all of our metrics including rent in a positive way.
Cedrik La Chance - Green Street Advisors: So our rents similarly growing by 13% over the last year in your portfolio or did it grow by more if we've gone from 15% of OCRs to potentially 17%?
Lisa A. Payne - Vice Chairman and CFO: Yeah, well, I would say obviously we're guiding you on average rents on the whole portfolio to now be at about 3% when we had it at 3% for the year. The right answer to your question Cedrik is, as David Weinert goes out and set the target for his leasing agents on rents, a space, a comparable space with exact same tenant would absolutely target would be up based on sales performance of 13%. So we set that target 13% higher. It is remember we do go two years effectively as a two year trailing number. If we change the merchandise maybe a different number, but apples-to-apples we're setting our targets based on sales at 17% of (two-year) trailing. As it flows into our numbers, obviously it takes time for that store to open and you have the openings, the openings this year may have been done a year ago, you see what I'm saying, but we're targeting 13% higher based on these sales. Correct.
Robert S. Taubman - Chairman, President and CEO: Yeah, and the 13% Cedrik that I was focused on is the opening rent number was up 13% in 2011 over 2010.
Lisa A. Payne - Vice Chairman and CFO: Yes.
Robert S. Taubman - Chairman, President and CEO: And our first quarter at $56 isn't showing a greater number, but it's still a very good number, especially when you compare it against the 13%. In essence, we're growing on top of that, and overall of the portfolio of leases, that is growing at 3%. So, I mean we think we're at very good place, and we think again that that was sales the nine quarters is impacting us very positively, and it will flow into our numbers (over.)
Lisa A. Payne - Vice Chairman and CFO: Yeah, I think though to say that we target and David does a great job getting as much rent as we can. We do make – there is merchandising decisions, there is other things, and I would say when sales grow as fast as they've grown, there's probably a little bit of delay; a sticker shock, but what we eventually get there.
Cedrik La Chance - Green Street Advisors: Maybe on a different topic, when I look at the construction costs in Puerto Rico and in Sarasota, and if I think about those costs per square foot, and I understand it's not the greatest of the metric in the mall business, but nonetheless, in Puerto Rico you'll spend about $630 a foot to build that center, whereas in Sarasota it's going to be about $350 a foot. What explains the difference between the two? Is it land values or are there any differences in terms of expected levels of finishers in terms of construction practices?
Robert S. Taubman - Chairman, President and CEO: Well, I mean the market in Puerto Rico is an island. It's a more expensive market that's build in period. But (we're) also the big difference is that, we're at a very small site in Puerto Rico and we're on a much larger site in Sarasota. We have no parking deck at Sarasota. We're all parking deck in Puerto Rico. So, we're building much more of a dense vertical project in Puerto Rico than we are in Sarasota.
Operator: Quentin Velleley, Citigroup Global Markets.
Quentin Velleley - Citigroup Global Markets: Just firstly, with the Chesterfield project, can you just give us a sense for where the current percentage preleasing is and where you expect that to move over the year?
Robert S. Taubman - Chairman, President and CEO: Well, as we said, it's a very competitive market out there and we are not ready to discuss anything about individual retailers or how much we leased or any of the above. Suffice it to say, we are very confident or we would not have started construction in the retailer response that we have been getting.
Quentin Velleley - Citigroup Global Markets: And then just in terms of Sarasota, can you just sort of remind us how the ownership change, I think Forbes had 50% and you had 25% and Benderson 25%, so whether or not there were any change in the economics because of that? And then secondly, with the change in the anchors, I think Neimans and Nordstrom were anchoring it, now you've got Dillard's and Saks, so how that evolved?
Robert S. Taubman - Chairman, President and CEO: Well, first of all it was originally a 50% Benderson originally owned 50%. He continues to own 50%. We owned 25% and Forbes owned 25%, and Forbes in the end decided not to participate for all kinds of reason. And to be clear, I mean we have a long and wonderful relationship with the Forbes family, both personally and professionally. We have two terrific assets with them in the Millenia and Waterside. They are private family. Their investment profile and their criteria is very different than ours as a public company. So, in the end they decided not to participate. It was their decision and given their decision, we were pleased with the opportunity to own 50% of the project, so that's sort of the Forbes' question. The department store question, it was an evolving discussion. I don't know how much of this – a lot of this is prevalence-based on individual company discussions. In the end, we are delighted to have the only Saks in Sarasota and have dealers and have Macy's. We believe that our location with the regional access and visibility of 575 that we have will serve the entire market. There was no other site in the market that could possibly create this kind of a regional platform and regional reach. As we said in the prepared comments over half of the tenants are going to be new to the market and unique to the market, and all the better tenants want to be in this market. It's a terrific upscale market, about 5 million tourists a year that come to the market. It's good at every level. So, we're very pleased with the anchors that we have. We're very pleased to have 50%. The overall economics from where we were previously with a completely different project, it's a very different program, very different plan. I mentioned a minute ago, there is not deck parking, there used to be deck parking previously, so it's two different programs, two different plans, two different moments in time.
Michael Bilerman - Citi Investment Research: Lisa it's Michael Bilerman. Can I ask just a quick question on reconciling guidance for a second? You've increased guidance for the year about 2.5% and one of the assumptions you called out was lifting same-store NOI by about 75 basis points, which probably adds about $0.04 to guidance and so, I guess, is there anything that's changing that guidance when lease go up by $0.04 just for the same-store putting aside that you would be probably $0.06 in the first quarter, you have talked about some of these refinancings which are quite positive as well I don't know how much of that was baked into previous guidance or not, so I guess, at the end of the day, why isn't the guidance going up more?
Lisa A. Payne - Vice Chairman and CFO: Yes, we did have a great first quarter. I do think we need to highlight that. In our original guidance we had expected the shares. If you remember, we issued a bunch of shares to Davis Street or units I should say, for our Davis Street acquisition, and at the time we issued guidance, our stock price was significantly lower. There was a provision and we expected that a group of the owners that got those shares would have tendered them back to us, and in the deal that there is a tender price of $55. So, now with the share price up as high as it is, we're not expecting any or very little to be tendered, so those shares are going to be outstanding for the full year and that was not in our original guidance. In addition, with our treasury stock message, the higher stock price does impact dilution for the year and we did add a little more share-based compensation in March that was not in the original guidance. So, in essence there is going to be more dilution then we had projected in our original guidance.
Robert S. Taubman - Chairman, President and CEO: I would say that when we agreed to the $55 guarantee the stock was trading at $47 and $48, so it felt like a good decision, and in the context of the stock being where it is today, obviously it doesn't look quite as good.
Michael Bilerman - Citi Investment Research: So that adds how much dilution you think to full year was it $0.05 or something?
Lisa A. Payne - Vice Chairman and CFO: Probably like $0.04 to $0.05. Correct. Four-ish.
Operator: Tayo Okusanya, Jefferies & Company.
Omotayo Okusanya - Jefferies & Company: Bobby just when you start thinking about the next wave of developments, just kind of curious if you could make couple of comments on what areas you're looking at whether it could involve looking at Oyster Bay again or how are you doing in Atlanta and some of these other projects that you've kind of talked about (peripherally) in the past?
Robert S. Taubman - Chairman, President and CEO: Well you're right. The ones that we talked about publicly are Oyster Bay, Atlanta and Hawaii. There are a number of other projects that we've been working on that we haven't yet talked about publicly and then of course we have all of the efforts that we're making in Asia that we expect to yield. I said in my comments that we would be disappointed if we weren't able to announce sometime this summer our first investment in China. So, I think that we certainly were very happy with what we have in front of us today. We do expect as I said at least another project or two in this decade, whether it comes from Hawaii, Oyster Bay, Atlanta or something that we haven't talked about. I am not sure at this point, although we do feel very good about where we are and why at this point. Obviously, we've been working hard on Oyster Bay for a long, long time, 22 years now. We're known for perseverance, we've been tested there clearly, but we think that it's Oyster Bay, it will be the best shopping center possible in United States, I mean it is just an outstanding site and one of these days' people will be shopping there.
Omotayo Okusanya - Jefferies & Company: What about Atlanta just kind of given everything else that's going on with CBL and Horizon in that market?
Robert S. Taubman - Chairman, President and CEO: I thought you are referring to the land that we own that's on our books in Atlanta. That is a site that we are very – it's a great site in a great location, along Georgia Route 400. It's been the growth area of the market, obviously up until the downturn. There are number of new housing projects that are being thought about again along that corridor and over time we think it's a great site. We have the zoning, we have the entitlement, in fact its entitlement is for about 4 million square feet of combined space of both hotel, residential, office as well as retail and hopefully one day we will be able to put the project together.
Operator: At this time, I'd like to turn the call back to Mr. Taubman for closing remarks.
Robert S. Taubman - Chairman, President and CEO: Well we're delighted that all of you were able to join us this morning and we thank you for all your comments. We look forward to seeing you all at ICSC, to the extent you are there. We are delighted, obviously as I said, with the state of our business. So thank you very much. Thank you, Martina. Bye-bye
Operator: This concludes today's conference call. You may now disconnect.