Operator: Thank you for holding, and welcome to the Taubman Centers' Third Quarter 2019 Earnings Call. The call will begin with prepared remarks and then we will open the lines to question. On the call today will be Robert Taubman, Taubman Centers' Chairman, President and Chief Executive Officer; Simon Leopold, Chief Financial Officer; and Ryan Hurren, Vice President, Investor Relations, Interim Chief Accounting Officer. Now I will turn the call over to Ryan for opening remarks.

Ryan Hurren: Thank you, operator, and welcome everyone to our third quarter conference call. As you know, during this conference call, we'll make forward-looking statements within the meaning of 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 yesterday's earnings release and our SEC filings, including our latest 10-K and subsequent reports, for a discussion of various risks and uncertainties underlying our forward-looking statements. In addition, a replay of this call will be provided through a link on the Investor Relations section of our website. During this call, we'll also discuss non-GAAP financial measures as defined by SEC Regulation G. Reconciliations to these non-GAAP financial measures to the comparable GAAP financial measures are included, when possible, in our earnings release, our supplemental information and our historical SEC filings. Non-GAAP measures referenced on this call may include estimates of future EBITDA, NOI, after-tax NOI, pro rata total portfolio NOI and/or FFO performance of our investment properties. Such forward-looking non-GAAP measures may differ significantly from the corresponding GAAP measured net income due to depreciation and amortization, tax expense, interest expense, and/or other adjustments some or all of which management has not quantified for the future periods. Following today's prepared remarks, we will open the call up for questions. We ask that you limit your questions to two. If you have more, please queue up again. Now let me turn the call over to Bobby.

Robert Taubman: Thanks, Ryan, and good morning, everyone. Yesterday, we released our third quarter results. Adjusted FFO per diluted common share was $0.86 in line with our expectations, and we remain on track to reach our full-year AFFO guidance. Our pro rata share of total portfolio NOI was up 70 basis points in the quarter and 3.6% year-to-date. Comp center NOI growth excluding lease cancellation income was down 150 basis points. Forever 21’s bankruptcy filing and the non-payment of September rent, along with continued unfavorable foreign currency exchange rates had a significant impact. Removing these items, third quarter NOI was flat compared to last year and was up 1.5% year-to-date. Average rent per square-foot was up 2.3% in the quarter and 1.7% year-to-date. On an NOI-weighted basis, it's 3.3% for the quarter and 3.2% year-to-date. In the U.S. comp centers, average rent per square foot was $62.20, up 90 basis points for the quarter and year-to-date. On an NOI-weighted basis, rent growth in our U.S. centers was 2% for the quarter and 2.5% for the year. At quarter end, our comparable center occupancy was 93.4%, up 10 basis points over last year and 120 basis points from last quarter. While in recent years, we have seen elevated levels of tenant turnover. We have continued to maintain healthy occupancy levels, while improving our merchandising. This quarter some of our notable additions were Balenciaga's new expansion and KENZO at Beverly Center, Gucci at The Gardens on El Paseo, Crate & Barrel open a 28,000 square-foot store at The Mall at Green Hills in Nashville. With respect to digitally native brands, Peloton opened in two locations. They now have seven stores with us. Warby Parker also opened in two locations. They have four stores with us. Casper opened its fifth store, and Chubbies now has two with us. At Waterside Shops in Naples, Apple reopened in an 8,000 square-foot store, and Louis Vuitton has reopened in a new expanded 4,000 square-foot store. At Dolphin Mall, Miami New Balance, Reebok, Aerie and Children's Place open comprising 20,000 square-feet. At CityOn.Xi’an and CityOn.Zhengzhou in China, we back-filled two Forever 21 spaces with Sephora, Nike, APM Monaco, Opel, Bose, Victoria's Secret and others. This has lifted the sales productivity and NOI at both centers. Lease space was 95.9% at September 30, up 80 basis points from last quarter and slightly ahead of last year. A few new and noteworthy leases signed this quarter, include Nordstrom's Rack and Adidas outlet taking a combined 44,000 square-feet at Great Lakes Crossing here in Detroit. Our house furniture in Pinstripes, a popular bowling concept will occupy over 40,000 square-feet in International Plaza in Tampa. And digitally native brands like Warby Parker, Beta and Chubbies continue to be adding stores. We are also delighted with our leasing progress related to the expansion and renovation at The Mall at Green Hills. The center will have 60 unique to market tenants, including Zara that is set to open its 37,000 square-foot flagship store for Nashville next year. Louis Vuitton will nearly double their space in a new 4,500 square-foot store, Golden Goose, Gucci, Powerhouse, EVEREVE, Morphe, Amazon Books, Fabletics and others have signed leases since our April update. We also now have 11 digitally native brands, either open or committed to the center. Overall, leasing program is substantially complete and we are very pleased with the level of merchandising, especially the luxury component which exceeded our expectations. Turning to sales. Overall steady sales growth has continued this year on top of very strong sales last year. Trailing 12-month sales in U.S. comparable centers were $964 per square-foot, up 13.7% over the prior period. Including Asia, our trailing 12-month sales were $868 per square-foot, an increase of 12% over last year. NOI weighted sales were $1,015 up 12.4%. In the third quarter, sales per square-foot were up 12.3% in the U.S., and we're up 11.2% overall. This is our 13th consecutive quarter of growth. Although, we benefited from Tesla's deliveries again this quarter, sales growth was solid nonetheless. Our largest categories of merchandise have performed well all year. Apparel sales were up for the eighth consecutive quarter on top of an 8.5% increase in the third quarter of last year. Shoes were up 5% in the quarter and year-to-date. Electronics including Apple continue to see double-digit growth. Growth in luxury across categories also remained strong. Louis Vuitton, Versace, Bulgari, Omega, Breitling, Saint Laurent, David Yurman, Salvatore Ferragamo and Hermes were all up at least 7%. In apparel, Zara, H&M, Fabletics, Lululemon, Aerie, Tory Burch, Ralph Lauren and Zumi's posted strong results. Moving to San Juan. In August, we settled the lawsuit with Hudson Bay Company regarding the Saks location at The Mall of San Juan. As you recall, in September, 2017 the Saks store sustained significant damage as a result of Hurricane Maria and did not reopen. We felt strongly, our agreements were clear and that Saks was required to make the necessary repairs and reopen as expeditiously as possible. With Saks closed, total sales grew nearly 20% compared to pre-hurricane levels and leasing along with merchandising continued to improve. In this context, we agreed to sell the litigation in exchange for Saks is paying us $26 million. We were also able to resolve nearly every co-tenancy issue, including with Nordstrom. We are actively working with a number of new tenants to take the Saks Box that would be additive to the merchandising of the center. So with that, I'll turn the call over to Simon.

Simon Leopold: Thank you, Bobby, and good morning, everyone. I'll begin by reviewing our year-over-year FFO variances for the quarter that is listed on Page 9 of our supplemental. FFO per share for the third quarter was $0.88. Adjustments this quarter included a promote fee received related to Starfield Hanam, a restructuring charge and cost related to shareholder activism, resulting in AFFO per share of $0.86. The net promote fee of $4 million resulted from Blackstone's purchase of the 14.7% interest that was owned by the Company's institutional joint venture partner. AFFO per share was $0.86 this quarter compared to $1.01 in the third quarter of 2018. We noted several year-over-year variances in the press release that affected this quarter's results including interest expense, unfavorable $0.05 primarily due to lower capitalized interest, largely the result of the completion of the Beverly renovation project in November of 2018. Non-operating income down $0.025 due to a land sale gain and dividend income from Simon Property Group shares that are included in last year's results. Lease cancellation income was also down by $0.025 and uncollectible tenant revenues, which are formerly known as bad debt were unfavorable by $0.02 primarily due to the Forever 21 bankruptcy filing. Our other year-over-year variances included the following, minimum rents up $0.04, primarily due to higher average rents, partially offset by the write-off of Forever 21 straight line rent receivable. Net recovery is down $0.02. We're also impacted by Forever 21 as well as higher common area of spending. G&A was $0.015 unfavorable due to some unanticipated non-recurring legal expenses, and lastly our non-comp centers were unfavorable by $0.01. Now moving to the balance sheet. We're pleased to refinance and extend both our primary line of credit and one of our unsecured term loans earlier this week. Our line of credit will maintain a capacity of $1.1 billion and our term loan now as a principal balance of $275 million. The maturity date of our line of credit is now February 1, 2024 with two six-month extension options, which is if exercised coincide with our new term loan maturity date of February 1, 2025. Both loans bear interest within a range based on the Company's total leverage ratio. Today, the line of credit has a rate of LIBOR plus 1.38% resulting in an effective rate including a facility fee of about 3.4%. The term loan has a rate of LIBOR plus 1.55% with LIBOR continuing to be swapped to a fixed rate of 2.14% through February of 2022 resulting in an effective rate of 3.69% today. These refinancing slightly lower our effective borrowing rates and improve our weighted-average debt maturity to nearly six years. We're pleased to have 15 banks participate in the facilities. I would like to thank our Bank Group for their continued support. I now want to provide an update on the progress of our Asian transactions with Blackstone. In September, we closed on the largest three joint ventures by completing the sale of half of our interests in Starfield Hanam to Blackstone for $300 million. The sale represents more than half of expected proceeds from the three joint ventures. The Company now owns the 17% interest in the center, but Blackstone owning 32% and Shinsegae owning 51%. We remain on track to close the two China joint ventures around year-end. In addition, there are two refinancings on the China projects that are part of the overall recapitalization of our Asia business. We completed the refinancing of Xi'an back in April and expect to close the Zhengzhou loan before year-end. Now an update on our 2019 guidance, which as a reminder can be found on Page 6 of our supplemental, along with all our key guidance assumptions. We are reaffirming our previous AFFO guidance range of $3.64 to $3.74 per share. The Forever 21 bankruptcy filed in late September remains a fluid situation. As we noted last quarter, we believed our guidance range incorporated adequate reserves for this year's AFFO impact. Based on what has happened and what we know to-date, we believe our AFFO range remains appropriate. As it relates to occupancy, our current expectation is that nearly all of our 17 locations will remain open and operating. While we are not changing AFFO guidance, we are adjusting three key guidance measures. First, we have revised our comp center NOI growth guidance. We now expect growth to be flat to 1%. On our last earnings call, we highlighted the headwinds that foreign exchange rates presented to our NOI growth. Currency continues to have an adverse impact about 80 basis points of drag on growth through the third quarter. In addition, tenant bankruptcies including Forever 21 have resulted in elevated frictional vacancy, non-payments or in some instances lower rent. We are also updating our interest expense guidance for the year. The previous range did not include the debt paydown associated with the Starfield Hanam transaction. Interest rates are also lower than we originally forecast. Finally, we revised our expected lease cancellation income at share from $12 million to $10 million. Now I'd like to make a few comments as we looked at 2020. First based on today's best estimates, we expect Forever 21's bankruptcy to create a drag on comp center NOI growth next year of 1% to 1.5%. The resulting FFO impact we estimate to be $0.08 to $0.10. Next, while the Blackstone transactions were clearly accretive when we announced the deal back in February, a good portion of that accretion was related to debt reduction at rates that were materially higher than they are today. We now believe rates will be at least 100 basis points lower than assumed and the net effect will be about $0.03 to $0.04 of FFO next year. Lastly, in 2019, we received about $7.5 million of business interruption proceeds related to the Mall of San Juan, which are included in FFO and AFFO this year. These will not pre-replicate next year and are not expected to be offset by NOI growth at the center. With that, I'll hand the call back over to Bobby.

Robert Taubman: Thanks, Simon. While the retail landscape continues to evolve, we have maintained strong occupancy levels and we are growing sales, rent and portfolio NOI. We're also on track to meet our earnings expectations for the year. Finally in Asia, we have made substantial progress on both our Blackstone transactions and our new development enhanced on South Korea. So with that, we'll take your questions. As Ryan said, please limit your questions to two. Christine, are you there?

Operator: Yes, sir. [Operator Instructions] Our first question comes from the line of Christy McElroy from Citi.

Christy McElroy: Hey, guys. Good morning and thank you. Just with regard to Forever 21, understand the process is still fluid and I really appreciate all the detail on the 2020 expectations? Can you talk a little bit about sort of how investors should be reading into that initial, closure list that was filed and how we should be thinking about that impact in the context of expected closures versus rent relief?

Robert Taubman: Well, as we said, the situation Christy is very fluid and the bankruptcy, it remains unresolved. There was a new list put out, I think yesterday that's a much shorter list of the closings and there were only two, on that list originally there were 12 on the list that were included for us. Now there were two. It's likely as we said that almost all our locations that will remain open. But when we have rights to take them back, if we have rights to take them back, what's the rent levels will be? What we're reflecting in our expectations here is based on all those negotiations that are occurring, and we think that that the likely outcomes are well within that that range, the reasonable sort of range of outcomes for this year and for what we've now said for next year. So we'll see what happens, but it's winding its way through the process. It is very complicated. It is our single largest tenant is 4% of our space. It's actually 2.6%, roughly of our AVR. So when your largest tenant, it goes into bankruptcy, it does have an impact.

Christy McElroy: And then just understanding that you're releasing spreads continued to be impacted by short-term leasing. But even sort of excluding that impact, it seems like there's been deterioration in your rent increases on a permanent leases as well. Maybe you could give us some insight into that trend? And can you remind us, does rent relief related to bankrupt tenants flows through those releasing spread numbers?

Robert Taubman: The answer to the last question is, no. They don't. We are still growing our average rents, Christy, and that's important to note. Even through the volatile environment, rents are going up. Spreads are always a complicated step. They do not tell the whole story. I will say demand for space in our centers broadly remains very strong. We have healthy occupancy numbers. We have healthy lease space numbers, and we are able to push rent at our best centers. We really – we manage for NOI. We manage for occupancy. We manage for the quality of our merchandising. And all of that's improving, while we are able to move average rents up. The volatility is creating some drag on our ability to grow NOI this year, but over the long haul, we think our centers are getting a lot better. Spreads really are for us just an output. And especially in a small portfolio in any quarter, they can be extremely volatile. So I've pointed to really the average rent, I pointed at occupancy, I pointed to our merchandising, and that's really where we're focusing.

Christy McElroy: Okay. Thank you for your time.

Robert Taubman: Thanks, Christy.

Operator: Our next question comes from the line of Jeremy Metz from BMO Capital Markets.

Jeremy Metz: Hey guys. As we look at the same-store, the 30 basis points year-to-date performance guidance as soon as you're roughly at that same level in the fourth quarter to finish in that flat to 1% range. So what are some of the moving pieces here to get you there and what are you expecting from Forever 21 impact is obviously 90 basis points here in the third quarter, but I think they did actually pay October rent? Correct me if I'm wrong there.

Robert Taubman: Yes. So on the last piece, Jeremy, they did not pay rent in September and that was a hit in this quarter. That was about $1.6 million in the quarter to NOI. There was also a straight line rent write-off that we refer to. That's not an NOI, that's an AFFO. But maybe just I'll give you the broad picture on the comp center guidance for the year and the revision. We started the year at 2%, which included a very small drag, very small, about 10 basis points from expected FX rates between the U.S. dollar, the Korean won and the China RMB. Rates have been – throughout the course of the year, we've been highlighting it have been a bigger drag than originally expected. It's about 80 basis points through the third quarter. So when you look at that versus about two, that gets you a lot closer to about one for the year. The other piece here is Forever 21, but it's also the entire volatile environment with bankruptcies where we are seeing an elevated bankruptcy environment. This looks a lot more like 2017 where we had about 3% bankruptcies. That was about half. It was about half that in 2018, but this is looking a lot more like 2017 than 2018. And so between Forever 21, and the expectations for the year and what we saw in the third quarter and the overall elevated level of bankruptcies on the year, we've essentially burned through the reserves that we had in place. We said on our second quarter call that we thought that we would be able to accommodate Forever 21 within our reserves, but we wouldn't have much left. That's in fact where we are. So between FX and what we've seen in terms of elevated bankruptcies and effectively putting back in a $3 million to $5 million cushion for reserves for the fourth quarter, that gets you down to about 50 basis points of growth for the year. And that's the midpoint of our guidance right now.

Simon Leopold: Yes. Let me just augment, Jeremy, on bankruptcy is just to put data on it. In 2017, over 3% of our tenants went into bankruptcy. In 2018, it was half. It was about – I think it was 1.6%. In 2019, year-to-date we're 2.4%. We're going to be over 3%. So if you think about 2017 and you think about 2019, they're really running on a similar basis. 2018 made us feel a little better. But I do think that things are settling. I mean, we knew Forever 21 had issues, and clearly there's tenants on a watch list, but this 3% level is very elevated. And as you look historically, we're anywhere from 50 basis points to a little over 4%. So anytime you get above 3%, you're really in the higher end of the range, especially when you get it sustained over – now really a three to four-year period of time.

Jeremy Metz: Yes, thanks. And in terms of the month-to-month leases and even these shorter leases you've talked about that are dragging some on the leasing spread front. How much does this account for today? And as we think about retailers mindsets shifting here, and we think about incubating newer concepts, getting some of these digitally native tenants to test our mall space, over time should we expect to see a larger proportion of these kind of shorter term deals, whether it's monthly or even one, two, three years?

Robert Taubman: I don't think that – we're clearly seeing some large tenants, a lot of fast fashion guys out there, but they create, I'll say the lower spreads. But when you think about the digitally native guys, there has been some of that and a lot of that has turned into long-term tenants. I mean, Peloton is a very good example. UNTUCKit, Casper, they started in our centers with short-term deals and they turned into real concepts and they're now expanding as we talked about earlier in the prepared comments. So we think it's been a good strategy to actually get them in the mall and now they're really expanding, but they're becoming normal tenants. They're paying normal rent and they're taking space in a whole broad variety of shopping centers, which you heard in my comments earlier. So there is a transition going on from many legacy retailers into the new retailers, but – and it's beginning to really take shape and take hold.

Jeremy Metz: Thanks guys.

Operator: Our next question comes from the line of [Greg McGinniss from Deutsche Bank].

Unidentified Analyst: Hey. Good morning, everyone. I was hoping to tackle and understand a few pieces related to Saks, San Juan. So you mentioned the co-tenancy is mostly dealt with there. So I’m curious what you have to maybe give up during co-tenancy negotiations with retailers to settle any of those disputes, especially with regards to Nordstrom? And then how much do you expect to spend to redevelop and backfill that anchor space?

Robert Taubman: Well, first of all, Nordstrom, I mean, they have an operating covenant with significant term on it. And as we said, it is resolved, the co-tenancy issue is resolved and we can't talk specifically about that individual discussion. With respect to the other tenants, there were about a dozen tenants that we dealt with, that in one way or another, the Saks closing impacted. And so I don't think it was material against where we were with those tenants, specifically. We do think the Saks resolution allows us to move forward. We realize the gain on the transaction and you asked is there going to be capital for to re-tenant it? It is possible, but we now have the ability to attract a much more productive tenant in their building. We are actively showing the space to a number of potential tenants. And we feel good about our opportunity to rebuild that location. And frankly the center is the island rebuilds and tourism returns. We expect to have strong tourism this year given what's happened in The Bahamas. And we expect it to continue to grow. It has been a long process. It could continue to be a long process, but we are optimistic about the center and we are very pleased to have the Saks resolution behind us.

Unidentified Analyst: Great. Thanks. And then second question, just hoping to talk a bit about Stamford Town Center. Curious that the market factors were there that kind of led to some of the issues with that mall and what was the impetus for finally listing the property, and do you foresee similar situation with any other holdings?

Robert Taubman: So first of all, Stamford is a unique situation for us. We are exploring all possible alternatives on the asset. I want to remind people, we've said this before, that it represents less than 1% of our pro rata NOI and about 1.5% of our comp center NOI. We did expect the competitive challenges that are there today. Again, it was unique. There are very, very few projects anywhere in the United States being contemplated for major retail right now. And clearly, I would say performance has been lagging in the assets compared to the rest of the portfolio for awhile. If we excluded the asset from our comp center NOI growth, we would have been 50 basis points better this year. So it is impacting us. We are very focused on it and we're looking at all the alternatives.

Unidentified Analyst: All right. Thanks Bobby.

Operator: Our question comes from the line of Todd Thomas from KeyBanc Capital Markets.

Todd Thomas: Hi, thanks. First question, Simon, the assumption that you provided for Forever 21’s impact on comp center NOI and FFO in 2020. I just want to understand what that consists of in terms of the number of locations just based on the comments around the list of closures that was released yesterday? And also what are you assuming, I understand again that things are fluid here, but what are you assuming in terms of the timing of those closures or the impact there from Forever 21?

Simon Leopold: Well, we don't want to get too deep into what is still a fluid situation, but I can give you the basic underpinnings of what went into our thought process, which is that we do believe that nearly all the locations will remain open. We do and we've gone space by space and we've looked at occupancy cost, we've looked at what we think makes sense. And so inherent in that 1% to 1.5% reduction to comp center NOI and $0.08 to $0.10 reduction FFO is a reduction of rent that's going to be different in every one of those locations based on the occupancy costs of the tenant in place.

Todd Thomas: Okay. And Bobby, the situation with Forever 21, does it make you – you mentioned that you just opened up a new store with Zara, I'm just curious if this makes you think differently at all about fast fashion in general whether Zara, H&M or just that business in general?

Robert Taubman: I mean they're two totally different organizations companies. Forever 21, I think it's been widely reported, made a bunch of missteps along the way, including their expansions in Europe and Asia. We've already released the two locations, I mentioned at CityOn.Xi’an and CityOn.Zhengzhou in a very, very positive way. And unfortunately they took some very large stores, many Mervyn's boxes and the like and they just couldn't fill the – they couldn't execute; they couldn't fill those large spaces and execute properly. And I think, again it's well documented that this is sort of a unique problem with them. It's unfortunate in every respect and they really did in this country, create the fast fashion idea, and they did a terrific job for a long time. I would say, just in addition to Zara, who've been very cautious in their expansion and taking very few new locations at a time here in this country. H&M has also expanded very broadly and H&M is doing very well this year, throughout their portfolio and throughout our portfolio. So I think it is a unique circumstance to Forever 21 and it sort of went off the rails in the last couple of years and given the environment that we're in the retail environment, I think it accentuated itself dramatically.

Todd Thomas: Okay. Thank you.

Operator: Our next question comes from the line of Craig Schmidt from Bank of America.

Craig Schmidt: Thank you. It appears that luxury sales are doing better than sales overall. And I was just wondering, are you seeing an increase in luxury retailer’s appetite to open new stores?

Robert Taubman: Absolutely Craig, both in the number of brands, the number of locations that you can hear in our comments about various expansions that occurred, whether Balenciaga, whether Saint Laurent, whether Gucci, whether Louis Vuitton. These stores are expanding. Hermes is expanding many of their locations. So luxury is strong right now. I mean, all those tenants I mentioned, every one of them individually was at least 7% or greater in their volume increase. So it's very good. They're very selective about where they go. It sometimes takes several years of planning to get them to look at a location and move into a location. But we're very pleased with our general luxury representation throughout our portfolio and its growth.

Craig Schmidt: Great. And then just maybe a long-term view on net debt to EBITDA. Where you think it might be by the end of this year and next year? And what's your long-term goal? Where you want to get that ratio to?

Simon Leopold: Craig, I guess I'd start by saying, our balance sheet remains solid. We noted on the call that we extended our primary line of credit and our larger term load out until 2025 at favorable terms. We closed the Starfield Hanam transaction, which gave us some cash to paydown our line here in the U.S. Our coverage ratios are very healthy. We're about 2.7 on interest expense, over 2x on fixed charges. And we've got one of the lowest costs of debt in the sector, we’re sizable below 4%, and now our weighted average debt maturity is nearly six years. Debt to EBITDA is a bit higher than we want it to be where we are in the 8. We’re going to be looking for ways to opportunistically address that. Obviously, growth in EBITDA is a piece of that. We are very focused and try and get – to get back down below 8x. But this is going to be an ongoing monitoring for us. It's ongoing focus for us. And if we can find more opportunistic way like we did with the Blackstone transaction to get that number down, we're going to do that every time.

Craig Schmidt: Okay. Thank you.

Operator: Our next question comes from the line of Shivani Sood from Deutsche Bank.

Shivani Sood: Hi. Good morning. Apologies for blabbering the Forever 21 point, but just wanted to clarify one item. It sounds like FFO guidance for this year contemplates that all 17 locations remain open. But I thought Simon that you mentioned earlier that they didn't pay September or October rent. Is that correct?

Simon Leopold: Well, we don't think they're all going to remain open. We think there's at least one that'll close. That's not a huge rent payer. But the way the bankruptcy happened, they did not pay rent in September, we think in everyone's portfolios. That rent then goes effectively into a bucket that'll end up as an unsecured claim after bankruptcy, we do not expect to recover that in any material way in any timeframe that we can evaluate.

Shivani Sood: Okay. Thanks. That's it guys.

Operator: Our next question comes from the line of Rich Hill from Morgan Stanley.

Richard Hill: Hey. Good morning. Bobby, first question for you. We've talked a lot about short-term leases for several quarters now, maybe even a couple of years. Is there any reason why this should not be transitory? And maybe just a reflection of how some retailers are approaching the retail environment?

Robert Taubman: I really do think it's transitory. We’re in a cycle right now. We're merchandising occupancy, managing your NOI, all those things are very, very important. And we would like to begin to push rents, but when you go through a cycle like this, especially with bankruptcies in the backfilling, that we're doing, it makes it harder. So you need to make judgments everyday. And when you have larger tenants that you think are critical to the center in terms of merchandising, then you're willing to make some short-term deals in order to sustain them in the center. And we’re making those decisions where we need to. And as we talked about, there were six spaces that were over 30 – are averaged about 30,000 square-feet. They did impact our number and we would have been 4% - 400 basis points higher in our spread absent those tenants. But we went through each one of the tenants. You would say, oh, I mean, we want every one of those tenants. But they're all part of our numbers. And we have a small portfolio. Everything gets accentuated and it's a very volatile statistic. So I think in this environment that you will see some of it continuing. But eventually, we will get back to less of it.

Richard Hill: Got it. Thank you. And Simon, maybe somewhat of unfair question, but a couple of quarters back, maybe a year-ago or two, you had some pretty nice statistics about how we should think about growth over the medium-term. I think you got away from that long-term growth after the Blackstone JV, but is there anyway we should sort of think about the new developments in the pool versus the properties that have been in the portfolio for quite some time from a growth standpoint?

Simon Leopold: That's a pretty broad question, but I'll try to take it in chunks. I guess, in 2018, we were able to exceed our guidance measures and outperform. Largely on the back of the three development projects in Asia and our development project in Hawaii doing materially better than we had projected at the beginning of the year. A little bit of that was positive outcomes on currency in Asia, but a lot of it, the bulk of it was really core better performance than expected in the those two assets. And we've been saying this year that our ability to outperform again would be outperformance in those assets. And you should not expect those to be dramatically different than what we said at the beginning of the year. If it is great, if it isn’t, we'll be closer to where we told you when we gave guidance. The assets are performing fine, but they are not outperforming our expectations this year. They're really – now I would say all of the development assets really are more part of core then they should be looked at as the kind of growth you would see in assets that are moving towards stabilization. So with that, we really have the assets that are in the portfolio now are all kind of in the numbers that you've seen with the exception of the – the expansion at Green Hills, which opened earlier this year and which will help growth in 2020. And will help growth again, we think in 2021 as those tenants continue that we've lead to continue to get open and we'll have a full-year in the run rate. That's really the only thing, that I would say should be producing outsize growth compared to the rest of the portfolio next year and into the following year with the exception I advance on, which will open toward the end of 2020 and should provide a boost a really in 2021 and 2022 is that asset gets to stabilization.

Richard Hill: Got it. Thank you for that. Can you remind me just real quickly of Green Hills in the same-store pool at this point?

Robert Taubman: It is.

Richard Hill: Okay. Great. Thank you. Thanks, guys.

Robert Taubman: Yep.

Operator: Our next question comes from the line of Caitlin Burrows from Goldman Sachs.

Caitlin Burrows: Hi. Good morning. I guess maybe just one on the remaining two Blackstone joint venture sales? Is there anything you can share on the process there and what's making it take longer than the initial one did? Is it just that it's harder to do when the properties are broader something else?

Robert Taubman: Yes. Hi, Caitlin. We always knew that these were going to be serial closing throughout the course of the year. We always knew Hanam would be first. So nothing has changed there. There are a number of things related to both the Xi'an and Zhengzhou closings, which we really at the end of the day really are administrative in nature, and to some extent things that we need to just work out with our partners that remember we've got a couple of partners in those assets as well. So it's really – it's nothing specific that's delaying it. I wouldn't even say that they are delayed. It's just that – we knew they were going to take some time to happen. We knew they were going to happen later in the year. And we still believe that they will. There is nothing has changed in terms of our expectation of the probability of this closings happening. We're still highly, highly confident they will, and we expect at least one before year-end or by year-end, and if one goes into next year, it won't be longer than the next year.

Caitlin Burrows: Got it, okay. And then maybe just going back to San Juan, wondering if you could give us any thoughts on what you're considering for the Saks Box replacement, whether it would be a multi-tenant or one use, and then I don't think that properties in the same-store pool. So just what would make it go back in?

Robert Taubman: On the tenant, if any of the above of what you've just said. It could be one tenant. It could be a retailer. It could be an entertainment tenant. It could be a two to three tenants. We were talking a whole range of people trying to figure out what we think would be most additive to the merchandising of the center.

Simon Leopold: Yes. And in terms of the same-store pool, it's not in the same-store pool right now. There's still a significant amount of work that we're doing with the Saks Box, and on the tenant base. We are fairly well lease there. I think we're about 90% lease close to it. We're occupied in the mid-80s, but there's still work to do there. So my expectation – I think the expectations of the investment community should be that it probably does not go back into the same-store pool next year. What would make it go back into the same-store pool, I think is when we get the occupancy levels that look more like the portfolio as a whole. So we have a little more work to do to get it to that point.

Caitlin Burrows: Okay. That's all. Thanks.

Operator: Our next question comes from the line of Samir Khanal from Evercore ISI.

Samir Khanal: Yes. Good morning. Simon, at one point you had talked about this $20 million to $30 million of NOI that was going to flow through from a redevelopments – I believe at that time was Beverly Center, the Saks Box at Short Hills and I think some of the Sports Authority boxes. Can you update honest on that and kind of what you're tracking as we think about 2020?

Simon Leopold: I can give you a general update. I think that The Green Hills contribution there is taking a little bit longer than we originally expected. That's really to do with the leasing environment. The merchandising is great. We're very happy with what's happened there. But we do think that it's just taking longer to get folks open and get all of that done. So the contribution in 2020 will be a little bit lower than what we expected. So you'll have closer to full run rate of that in 2021. Beverly Center is still work in process, but a positive work in process in terms of our ability to bring restaurants in, our ability to bring better uses throughout the center in luxury and things like that. 2019 contribution is looking like what we expect it to be there, and as to the Sports Authority boxes, those are pretty much looking like where we expected to be. So I would say when you look at the $20 million to $30 million by 2020, we're going to be shy of the 2020, but not by a huge amount.

Samir Khanal: Okay. Thanks for the color on that. And I guess Bob is switching gears, despite the distress we've seen in retail, you held occupancy, you're expecting occupancy still to be at sort of at 95%, maybe to expand on that. And again, as we think about next year, what does the leasing momentum look like as you're kind of dealing with sort of these 2020 expirations right now?

Robert Taubman: Well, look we have solid demand as you've heard in various ways throughout the call. Solid demand remains in our portfolio, especially I'll say the top half of the assets. You can hear in the leasing program that Simon just talked about Green Hills. I mean, it's a very good example of the dynamic. I mean, we attracted the very best tenants, Zara, Restoration Hardware, Crate & Barrel, the expansions that I mentioned from Apple and Louis Vuitton, adding Gucci into the shopping center, all the digital natives that we brought in. I mean you're hearing that we're getting all the best brands. They're coming to our shopping centers. We did have more bankruptcies in 2019 than we expected. Then we've made very good progress on the backfilling with a broad group of tenants, but we have a lot of backfill to do. I mean I think at the end of the second quarter, we had a 100 basis points of closers that we expected due to bankruptcies and we expected that backfill about 60 basis points of it by year-end. Well since then, we now have 140 basis points instead of a 100. And we're expecting the backfill maybe 90 basis points of that. And this does assume that most of the Forever 21 locations are going to stay open. Not all, but most. So you're seeing there is demand. It is solid. You can see in our NOI weighted statistics that we were up 2.3% what we were up 3.3% on an NOI weighted basis. So you're seeing that, we're getting stronger rent in the better assets, but we did get hit on Forever 21 and we did get hit on currency and otherwise the portfolio is doing well in a very difficult environment.

Samir Khanal: Okay. Thanks for the call.

Operator: Our next question comes from the line of Vince Tibone from Green Street Advisor.

Vince Tibone: Hi, good morning. Forever 21 operates on a much bigger footprint than most in line retailers. I'm just curious, what is the backfilling strategy of the Forever 21 spaces you get back? Do you think you're going to have to split some of these stores to get a backfill a quicker than maybe a single tenant?

Robert Taubman: I think in many of the cases, I think we have six or seven locations out of the 17 locations that are 30,000 square feet or larger. And in a number of those locations, we will likely split it up. And we're in discussions on a number of them right now. And other ones, it will be a single tenant. So, it depends on the location, the frontage the options and we'll see over the next couple of years what we ended up doing. But yes, it's a combination of both. I think we only have – I think one store up to 50,000 feet. They did take a lot of stores. I'll say above that, even above 70,000 square feet. But again, those were old Mervyn's generally, and we did not have any Mervyn. So we never made one of those deals with them.

Vince Tibone: That makes sense. But it sounds like when you do, if you were to split some of these, NOI box. So this would be a potentially a multi-year process versus maybe, having something come back online in 2020. Is that a fair statement?

Robert Taubman: Well, again, it's a fluid situation that's in bankruptcy and we're negotiating with them. And to the extent that you negotiate a rent relief with them then we want a short in term. We want certain rights to take back in various locations. So we're going to be prudent about the merchandising in these centers. We're also going to be obviously focused on improving rents wherever we can. But it is a process that on average will take longer than just a 2020. But I think that will be very typical of this bankruptcy for all of the landlords in our sector.

Vince Tibone: Thank you. That's helpful color. One more for me, could you provide an update on the Beverly Center redevelopment, specifically the food hall that is not yet open and just, you know, how close that overall property and project is to stabilization?

Robert Taubman: Well, the center has very strong momentum. We introduced all these tenants in that. We've strengthened the luxury and we've strengthened the food and the center has been well received by the customer. We've talked about it really is the only place in LA to shop from fast fashion up to luxury, and everything in between the sales have been good. And they are near the historic levels that we ever achieved there. So as far as the eighth level goes, we are in very active negotiations. Forever 21 also has their location in that center up in the eighth level. So we're very active locations with food, with co-working, with entertainment. And what we're trying to do is look at the eighth floor in totality, and really create a destination or an anchor there on the eighth level that will really drive customers in the center generically and largely in what I've just said, non-traditional retail, so that you will have other reasons and other destinations to come into the center off of the eighth floor.

Vince Tibone: That makes sense. So there's nothing then imminent in terms of opening the food hall or it sounds like everything is still on the works up there then?

Robert Taubman: It is still in the works and it's not imminent, but we would hope that we resolve what we're doing there imminently.

Vince Tibone: Got it. Makes sense. Thank you.

Operator: Our next question comes from the line of Alexander Goldfarb from Sandler O'Neill.

Alexander Goldfarb: Hey. Good morning out there. Simon, just to go back on a few points of clarification, I think you said that – well you did, in the earnings release that Forever 21 was $0.03, and you said they skipped September, but I was unclear. They also skipped October and then if they did, is that like another $0.03 that we should be contemplating or just trying to figure out how to think about the totality of the Forever 21 impact so far?

Simon Leopold: No, they paid rent in the third quarter, I'm sorry, in October.

Alexander Goldfarb: Okay. So the $0.03 is just merely the skip payment.

Simon Leopold: The $0.03 is the skip payment and the write-off of the straight line rent receivable.

Alexander Goldfarb: Okay. And then Bobby, heading into next year, you said that 2018 one of the past years was sort of an anomaly where the bankruptcies went to like 2017 versus the prior three this year you expect it to be north of three. Is your expectation that next year is going to be similar, like again it's going to be like elevated bankruptcy year or what gives and if not, what gives you confidence that things will improve given that this year I think surprised most people?

Robert Taubman: Well, it was clearly an elevated environment this year and we're working through all of that. But I think what you heard us say is that in 2017, it was over 3%, in 2018 it was half that, in 2019 it looks like it's going to be over 3%. It's 2.4% year-to-date. So our sense is that as you look at – as we look at our watch list, as we look at the tenants and what their total occupancy costs are and how sales are doing category by category, tenant by tenant, our sense is that this has been a very elevated year and it really has culminated in the Forever 21 issue. And as I said earlier, I really think there are specific to the Forever 21 business and a lot of judgements that were made by their leadership. So I mean that's what we're dealing with. So our sense is that it should settle and it should be better in 2020 on the bankruptcy front. We're not going to know until we lived through 2020. We are going to definitely have reserves. We're going to have significant reserves. And I would say even in the context of all that's happened this year, we're still operating against what we told you in the context of the reserves at the beginning of the year. But we are getting hit with Forever 21, we are getting hit with currency, and that's largely the differential.

Simon Leopold: And Alex, let me just add to that a little bit. There's no single tenant that we have that can have an impact like Forever 21 is having on our portfolio. The next biggest name out there that people are talking about Ascena, they seem to be doing better in general. We have less exposure to their underperforming brands like Dressbarn. But just to give you a sense, the ADR exposure that we have to Ascena versus Forever 21, it's about half. And that's kind of the next larger name that people are focused on. So Forever 21 clearly was meaningful in our portfolio. You can't replicate that next year in terms of any one tenant.

Alexander Goldfarb: Okay. And then Simon, just to clarify, at the beginning of the call, I think you said on the FX front that was solely related to currency, not tourism at your centers, correct?

Simon Leopold: Correct.

Alexander Goldfarb: Okay. Thank you.

Operator: Our next question comes from the line of Michael Mueller from JPMorgan.

Michael Mueller: Yes. Hi. Simon, I hear what you're saying about the lease spreads and how the stats may not tell the whole story, but I guess when you strip out the short-term leases and you see that 3% level, that was 8% last quarter and I think it was 10% before that or so. I mean is there something that is positive that may not be as obvious from looking at that trend?

Simon Leopold: Well, look, we really try to make sure everybody understands the spreads are a limited stat and they really aren't just a stat. They're an output of a lot of other decisions that get made. At the end of the day, Mike, what we really think you should be doing and everybody should be doing is focus on occupancy levels, which are excellent, focus on rent growth, which is there, focus on the merchandising, which is getting better and think of it and think about it from that lens. At the end of the day it spreads our very volatile quarter-to-quarter. They tell only a story about closures and openings in that quarter. And they don't tell – they don't give you the entire directional kind of look at the story. So yes, they go up, they go down, they're volatile quarter-to-quarter. End of the day, you should be looking at rent, you should be looking at occupancy. That's what matters the most.

Michael Mueller: Okay. That was it. Thank you.

Simon Leopold: Thank you.

Operator: Our last question comes from the line of [indiscernible] from Jefferies.

Unidentified Analyst: Hi. Thanks for taking my question. Maybe set a little differently given the slightly negative releasing spread this quarter and acknowledging a handful of shorter term leases weight on it. How are you weighing the decision between rate and occupancy as you look out further?

Robert Taubman: Well, it's a balance, Linda. It's a balance. At the end of the day, the most important thing, particularly in this volatile environment and it is a volatile environment, the biggest thing that we're thinking about is NOI and merchandising. So even though the spread stat may not look that great, that's not what we think about when we make these decisions. You need to have the best merchandising in your centers that continue to be able to drive the customer to those centers to continue to drive sales at those centers. And there will be a connection between sales and merchandising and rents going forward. We think there still is today, we think there'll be even more linear going forward. So we're looking at NOI, we're looking at merchandising for sure. At the end of the day, that's what you need to do to be able to navigate the volatile environment that we have today to get to what we think is a much brighter future for the great real estate in the U.S. If you have mediocre real estate, you may make different decisions. But in the best real estate, right now it's about merchandising and it's about trying to drive NOI, it's not about spreads.

Unidentified Analyst: Thanks for that. And then how are you feeling about dividend coverage? It seems like increased CapEx and the pressure on NOI from troubled retailers could pressure AFFO?

Robert Taubman: Well, dividend coverage for us is, it is a focus with our payer ratio right now is on FFO is about $0.78 – I'm sorry, AFFO, it's in the high 70s. It did rise after we had a sale of the seven centers to Starwood back in 2014. We have not grown our way back down into, call it, a range that we are a little happier with which is below 70. We have increased our dividends 22x in 24 years. We've never decreased it. I will tell you that, these are always board decisions. The board is very focused on it. They're comfortable with the dividend at these levels given our liquidity and given our upcoming capital needs. So as of right now and there's no reason that we think this is going to change and we're comfortable with that dividend where it is, the board ultimately makes those decisions.

Unidentified Analyst: Thanks. And then just one last one. Not to beat a dead horse. But in terms of your 2016 to 2017 Forever 21 stores, how variable is this population in terms of your willingness to accept rent cuts or closures, suggesting that these spaces could be replaced at comparable or higher rents. And then to the extent you do agree to rent cuts, would you gain kick out rates or short-term leases?

Robert Taubman: Well, I think we have answered those questions largely, but to say again, it's a whole negotiation. You're dealing with Forever 21, yes, you're dealing phase-by-phase, but it also matters to them what they're doing in one location versus another and the overall relationship with the landlord. So it can't be totally one-by-one. There is the broader relationship and so we'll get some things that we liked. They'll get some things that they like and net-net, they will continue to operate and in some cases we'll have the right to take back the stores, in others we will reduce their term, in others, we won't. And net-net, our expectation has been articulated here and bookended here in terms of the range of outcome for this year and for next year.

Simon Leopold: But not now, Linda, I think you got to focus on what Bobby said, which is, this is still a negotiation. We're not going to negotiate in public on this. So we are a little hamstrung and how much detail we can give to you. When the situation is resolved in whatever way and ultimately is, we'll be happy to provide some more detail on what we think that means for the future.

Unidentified Analyst: Thanks a lot.

Robert Taubman: Thank you.

Operator: We don't have any further questions. I will now turn the call back to Robert Taubman.

Robert Taubman: Thank you, Christine, and thank you all. We look forward to seeing you at Los Angeles, and welcome you to come to see Beverly Center. Bye-bye everybody.

Operator: Ladies and gentlemen, this concludes today's conference. Thank you for joining. You may now disconnect.