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Simon Property Group (NYSE:SPG)

Q2 2012 Earnings Call

July 24, 2012 11:00 am ET

Executives

Shelly J. Doran - Vice President of Investor Relations

David E. Simon - Chairman, Chief Executive Officer and Chairman of Executive Committee

Richard S. Sokolov - President, Chief Operating Officer, Director and Member of Executive Committee

Stephen E. Sterrett - Chief Financial Officer and Senior Executive Vice President

Analysts

Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division

Ross T. Nussbaum - UBS Investment Bank, Research Division

Craig R. Schmidt - BofA Merrill Lynch, Research Division

Caitlin Burrows - Goldman Sachs Group Inc., Research Division

Cedrik Lachance - Green Street Advisors, Inc., Research Division

David Harris - Imperial Capital, LLC, Research Division

Paul Morgan - Morgan Stanley, Research Division

Steve Sakwa - ISI Group Inc., Research Division

James W. Sullivan - Cowen and Company, LLC, Research Division

Quentin Velleley - Citigroup Inc, Research Division

Wes Golladay - RBC Capital Markets, LLC, Research Division

Christy McElroy - UBS Investment Bank, Research Division

Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division

John P. Kim - CLSA Asia-Pacific Markets, Research Division

Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division

Ki Bin Kim - Macquarie Research

Michael Bilerman - Citigroup Inc, Research Division

Michael W. Mueller - JP Morgan Chase & Co, Research Division

Operator

Good day, ladies and gentlemen, and welcome to the Q2 2012 Simon Property Group Conference Call. My name is Cosmic, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes.

I would like to turn the call over to Shelly Doran, Vice President of Investor Relations. Please proceed, ma'am.

Shelly J. Doran

Good morning, and welcome to Simon Property Group's Second Quarter 2012 Earnings Conference Call. Please be aware that statements made during this call may be deemed forward-looking statements, and actual results may differ materially from those indicated by forward-looking statements due to a variety of risks, uncertainties and other factors. Please refer to our filings with the SEC for a detailed discussion.

Acknowledging the fact that this call may be webcast for some time to come, we believe it is important to note that our call includes time-sensitive information that may be accurate only as of today's date, July 24, 2012.

Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included within the earnings release or the company's supplemental information package that was included in this morning's Form 8-K. This package is available on the Simon website, in the Investors section.

Participating in today's call will be David Simon, Chairman and Chief Executive Officer; Rick Sokolov, President and Chief Operating Officer; and Steve Sterrett, Chief Financial Officer.

I will now turn the call over to Mr. Simon.

David E. Simon

Okay, thanks. Good morning, everyone. We're pleased with our strong results for the quarter, and I'll just go through some highlights.

First of all, funds from operation was $1.89 per share, up 14.5% from the second quarter of 2011. Our FFO exceeded the First Call consensus by $0.08 per share. For the malls and the Premium Outlets, our comparable property NOI grew 5.1%. Comp NOI growth in the second quarter of 2011 was 3.5%, so a very healthy trend.

Tenant sales were up 9.9% to $554 per foot. Occupancy was up 60 basis points to 94.2%. Average rent per square foot increased by 3.7%, and the releasing spread was a positive 10% or $4.77 per square foot.

On the capital market side, on June 1, as you know, we completed a new $2 billion unsecured revolving credit facility that supplements our existing $4 billion revolver, resulting in $6 billion of total capacity. The facility matures 2016 with a 1-year extension option at the same rate as our other facility, which is LIBOR plus 100 basis points. In the secured market, we've been very active year-to-date. We have closed a lock rate on 17 new mortgages, totaling approximately $1.9 billion, of which our share of that debt is $1.3 billion. The weighted average interest rate on the loans is 4.3%, and the term is 7.5 years on the average term. And last Friday, we redeemed 2 million units of our operating partnership owned by an affiliate of JCPenney at $124 per unit or share.

On the acquisition side, June 4, we acquired a 50% interest in Silver Sands Factory Stores, a large and highly productive upscale outlet centered in Destin, Florida. The 450,000-square foot center generates sales of approximately $500 per square foot. We've assumed leasing and management duties, and in the coming months, it will be re-branded as a Premium Outlet Center.

Development activity is very strong. First of all, we grand opened Merrimack Premium Outlets, a large outlet center in Merrimack, New Hampshire on June 14. Strong opening. We're 99% leased, great-looking center. Construction continues on 5 additional Premium Outlet Centers, all scheduled to open this fall or in 2013. They're located in the U.S., Canada, Japan and Korea, clearly demonstrating the global nature of our company in our Premium Outlet platform.

First of all, 2 in the U.S. are in Texas City, suburb of Houston, which opens this fall; and then Chandler, Arizona, a suburb of Phoenix, which will open next year. We're continuing construction in Toronto, which opens next year. Another outlet center in Japan, which will be our ninth, near the airport outside of Tokyo; and Busan, our third Premium Outlet Center in Korea. We started construction on July 11 at St. Louis Premium Outlet Centers. We announced the strong lineup of tenants and are opening this plant for the fall of 2013.

Progress is being made under our agreement to develop Premium Outlet Centers in Brazil with BR Malls. And importantly, construction is underway on 25 redevelopment expansion projects at the mall, Premium Outlet and Mills platforms in the U.S. and 2 Premium Outlets in Japan, all with 2012/2013 completion dates. We continue to expect our share of the development and redevelopment spend to approximate $1 billion this year, next year and 2014.

Let me just turn to Klepierre and give you a quick update. As you know, we bought 54.4 million shares or 29% of the French public company in March. They are the largest -- second largest owner of retail assets in Continental Europe, with assets valued at EUR 16.2 billion. They will be announcing their earnings later today. Their business has been remarkably stable considering the turmoil in Europe. They have made excellent progress in refinancing debt, selling assets and creating additional liquidity. And I have been very involved in the development of their future strategic direction. As they accomplish their goals, there's no doubt in my mind that they will be poised to take advantage of future growth opportunities.

Turning to dividends. As you now know, we have announced the fourth consecutive increase in our quarterly dividend from $1 per share to $1.05 per share. Our dividend is now 31% higher than it was a year ago and well above our previous all-time high before the onslaught of the great recession. I'm happy to announce that we've increased our 2012 FFO guidance again. Initially, as you'll recall, we were at $7.20 to $7.30 per share. Our new guidance now is $7.60 to $7.70 per share. Primary factors contributing to this are strong operational performance and the impact of our recent investment activity.

Now just to highlight another important factor in what's happening with the company, we continue to add to our very talented management group. As you know, in 2011, we added Contis to our mall platform, Fivel, to help us in our legal and deal business. And obviously, I'm very pleased to announce the most recent addition many of you know, Matt Lentz. Matt is our Chief Investment Officer, which is a new position in our organization. He brings a great and extensive, broad real estate background both from a bricks-and-mortar point of view but also from a securities point of view, also very been involved in reviewing many international opportunities in his previous roles. He'll focus -- his job will primarily assist myself and others in the management group in pursuing strategic growth opportunities for the company. And Matt's first day on the job was, in fact, yesterday, and as far as I know, he's still here. But actually, his wife is about to give birth, so I hope he's not at the office.

Concluding, let me just say last second quarter, I addressed the unfair advantage that the Internet retailers have in not being required to collect sales and use tax on remote sales. I believe our efforts and others have made significant progress at the state level, but our tenants need Congress to act to level the playing field on a national level. In the past year, the Marketplace Equity Act was introduced by a bipartisan group of senators, and similar legislation has been introduced in the House to address the inequality in today's marketplace and level the playing field between bricks-and-mortars and online retail business. We support these proposals. We'll continue to be very focused on making this happen, and we appreciate all -- everybody's support in showing their strong support of this very important legislation.

So with that said, we can turn it over to questions.

Question-and-Answer Session

Operator

[Operator Instructions] The first question comes from the line of Mr. Alexander Goldfarb with Sandler O'Neill.

Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division

David, just going to the JCPenney for a second, $1.24 [ph] is certainly below where you guys are trading. Just want to get a little more color on one, who approached who first, and two, just want to try and understand why someone would take $124 versus where your stock is trading in the open market.

David E. Simon

Well, look, let's just say we have a strong relationship with Penney. They're a very important retail partner of ours. I know -- Rick and I know Mr. Johnson, and we also know very well members of the board. So I'm not going to get into the particulars, but just so you understand, I mean, the unit holders have the ability to convert their units on a one-for-one basis for common shares. And we view it essentially as common stock equivalents because, obviously, they can convert it on a one-for-one basis. When they do that, then they -- we have the option to give them fully diluted stock or cash, and it was through that discussion that we negotiated the deal. And I'm very convinced it's a great opportunity for the company, and I think it met Penney's strategic goals in terms of their focus on what they're trying to do with their business. So we're pleased with the transaction, and beyond that, there's not much to add to it, Alexander.

Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division

Okay. And then on Brazil, Equity International sold their stake in BR Malls. Just curious if you guys took a look at buying their stake or if there's any discussion around that.

David E. Simon

Well, we've looked at a lot of things with BR Malls. We've looked at a lot of things in Brazil. The good news is we're very close to approving our first outlet there, which will start construction here potentially within the next 30 to 60 days and open -- it's outside of São Paulo, and open late next year. That's not in this list that I've described to you, but it is moving a pace and I expect that to -- I expect that to happen, and I think we'll get our first outlet center built and open next year. So we're pleased we're making very good progress on that.

Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division

Okay. And just a final question just with the recent economic data. Has there been any change in the conversations with tenants? Are they still full steam ahead in terms of leasing space in their program this year, next year and further out?

Richard S. Sokolov

Alex, this is Rick. There really has not been any change. They are still coming in and aggressively looking for new opportunities across all the platforms.

Operator

The next question is from the line of Mr. Ross Nussbaum from UBS.

Ross T. Nussbaum - UBS Investment Bank, Research Division

Can you guys talk about the dynamics that you're seeing in the department store sector as you look ahead to next year? Obviously, you've got one big transformation going on at JCPenney and then you've got another different type of situation over at Sears. At what point do you guys -- or do you believe there's still needs to be some rationalization in terms of the number of boxes that are out there?

David E. Simon

Well, I put Penney in a completely -- Rick and I put Penney in a completely different category than Sears. I mean, Penney is very focused on delivering value to their customer. They have a very talented management team. We expect -- obviously, they are going through a transformation. But we expect Penney to be a viable mall anchor in a fashion that they have been historically. Sears is a little bit different. I mean, the fact of the matter is Sears needs less space. I think we've touched on this the last time. Sears needs less space than what they currently have, and I think there'll be ongoing discussions with us and Sears and the other mall people that will rationalize that space, creating opportunities for both the landlord and Sears. I really, really would not lump them in together. They're 2 different companies on 2 different paths. And at the end of the day, look, it's going to be -- Sears will be a lot of work, but we feel confident as they probably reduce some of their space that that will ultimately benefit us in the long run. Rick, anything you want to add?

Richard S. Sokolov

I would just add if you look at today's landscape in the department store universe, their equity, their balance sheets, their credit profiles are all dramatically better than they were just a few short years ago. You have Lord & Taylor that's been recreated into a very viable and aggressive growth vehicle. Dillard is very well situated. Macy's is well situated. Carson's has a new leadership and great financial upward trajectory. So candidly, we're in a better position now than we have been, and with no new development, these stores are maintaining their existing stores because they want to really enhance their top line.

Ross T. Nussbaum - UBS Investment Bank, Research Division

Okay. And the second question is -- and I've gotten this question over the past couple of days from some of your investors. Does the hiring of Matt reflect in any way a signal that you intend to accelerate your international expansion, or is it more of a reflection that you just needed another body or 2 in the door given everything you've got going on?

David E. Simon

Well, it's really a function of what we've got going on. I mean, we -- believe it or not, this is a big company, and just like -- I am never satisfied with the portfolio and where we've taken the company. I'm always going to try and add talent to the organization. I've known Matt a long time. We talked on and off. We wanted to fill this position, lost probably in late '08 and then the world ended, so we put it on a back burner because we said, well, we're going hunker down. I just think there's so many opportunities for this company. It's very important to continue to add talent, another pair of hands, another deep thinker. He fits in great with the team. So to me, it was a no-brainer. And we'll take it wherever it goes, wherever we think we should invest. Who would have thought we would have bought our stock at $124 3 months ago? But that's -- we saw an opportunity. Who would have thought we would have invested internationally 4 months ago, get paid? I'm getting paid. Most people pay for options. I'm getting paid as I think about that company as optionality. What do I mean by that? If you look at the cash flow that we'll get from their dividend against the cost that it took both in equity and debt, we're going to get paid $55, plus or minus, million a year to decide what we want to do with that stake. That's a good spot to be in. There's not many malls you can build that can generate $55 million of cash flow. So having another guy to think these things with our team, I think, is exciting. I also think it -- with David and Steve, we hired Larry Krema to run our HR group. I think it also demonstrates that this company is a neat place to work and be part of.

Operator

The next question comes from the line of Craig Schmidt from Bank of America.

Craig R. Schmidt - BofA Merrill Lynch, Research Division

The pace of outlet development, it actually seems as high as it's ever been. I'm wondering if that's sustainable going forward in 2014 and 2015?

David E. Simon

On the new development or the redevelopment?

Craig R. Schmidt - BofA Merrill Lynch, Research Division

The new development.

David E. Simon

I still think the full-price new development still is not -- it's still a ways away, even though there are a couple announced ones here and there. The outlet business still has some pockets, but again, I think we discussed the last time. I mean, I don't -- I know there's all these ones that are being bandied about, but I think it's going to be harder to do. So I think pure new development is still going to be a little bit -- still be less than everybody thinks. The redevelopment, though, has the potential to really pick up, and that's where -- thankfully, between Rick and Contis, that's where a big, big focus is. That has, Craig, a little bit of potential to do more than what we're doing. But Rick, you can add to that thinking.

Richard S. Sokolov

Yes. Just on the outlet side, right now, it's being driven by explosive demand among a number of tenants that are not in the business that want to get in the business. And I don't want to lose sight of the fact that this demand is going to help our existing portfolio dramatically and that you're seeing that in our result. There's got to be a finite end to the arc of new development. There's a limited number of new opportunities. On the redevelopment side, when David articulated, I believe it was last year or the year before, our redevelopment program, we identified some for you. Literally, 3 quarters of them are under construction right now, and we're in the process of reloading that pipeline with the next wave of opportunities. So there's a lot going on, and if you look in the 8-K, we're producing low double-digit yields on those, which, on a risk-adjusted basis, are even better than they are on just a return basis, which are terrific in and of themselves.

Craig R. Schmidt - BofA Merrill Lynch, Research Division

I guess when I look at your portfolio, you have between Westbury -- Woodbury, Orlando, San Marcos, centers that are at 700,000 square feet and larger. Is there the capacity in your portfolio to take some as large as that?

David E. Simon

I think that it's in the outlet side. That's still going to be few and far between. I mean, we're making Orlando bigger. We're making Vegas bigger. We're making Desert Hills bigger. But these are, I hate using this word, but iconic outlets. Those will all be bigger. Those are all -- Seattle's getting bigger. Chicago will get bigger. So these are all -- that is probably underappreciated opportunity for this company. Just like -- Craig, I mean, people talk they're going to do this, they're going to do that. People are focused on a company having this particular lease here and there. We've got 5 outlets under construction. We just opened one. So people talk about, well, we're about to or hoping to lease the space. Hello, we got 5 under construction, so...

Richard S. Sokolov

And you just mentioned expansions of many of the best outlet centers in the United States.

David E. Simon

Right. And that coupled. So there is a lot to what we're doing. That's why we have great here.

Operator

The next question comes from the line of Caitlin Burrows from Goldman Sachs.

Caitlin Burrows - Goldman Sachs Group Inc., Research Division

We saw a report that Bank of America is not renewing its deals to keep their ATMs in Simon Malls this year. Because of that or for other reasons, do you expect any material changes in your ancillary income?

David E. Simon

No. In fact, we've already replaced them with another operator. That's been in the works for, really, a couple of years. No big deal. Yes, I was surprised it got the press, but no big deal.

Caitlin Burrows - Goldman Sachs Group Inc., Research Division

And then also, you reported land sale gains of over $6 million. Could you tell us who you sold that land to?

David E. Simon

Yes, I don't have it in front of me, but...

Richard S. Sokolov

We sold a piece of land in Northwest Houston for a supermarket right next to our Houston Premium Outlets, and that was a pretty substantial gain.

Operator

The next question is from the line of Cedrick Lachance from Green Street Advisors.

Cedrik Lachance - Green Street Advisors, Inc., Research Division

Just going back on outlets, in regards to Silver Sands, you got a loan there from the bank at a rate under 4%. Can you give me a sense of the appetite for mortgage financing in the outlet space at this point?

Stephen E. Sterrett

Yes, Cedrik, most of our portfolio in the outlet business, because it's wholly-owned, is unencumbered. But where we have shown the products to the mortgage market, whether it's the banks or the life companies, I think they recognize the quality and the stability of the cash flow, so I think about Philadelphia Premium Outlets, we had a mortgage on. We just got some financing on the -- we've got a construction/mini firm on Toronto at very attractive pricing. So it's a very attractive, very viable product for that market.

David E. Simon

Yes, I mean -- and I would just say, Cedrik, throw that in for the Mills projects, too. I mean, we're -- some of these are locked out, but the ones that are open and the ones that we bought out of the TMLP are extremely financeable, and that financing rivals any A mall that there is out there as well.

Cedrik Lachance - Green Street Advisors, Inc., Research Division

And just going back a little bit, looking at the big picture, where do you see the most fertile ground for investments today? Is it primarily in publicly traded companies, or is it in malls or outlets that are owned privately?

David E. Simon

Well, that's a tough one, Cedrik, to be honest with you. At this point, I would probably say that outside the opportunity that we saw at Klepierre, it's probably the private deals that we see as the most -- the biggest opportunity primarily because the private owners are going to have a much more difficult time to get financing and/or the private individuals that may want to monetize their business for whatever reason or their asset for whatever reason. I would say that's probably the biggest opportunity that we see, though it doesn't rule out that eventually, there may be some more public opportunities. But I would say to you as we think about what we're looking at, they tend to be more private-oriented, and it's either financing issues or state issues or whatever that's driving the need to do it. Now philosophically, we will not -- we don't rarely -- and I don't blackline everything, but we don't participate in bidding when -- if there's a banker or a broker and it says, "Bids are due at 2:00 p.m. Please send in your letter." We don't do that. I mean, I can't remember the last deal that we did where we'll participate in an auction. I mean, we just don't do it. We don't need to do it. We have no interest in doing it. So these are people that want to do business with us, and then we -- it doesn't mean that they're not represented by bankers or whatever, but those bankers know that if there's an auction, they can send it to the next mall guy. We're not going to play.

Operator

The next question is from David Harris from Imperial Capital.

David Harris - Imperial Capital, LLC, Research Division

On the appointment of Matt Lentz, how much experience has Matt acquired outside of public securities over the years?

David E. Simon

He's had -- he used to be a broker. He's been in the bricks-and-mortar business, so I think it's pretty good. I mean, we've got a group here that any -- not that I think there's any holes there, but we've got a lot of guys here that know about bricks-and-mortar that will help him.

David Harris - Imperial Capital, LLC, Research Division

Okay. Will his compensation details be made public?

David E. Simon

I believe it'll be whatever this -- I can't keep track of all the rules, but I think he will be one of the...

Stephen E. Sterrett

He'll be a named executive officer.

David E. Simon

Yes, I think he'll be a Form 4, 5 -- I don't know. Whatever the rules are, he'll be part of the rules.

David Harris - Imperial Capital, LLC, Research Division

So that will be in next year's proxy?

David E. Simon

Potentially. I'm not going to guarantee it because I really don't know.

David Harris - Imperial Capital, LLC, Research Division

Okay. Then turning to Klepierre, if I'm doing my numbers right, it sounded like you were down about $200 million on your investment here, about half is the stock depreciation and half is FX. You did put in $1 billion against $2 billion gross investment by way of a hedge, by way of your -- I think it was a credit line facility. Have you expanded that or hedged your position against the currency any more since then? I mean, it looks like all the risks are to the downside, David.

David E. Simon

Yes, well, David, look, we don't -- I don't think about -- the good news about -- for the investors is I actually think about the real estate long term, not quarter-to-quarter. So yes, the euro is down a little bit. The stock, we did buy it at a premium to where it was trading. That gap has been closed. In fact, it's been up since -- where we bought it. We kind of look at where we bought it versus the net asset value, and we still think the net asset value is higher than when we bought it. I'm not going to panic about the euro. It's a good portfolio. It's stable. You'll see the results later today. So to me, this isn't -- it's not a quarter-to-quarter gain. So that's of no concern to me, no consequence to me. But we did increase our hedge, and we're about 60-some percent hedged. We did that before even the latest euro depreciation. But I think the other point is that -- and if I could put it in real estate context, the real question is what happens in the principal. But this is not -- we didn't do this based upon short-term trading patterns. But if you look at the dividend and our cost of financing, just a simple -- go back, you know real estate, right?

David Harris - Imperial Capital, LLC, Research Division

A little, just a little.

David E. Simon

Cash on cash returns. We're going to get roughly, and this is even with the lower currency, we're going to get $55 million added cash flow while we decide whether we love this company, we want to maintain our investment, whether -- who knows what we do with this investment. But the fact of the matter is we're getting paid while we help make it a better company, which we're doing today. And I think about what it takes to build $55 million of additional cash flow, and I think it's a good trade. But look, the proof will be in the pudding. We'll see.

David Harris - Imperial Capital, LLC, Research Division

Okay. Another question on Klepierre. Since the election of Hollande, there have been a raft of tax changes, including increases in the dividend tax. Have any of these prompted you to recalculate your pro forma after-tax returns?

David E. Simon

No, no. None of those at this point will have an impact on us.

Operator

The next question comes from the line of Paul Morgan from Morgan Stanley.

Paul Morgan - Morgan Stanley, Research Division

On the sales growth trends that have been continuing to impress, I mean, maybe you could answer a little bit of the composition of it. I mean, clearly, they're above what a lot of retailers are reporting on a portfolio-wide basis. So I mean, how much of the increase is a same-tenant basis versus sort of shifts in the mix within the mall? And then maybe on a trend basis, kind of how is the tourist spending side of your portfolio going?

Richard S. Sokolov

Let me unpack that a little bit. One, the tourist aspects of the portfolios are still very strong. We're still seeing a lot of activity from a number of the tourism groups, but the only one that's softened at all is Japan. So that is still a major contributor, and we are out-weighted in tourist market. Secondly, when you think about the contributions of any one tenant, our sales base is over 60 million square feet. So when you get a number out of us, it's a broad-based trend. It's not going to be materially influenced by the out-performance of any one or any collection of tenants. Thirdly, I believe this reflects the fact that we're doing a good job making our properties better and hopefully taking market share from other properties operating in our markets. And that comes from adding better tenants, adding additional anchors, adding renovations and making our physical plants better, and all of ose things are feeding into what you're seeing as our bottom line sales growth.

Stephen E. Sterrett

And Paul, this is Steve. I'd just add one more comment that if you componentize that growth a bit, the rate of sales pace growth that we're seeing in the outlets in the malls is pretty much on top of each other.

Paul Morgan - Morgan Stanley, Research Division

And so, I mean, would you say that the kind of the non-same tenant number is maybe -- if your 10% comp year-over-year, is it -- half of that is due to change in mix or...

David E. Simon

Let me just say this. Our comp numbers and our rolling 12 are right on top of each other, absolutely right on top of each other, if that's what you're getting at. The comp sales and the rolling 12 are exactly right on top of each other.

Paul Morgan - Morgan Stanley, Research Division

Okay. And then just on terms of new concepts, I mean, there's been good growth from -- a lot of the public chains have sort of gotten back into growth mode. I haven't as many new concepts at least relative to the kind of '04 to '06 period. Maybe that's sort of what spurred a lot of development that you're not seeing now. But maybe, Rick, are you seeing signs that we're about to see an acceleration of new concepts?

Richard S. Sokolov

Well, there's a couple of things that are happening. One, a number of retailers that were new concepts, say, x years ago are now public, and they are substantially accelerating their growth because they have a very firm capital plan. Francesca, Teavana, Tumi, Five Below, Fresh Market. We also are seeing a number of concepts that were, again, relatively new a while ago that are being aggressively grown by their companies, Crazy 8, PS by Aero. But we're also seeing a number of new concepts, Versona by Cato, Dry Goods by Von Maur, Vince by Kellwood, C. Wonder, Hearts on Fire, Tesla. Hot Topic is doing Blackheart.

David E. Simon

We get it. We get it.

Richard S. Sokolov

So I'm going to wear you out. But there's a lot of stuff that's going on in that sector still.

David E. Simon

Paul, we all cringed because this gives Rick the opportunity to list all these tenents. Okay, so...

Operator

The next question is from the line of Steve Sakwa from ISI Group.

Steve Sakwa - ISI Group Inc., Research Division

David, I was just wondering if you could maybe talk a little bit more about some of the synergies and maybe best practices that both Klepierre and Simon are kind of sharing with each other. And I realize it's still kind of in early days, but are there any sort of success stories or things that you could sort of talk about that kind of show how things are kind of transforming kind of across both companies?

David E. Simon

Well, look, the fact is we've been very focused on the balance sheet. As you know, they've raised a lot of money in the bond market at much lower spreads than where they were beforehand. So that's a very tangible, very important, credible and important thing that we brought to the table. I'm not sure that absent our investment that they would have been able to do it. We've also reduced the reliance on their funding from BNP. And I mean, those are real tangible -- in the bounds of the organization making happen. Operationally, I mean, we're helping them think about all the promotional other income opportunities. I mean, that's going to take time, but we are now talking to certain sponsors on a global basis. We've helped them with a few tenants and a few areas on a global basis. Their head of leasing was in our -- at our shopping center convention, the ICSC. We had a number of global meetings with him and our people with the global brands, including H&M, Apple, just to name a few, Hollister. So it's happening. That stuff's going to take time, but the bond business is tangible. It's there, it happened, and that's only been in 4 months. Now strategically, you'll see changes with this company over a period of time. And the management team there has been very, very good, very cooperative, very interested in replicating what we have and listening to what we have to say. So it's working. It's a lot of work. We spent -- I spent last week there touring assets with them, going through strategy, going through numbers, going through developments. Actually, it's a scary thing helping design some of the extensions. It's scary because I was helping them, and that's -- but there's certain things I've learned over the years, too. So it's happening. It's going to take time. There's a lot that we're providing. There's more that we'll provide over a period of time. We're also respectful. We've been there 4 months. We try not to be Attila the Hun. We want to be -- we want to learn as much as we can. But the cooperation, the synergies are available. They're there. The chemistry between their managers and ours have been great. The only negative is that every morning, I have to hear about Europe every day. Harris reminded me of some of the ups and downs that go with the territory in trying to create value. We're big boys. We know nothing's easy. But I look at it, I'm getting paid to make this company better, and I've got a board and a management team that wants to get better, and we've got people here that can help make them better. And it's happening, and you can see it in the bond yields right away.

Steve Sakwa - ISI Group Inc., Research Division

Okay. I guess second question, last quarter, we talked a little bit about the St. Louis project and kind of where you and the other project from Taubman were. Now that you guys have kind of started construction and had your groundbreaking, I'm just wondering, kind of maybe being first out of the ground, has the leasing dynamic changed at all? And can you kind of provide us with maybe an update on where you are leasing on that project?

David E. Simon

Well, we announced a whole host of tenants on July 11. We've added a few more to that mix. I mean, look, they're -- Taubman's a formidable competitor. I'm sure they'll announce certain tenants as well. We anticipate that they're going to build their project. We're going to build ours. Our numbers are -- we're comfortable with our investment. This is not driven by ego, by any stretch of the imagination. We expect to get our lease. We expect to have double-digit returns. Taubman's a very formidable competitor. I'm sure they'll feel the same way about what they're doing. And it's most likely that we're going to have 2 outlet centers there. But I think, as I said, we're comfortable. We've got a lot of experience in the outlet business. I've been at it since '98. We were -- people scratched their head when we did our first joint venture with Chelsea. People scratched their head when we bought it in '04. I got confidence in our team. We expect to build a very high-yielding outlet center and we're moving forward with it.

Steve Sakwa - ISI Group Inc., Research Division

Okay. And then just last question on kind of the international outlets I see. I think, if I did my math right, that Japan sales were up kind of 5% to 6%. And I'm just wondering, how do you kind of look at Japan in terms of potentially new outlets? And maybe talk a little bit about just how Korea's performing and also the new project in Malaysia and any update on the China project.

David E. Simon

Sure. Generally, Asia is very strong. I mean, there's supply and -- and even with all the -- it gets down to kind of almost Europe to some extent. I mean, even with all the macro headlines in Japan, I mean, they're still doing roughly $1,000 a foot. And there's just not that many, and they're just not going to be that many. We've got our ninth that will open next spring. It's in a great location. We have a terrific partner in Mitsubishi Estate. So I don't think that 9 is going to go to 18. There might be 1 or 2 or 3 more to do in the next few years. We're also -- as you know, there, we phase a lot of stuff in, so we'll do 3, 4, 5 phases there. Japan, so even with all the headwinds and everything else, we've got a wonderful niche there, and we'll continue to exploit it and increase the cash flow there. Korea's the same thing. There's 1 or 2 formidable competitors, but our outlets there are probably -- what's the -- $700 a foot? $800?

Stephen E. Sterrett

$800.

David E. Simon

$800 a foot. The brands that we deliver are great. We have a very good partner there as well. So it's fine in Malaysia. It's exactly what we thought it would be. It's really trying to get access to a Singaporean market. We have a great partner there. They're doing stuff worldwide, which we're talking to them about, some other opportunities, and it's meeting our expectations there, so so far, so good. China is a little bit not as far along as we would like it. It's still a very complex place to do business. We're still hopeful that we'll get one started there. But it is more complex, and we're being more cautious given the -- if you think there's a robust pipeline in the outlet business here, you happen to think that pipeline has been around for years and years and not much will get -- not much of it will get built. The pipeline there expands daily. So we're trying to really underwrite it smartly, make sure this is something that we want to do. We do have a good partner in Shanghai. But we're going to be very, very judicious in how we ultimately build something there.

Operator

The next question comes from the line of Jim Sullivan from Cowen and Company.

James W. Sullivan - Cowen and Company, LLC, Research Division

David, I appreciate all the commentary on Klepierre. I have one other question. As I recall, their 2011 asset sales were completed at about a 5% premium to appraised NAV, and I believe at the beginning of this year, they talked about planning EUR 1 billion of additional sales for this year and next. I wonder if you could tell us number one, if that disposition plan is still in place and what the pricing expectations are relative to NAV.

David E. Simon

Well, look, they're going to announce probably shortly here. But generally, I'll say this, and I want to be very careful. Everything -- they're ahead of schedule, and NAV, by and large, has not been an issue in terms of being able to sell the assets at or above their NAV. But you'll see their results. I don't want to -- I just want to be very careful here because they do report or they may have already reported. I think they go out at 6:00 Central European Time. But so far, so good. And it's still on plan, perhaps ahead of schedule, and it's moving right along.

James W. Sullivan - Cowen and Company, LLC, Research Division

Okay. Second question on Woodbury, which you mentioned earlier and you mentioned also in the last call, in terms of the expansion potential there, can you indicate whether the plan is to add square footage on land you already own or at land you otherwise control?

David E. Simon

It's land that we own. So it's really reconfiguring a number of spaces, decking some of the parking and creating additional space on the land that we own.

Richard S. Sokolov

It's about a 60,000 square feet addition, primarily reconfiguring the additional -- the existing formats and just substantially upgrading the whole physical plant.

James W. Sullivan - Cowen and Company, LLC, Research Division

Okay. And then separately on Amazon, David, you touched on this in, again, your prepared comments. But as they prepare to pay sales taxes in several large states this quarter and open more infill DCs, have they had any discussions with you about opening outlet or full-price stores?

David E. Simon

Not with us.

James W. Sullivan - Cowen and Company, LLC, Research Division

Okay. And then final question, just a line item in other income maybe for Steve. The interest and dividend income was down materially on a consecutive-quarter basis. I wonder if you could tell us what's going on with that line item.

Stephen E. Sterrett

A couple of things, Jim. Number one, the dividend from our U.K. investment, CSC, was a second quarter event last year, third quarter this year, just the timing of their payment of that dividend. And then we had some investments in some loans that were, in fact, paid off earlier this year, so interest income is down.

David E. Simon

Yes, we're bummed out about that.

James W. Sullivan - Cowen and Company, LLC, Research Division

So on a full year basis, so the loans that were paid off, it sounds like they're variable on a year-over-year basis.

Stephen E. Sterrett

On a year-over-year basis, that's correct.

David E. Simon

And then the other point is we did -- as you know, we did have the mez loan with Mills, and obviously, that got paid off and retired as part of that whole transaction, so you're seeing that as well, Jim.

Operator

The next question comes from the line of Quentin Velleley from Citi.

Quentin Velleley - Citigroup Inc, Research Division

Just another Klepierre question. David, your involvement in forming the strategic direction for the company, does that involve acquisitions at this stage, or is Klepierre somewhat held back by levering cost of capital at this stage?

David E. Simon

I don't think that they are. I don't know that it should be their #1 focus. And we actually did discuss at the recent meetings a couple of opportunities that are out there. But I don't think it should be their #1 focus. But I don't think it's too far off in the future that we could be -- it could be up there, and we do think there's going to be a number of opportunistic deals. And again, it doesn't mean Klepierre. It could be Simon. It could be all sorts of things. But there are going to be a handful of those things to do, and I think it should be on the agenda, but probably not at the top of the list.

Quentin Velleley - Citigroup Inc, Research Division

Okay. And then just in terms of Brazil, could you give us an update on discussions with retailers regarding the Brazil outlet industry? And in particular, I'm interested in some of what the domestic Brazilian retailers' thoughts are on the outlet industry and the outlet channel given, I guess, the infancy of that industry down there.

Richard S. Sokolov

We had a, almost, say, 30 days ago, kind of a presentation to a number of Brazilian plus international retailers about our outlet pipeline with BR Malls. It was very, very well attended. The international retailers are growing there daily, and certainly, the high-end guys that we think are important to bring into the outlet properties are gaining entrance into Brazil on a weekly basis, so to speak, like Tory Burch just opened a store at a new high-end mall in São Paulo. So very, very well attended. The Brazilian retailers are very excited about the pipeline, and we expect them to populate these outlets aggressively. So it's very, very encouraging kind of what's going on down there.

Operator

The next question comes from the line of Rich Moore from RBC Capital Markets.

Wes Golladay - RBC Capital Markets, LLC, Research Division

This is Wes Golladay. A quick question on the outlets. We've heard the number 100 outlets in 10 years. Do you think there's actually more capacity than that for development in the United States?

David E. Simon

No, and I wouldn't put much credence in our opinion, we could be wrong, but certainly, we don't think there's 10 outlets in -- or 100 outlets in 10 years. Not a chance. We don't see it that way.

Wes Golladay - RBC Capital Markets, LLC, Research Division

Okay. Well, I guess, maybe how would you view it, the total opportunity for development?

David E. Simon

Look, I think there'll be a handful, but I don't see 100 outlets in 10 years, not a chance.

Wes Golladay - RBC Capital Markets, LLC, Research Division

Okay. And turning to the malls, what are you guys seeing in terms of traffic trends for the last quarter?

Richard S. Sokolov

Traffic has been relatively flat to up a little in all the platforms.

Operator

The next question comes from Christy McElroy from UBS.

Christy McElroy - UBS Investment Bank, Research Division

Sorry for all the outlet questions, I just have a follow-up. Given the pipeline in the U.S. with competing projects and quite a few private developers in the fray, I'm wondering how influential the core group of outlet retailers are in the center actually getting built. And while demand for space is obviously very strong today, how are the deciding factors for retailers signing a lease and a new project different compared to what they were 5 to 7 years ago?

David E. Simon

Well, look, we are living this every day. I would say to you it is still quite a challenge to convince outlet retailers, whether they're manufacturers or full-price retailers. This is our experience, and we have a pretty good portfolio, pretty big one. I think it's still quite a challenge to convince them to go to new centers. That's why all this talk about this unbelievable demand and all of this hundred centers and this that and the other, I've got to tell you we work our tails off to convince the retailers that this is worthy of an outlet center. So I don't think it's, by any stretch of the imagination, simple and easy to do. When we do it, we have confidence we'll do it. But it is not like you can plop these anywhere by anybody, anywhere by anybody, and it'll be successful. It's just not going to happen. And I think the retailers that have a high understanding of this business, whether they're manufacturers or full-price retailers, understand that and will also govern. They're open to buy very seriously.

Richard S. Sokolov

The only thing I would add is I think we would hope that the retailers have a high regard for the consistency of what we produce. David and I were just up in New Hampshire and visited Merrimack. That is an incredibly well-executed, well-leased, well-marketed project, and hopefully, we have that going for us when we approach retailers about our new project. They have confidence that we will -- they know what we will deliver and know that it will produce.

Christy McElroy - UBS Investment Bank, Research Division

Okay. And then on your property operating expenses, they seem to run a little bit lower than normal again this quarter. I know in Q1, there were some favorable comps, given weather and such. I'm wondering if there was anything specific in Q2 that you could point to, any trends that favorably impacted OpEx this quarter. And is there a way for you to break out your same-store NOI growth between revenue growth and expense growth?

David E. Simon

Well, there's a way to do it, but we don't. I assume we know what drives our business. Look, where size and scale -- when we talked about this company 15 years ago or 17 years ago or 18 years ago, we thought size and scale matter for a couple of different points. Retail relationships, ability to run efficiently, ability to cover our overhead at the executive level over a huge asset base more efficiently than our peer groups, that's what it takes to generate comp NOI growth, and that's what we do. Nothing jumps out, as we're reviewing it right now, that is worthy of mention. But we are very focused on our operating margins, and our size and scale and quality of assets allow us to do that.

Operator

The next question is from the line of Tayo Okusanyo from Jefferies.

Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division

Just a quick question in regards to any early indications about what back-to-school may look like this year?

David E. Simon

It's really too early to say at this point.

Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division

Got it, okay. And then, David, any other market -- I mean, you guys are seniors in many key markets, but any other markets internationally that you might be interested in?

David E. Simon

Let's see. Look, we have a big investment in Klepierre, and I think internationally, that's the big focus. We have got to make sure that that turns out to be a profitable investment. That's the #1 priority. The outlet business in Asia continues to progress. I explained that in detail to you. But that's really the focus. I mean, Brazil, Latin America, I mean, I do think will present more and more opportunities, not just Brazil but all of South America, for the company. And so I think you'll see us hopefully do some smart things down there over time. And Steve is whispering to me, but you can certainly jump in there. But we do have -- we are building Canada, Toronto. I mean, Toronto, there was a lot of talk about it. There's not a lot of talk about it now. We are under construction. We're going to have a great outlet there. We've got a great partner. We're looking at another deal in Canada, but hopefully, that will be a market that will possess -- present a few more opportunities for us.

Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division

Got it. And then just the last question. In regards to the supplemental line of credit, the additional $2 billion, should we be reading something into that in regards that you guys are seeing something out there that you need that additional source of capital for?

David E. Simon

I would just say it's consistent with our philosophy to be as prudent and opportunistic as we possibly can be. I mean, you're always trying to balance prudence against opportunity. They tend to kind of conflict each other. When you should be prudent, there's a lot of opportunities, so you try to get that right balance. And the world -- let's face it. The world is going to continue to be uncertain for, I think, a few years to come. If not, that's just the world we live in. So there's no reason not to be -- not to have the ability to be both prudent and opportunistic. And then based on how we read the tea leaves, figure out where the primary -- who wins, prudence or opportunity.

Operator

The next question comes from the line of John Kim from CLSA.

John P. Kim - CLSA Asia-Pacific Markets, Research Division

I had a question on the Main Street Fairness Act. Do you view this initiative as ultimately a revenue booster for your centers, or is this more of a defense mechanism?

David E. Simon

Look, I think it helps -- I think it's going to help our merchants. Anything that helps our merchants ultimately helps us. Look, Congress should not -- look, this is a states' right issue. I think most people in this country believe in state rights. So that's one aspect of it. But also, the government, Congress should not be picking, creating winners and losers. And this certainly has helped fuel the online against the bricks-and-mortar. Certainly, we're not -- oh this is going to mean x million of revenues, but if it helps our merchants, it's bound to trickle down to us in some way, shape or form.

John P. Kim - CLSA Asia-Pacific Markets, Research Division

So for the states that have already begun collecting tax from Internet companies, you haven't really seen a noticeable difference in sales?

David E. Simon

It's so early in that effort that I would -- certainly, we haven't seen anything, but it is just beginning.

John P. Kim - CLSA Asia-Pacific Markets, Research Division

Okay. On Klepierre, I don't see the second quarter numbers out yet, but in the first quarter, retail sales in Spain were down 6%, Italy was down 2%. What's the bull case for the company to potentially turn these markets around?

David E. Simon

Well, look, I think the bull case is that supply and demand will be in their favor once demand picks up because you cannot expand. It's very hard to get the right to build there. And the other point is they've got a great portfolio in Northern Europe, which is somewhat insulated from what's going on in kind of the Scandinavian areas, somewhat insulated from what's going on in Continental Europe. I think operationally, there are things that we can do to help the company increase its cash flow. And an operational focus from the company, we think, will increase the cash, so I think that's the bull case. The negative is, look, they're going to have to weather tough environment. The one country there that continues to be difficult for them is Spain. And again, it's not all Spain. It's certain assets in Spain. And we'll weather that storm, and I think as things stabilize, we'll get back to being able to generate cash flow growth from those assets.

John P. Kim - CLSA Asia-Pacific Markets, Research Division

Sure. And maybe just a follow-up to David Harris's question, if the euro continues to decline, how would that impact your decision to potentially acquire the remaining part of the company?

David E. Simon

We really -- at this point, we're pleased with our investment, and that's the focus. I can't really speculate on that going forward. Certainly, it makes it cheaper, right?

John P. Kim - CLSA Asia-Pacific Markets, Research Division

Yes, well, that's the potential outcome.

David E. Simon

Sure.

Operator

The next question comes from the line of Nathan Isbee from Stifel, Nicolaus.

Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division

Just going back to the same-store growth, I assume a good portion of that is coming from the 3.7% average base rent growth. Can you give us some detail on where the 3.7% growth is coming from, especially given your spreads are right around 10%?

Richard S. Sokolov

We're basically in the position of one, increasing occupancy; two, we're adding considerable number of anchors that are generating revenue. But see, it's just re-leasing our space at higher rents. And when you look at our expiring rents and look at what our average rent is, we've got a nice spread in there. And as our product gets better, we're able to take advantage of that and generate the higher rental revenues.

Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division

The 3.7% is in your small shop, correct?

David E. Simon

Correct, yes.

Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division

And the 10% spreads, I assume across maybe 10% to 13%.

Stephen E. Sterrett

Yes, Nate, this is Steve. We've had this discussion before on calls, but one thing, we calculate our spread in the most conservative way possible, which is what is the ending cash rent that a tenant was paying compared to the beginning cash rent that the new tenant or the same tenant on the new lease is paying. And that is a much more conservative approach than the GAAP method of which you're preparing financials, which would include the straight-lining of both the old lease and the new lease. So that's going to have some impact on it.

Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division

Yes, I understand. Even on a cash basis, the delta between, let's say, 1.3% to 1.5%, let's say, from your spreads to 3.7% across a very large portfolio is still pretty wide.

David E. Simon

Well, you got overage rent. I mean, you got lots of things that...

Stephen E. Sterrett

You're taking overage rent and you're capturing it in the new base rent.

David E. Simon

I mean, you got a lot of things going on.

Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And then one final question, a follow-up on St. Louis. Can you give us some insight on how the tenants are viewing the 2 projects? Are there any tenants that you're aware of that have said no to you because they were going next door?

David E. Simon

Yes, yes. There are a handful of tenants that had said no to us, absolutely.

Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division

And are there any tenants that have signed in both?

David E. Simon

There are some that have expressed that they're prepared to do both.

Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division

And so is it safe to say you're not putting in normal radius restrictions or you're not having the success putting them in...

David E. Simon

I think it's a tenant-by-tenant discussion. I don't think there's any -- it's a tenant by tenant -- we're going to tend to get that for the people that commit just to us like we do for every other outlet center.

Richard S. Sokolov

And the only other thing to say is we have announced, as David said, we're now 62% leased and committed. So that is certainly consistent with the kind of leasing progress we have had on all of our new projects.

Operator

The next question comes from the line of Ki Bin Kim from Macquarie.

Ki Bin Kim - Macquarie Research

Just a couple of quick follow-ups. First on leasing. Could you comment on -- I know you figured releasing spreads that you quote are on a cash basis. What would that look like on a straight-line basis for that 10% number?

Stephen E. Sterrett

Ki Bin, we don't calculate it on a straight-line basis. As David has said, I think, gazillions of times on this calls, the laser focus is cash flow, and so that's the way we look at the spread.

David E. Simon

It would be higher, though.

Stephen E. Sterrett

It would be higher.

Ki Bin Kim - Macquarie Research

Yes, that was what I was trying to get at.

David E. Simon

We're still getting steps in all of our leases.

Ki Bin Kim - Macquarie Research

And if it's possible, could you comment on what is the average vintage of the leases that have been expiring this year? Are they, like, 7 years old? And the second part of that question is, if you could calculate, what would the, on a like-for-like basis, the sales per square foot be back then versus today?

Richard S. Sokolov

I want to caution you on 2 things. One, and Steve touched on it earlier, when we roll over, we've done a very good job over the years getting much more focused on our breakpoints on our overage rent. So when you look at the relationship between the spreads and our comp NOI growth, there's a comp NOI being generated from sources other than just our spread. And David just said we also build in all of our bumps over the course of the leases, so the ending rent has already been impacted by our ability to raise the base rent over the existing terms.

David E. Simon

But if you look at '04, '05 sales per square foot, they were in the $400s, and we're rolling leases over. I mean, our expiration aren't in front of me, but it's the mid to high 30s. I mean, that's -- so now we're at $550, and we're getting in the 50s. I mean, that gives you a sense of what's happened on that. I think that's what you asked.

Ki Bin Kim - Macquarie Research

Yes. I just want to clarify that. So you're saying roughly, on a like-for-like basis...

David E. Simon

In other words, if you look at the leases we did 6, 7 years ago are rolling off today. These are rough, rough numbers, but they were $38, $37, $38. That probably was just under 9% -- probably under 10%, probably 9% of sales. And if you look at where we are today, we're $550. And that relationship is probably still pretty the same, but therein lies the spread differential. That's what you're thinking about.

Ki Bin Kim - Macquarie Research

Yes. And just last quick question, in respect to your comp sale, 1.5%, 1.4% treasury rates and maybe risk premiums offsetting some of that decline. How has that impacted B mall pricing, and have you seen any additional activity on that front?

David E. Simon

Well, look, I think -- and I think this applies, which is great. I mean, this is what PIMCO -- this is what Bill Gross said. I mean, the fact of the matter is unless the real estate is going out of business, okay, the fact is people are going to need cash flow growth, right? And that's the world that we live in. In a slow growth environment, rates are going to stay low, cash flow is going to be stable. I mean, if we proved anything to you over the years, it's that this real estate is -- it doesn't mean that certain things don't turn against us, and they have, okay? We've had centers that we've lost for whatever reason. But these things are sticky, cash flow is stable and yield is there. And you're seeing it by opportunistic investors. You're seeing it -- I mean, in Europe, you're seeing it. I mean, the stuff that Klepierre is selling is to yield-hungry investors. Why would they want to buy the German bond when they can get a 6 yield or 5.5, 6 yield on a stable asset? I think that's great for us to be in, not just us but all real estate companies. And that's a very attractive feature, one of the reasons why we're increasing our dividend.

Ki Bin Kim - Macquarie Research

I guess maybe do you expect any kind of reignition of the transaction market for BMO in the second half and maybe specific to you, too?

David E. Simon

With those -- with the outlook the way it is, the answer is yes, and it's happening slowly. I mean, you're starting to see the market pick up.

Operator

The next question comes from the line of Quentin Velleley from Citi.

Michael Bilerman - Citigroup Inc, Research Division

It's Michael Bilerman. David, I just want to come back to the unit purchase from JCPenney, and I think most would agree with your comment that units, think of them as one-for-one common stock equivalents. So being able to buy something back and create $60 million of shareholder value is impressive, given the fact that there's still another 61 million units outstanding. And so is there something particular about this OP agreement with JCPenney that -- where there was restrictions or something that would have caused the value of that stake to be 20% less than what the market is?

David E. Simon

No. There's only one operating partnership, and all the unitholders are treated the same. There's a preferred unit, but we're getting rid of that soon. But all the unit holders, there's no separate, different agreements. They're all the same.

Michael Bilerman - Citigroup Inc, Research Division

So then going back to the question of getting a 20% discount, was there a time lapse effectively if they came to you and said, "Okay, I'm going to exercise -- I'm going to put my notice in to redeem units," and now you have the option of delivering them stock or cash. Was there a time that they saved on that?

David E. Simon

The time actually is very quick, but put that aside. We actually didn't get noticed, technically. But there was a discussion about -- relatively simple. If they give us -- they did not give us notice. They give us notice, they get the stock, and they can market it. We actually -- Shelly, correct me. But we actually have to register the stock, I think, right?

Shelly J. Doran

[indiscernible]

David E. Simon

So it's freely tradable, we register it, boom, done. It was in the discussion that obviously, it turned to cash. And we part -- believe it or not, we part with our cash. We're very tough whenever we write a check out of this building. We are very focused on parting with our cash. We like cash, and that's what happened.

Michael Bilerman - Citigroup Inc, Research Division

But if they were to take stock, how quickly could they have monetized that stock?

David E. Simon

Two million shares, I assume it's pretty quick.

Michael Bilerman - Citigroup Inc, Research Division

Why would someone leave $55 million on the table? I mean, it's not like small potatoes, right?

David E. Simon

Well, look, I'm not going to get into that. Let's move on, Michael.

Michael Bilerman - Citigroup Inc, Research Division

Okay. Is there other opportunities that you have with -- you still have 61 million units. I recognize a lot of them are family -- there's a bunch of family units in there. But is there other opportunities where you can buy back stock at such an accretive discount?

David E. Simon

Look, there's nothing that I can really add to that other than what I've already said.

Michael Bilerman - Citigroup Inc, Research Division

Okay. And then just curious what the board's course of action has been since the proxy and the shareholder vote.

David E. Simon

Well, look, I mean, it is -- the board obviously has taken the vote to heart. They are very focused in talking to shareholders about it. The good news -- look, I mean, the fact of the matter is we're putting this -- our focus, our #1 focus, and that's me, Rick, Steve, the other members of our team, is on the business, okay, and obviously, our performance over this year, last year, for as long as we've all been together, is pretty good, and it speaks for itself. And we have all the confidence in the world that we'll continue to deliver very good performance to our shareholders. There's no guarantees, but that's the focus. The vote, given our performance, was extremely disappointing, and we didn't understand the vote, and there's enough precedence out there to suggest it was -- we just didn't understand the vote. But we'll be talking to our shareholders about it, trying to understand the way they voted it. And I will say that we've had some discussions. There's not a clear consensus as to why we voted -- they voted against it. We've had a number of shareholders that were supportive of it, but the board will take its job very seriously. We welcome any shareholder comments. We've had discussions with shareholders. We expect to have more, and we'll take it from there. But the #1 focus, obviously, even though we're disappointed because we've been such stewards of capital and performance, continues to be how do we make this company better, and we do it every day. But we've had discussions, and we'll continue to have more discussions with shareholders.

Michael Bilerman - Citigroup Inc, Research Division

Okay. And then just lastly, hopefully, this is okay from JCPenney, but should we expect any other announcements between you and JCPenney in regards to maybe buying anchor boxes or other sort of ventures with them in the future?

David E. Simon

Well, no. This thing was just really focused on the transaction that we did. We'll talk to them like we talk to all of our retail partners, but nothing -- I wouldn't expect anything out of the normal course of business.

Operator

The next question comes from the line of Mike Mueller from JPMorgan.

Michael W. Mueller - JP Morgan Chase & Co, Research Division

Most have been answered, but just one question. David, in the past, you cut up the U.S. portfolio based on sales just to show how concentrated it was, x percent of your NOI comes from over $800, over $500 a foot in sales. When you look at the Klepierre portfolio, how concentrated is it on that basis?

David E. Simon

It's really not up for me to do that, but I'm sure they'll welcome the question. I will say this, they do a very sophisticated analysis of their portfolio, buys, hold, redevelopment. But it's really not up for me to do it. But I do think the quality is there, the opportunities for enhancing the operations are there, but it's really not up for me to do that. I will tell you, though, they're very sophisticated in how they slice and dice the portfolio and what they want to do with the assets.

Operator

Sir, you have no further questions at this time. I would like to turn the call over to Mr. David Simon.

David E. Simon

Thank you. Thanks for your questions, and we look forward to answering anything else you might need over the next few days. Thank you.

Operator

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect, and have a very good day.

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