Jean Wood - VP, IR Art Coppola - Chairman and CEO Tom O'Hern - SEVP and CFO Robert Perlmutter - EVP Leasing John Perry - SVP, IR.

Craig Schmidt - Bank of America Merrill Lynch Paul Morgan - MLV Ki Bin Kim - SunTrust Robinson Humphrey Todd Thomas - KeyBanc Capital Markets Jim Sullivan - Cowen and Company Steve Sakwa - Evercore ISI Mike Mueller - JPMorgan Alexander Goldfarb - Sandler O'Neill Vincent Chao - Deutsche Bank D.J. Busch - Green Street Advisors Haendel St.

Juste - Morgan Stanley Michael Bilerman - Citigroup.

Presentation:.

:.

Good day, ladies and gentlemen. Thank you for standing-by. Welcome to The Macerich Company Fourth Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct the question-and-answer session. Instructions will be provided at that time for you to queue up for questions.

I would like to remind everyone that this conference is being recorded and would like to now turn the conference over to Jean Wood, Vice President of Investor Relations. Please go ahead. .

Thank you, everyone for joining us today on our fourth quarter 2014 earnings call. During the course of this call, management will be making forward-looking statements, which are subject to uncertainties and risk associated with our business and industry.

For a more detailed description of these risks, please refer to the Company’s press release and SEC filings. During this call, we will discuss certain non-GAAP financial measures as defined by the SEC’s Regulation G.

The reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure is included in the press release and the supplemental 8-K filings for the quarter, which is posted in the Investors section of the Company’s Web site at www.macerich.com.

Joining us today are Art Coppola, CEO and Chairman; Tom O'Hern, Senior Executive Vice President and Chief Financial Officer; and Robert Perlmutter, Executive Vice President, Leasing and John Perry, Senior Vice President, Investor Relations. With that, I would like to turn the call over to Tom. .

Thanks, Jean. Welcome, it's been a couple of months since we saw most of you at our Investor Day on November 18th in Santa Monica, with some great acquisitions leading into that Investor Day and with many of our management team members presenting on a variety of topics including development project status.

We’ll be updating much of that information for you today as well as our view on 2015. Consistent with past practice, we will be limiting this call to one hour. If we run out of time and you still have questions, please do not hesitate to call me or John Perry or Jean.

So it was another very strong quarter for us across the board, we continue to see strong operating results, leasing spreads were good and leasing volumes were very significant. We signed leases on 516,000 square feet of space that compared to 330,000 square feet in the fourth quarter of 2013.

The releasing spreads were positive 22%, mall occupancy was at 95.8%, that’s up 125 basis points from a year ago looking at that stat on a same-center basis we’re up 70 basis points from 95.1% at 12/31/13.

Temporary occupancy was 5.1% of that occupancy, compared to 5.8% at December 31st of last year to, it’s down about 70 basis points from year ago, but we still have a lot of progress to make on that front and that will continue to be a focus for us.

Average mall store base rents are now over $50 a foot, they increase to $51.15 up 6% from $48.16 a year ago.

Looking at FFO for the quarter, reported FFO was $0.99, compared to $0.94 in the fourth quarter of last year, reflected in FFO was a $9.1 million early extinguishment of debt penalty $0.06 a share that was on the early payoff of Vintage Faire and Fresno Fashion Fair of loans which were combined $250 million and at an average interest rate of 6.2%.

We arranged a new $280 million, 3.49% 11 year fixed rate loan to be placed on Vintage Faire essentially replacing that debt that we paid off and Fresno will remain unencumbered for now. Excluding the prepayment penalty we came in at $105 for the quarter right in the middle of our guidance range.

Impacting net income for the quarter, but not FFO was a $1.5 billion re-measurement gain that is recorded for accounting purposes as a result of converting our ownership of Queens, Lakewood, Los Cerritos, Stonewood and Washington Square from an unconsolidated 51% to a consolidated 100%.

The gain is essentially a value of our 51% interest at the date of the transaction less our book basis. Same-center NOI for the quarter increased by 5.8%, compared to the fourth quarter of last year, this increase was driven by increased occupancy, positive releasing spreads, annual CPI increase on leases.

We think however it's more meaningful to look at a full year same-center NOI for year ended December 31, 2014 same-center NOI growth was 4.24%. During the fourth quarter we had stronger occupancy, lease term revenue and percentage rents than we had forecast.

Term fees are included in same-center NOI as they are a recurring part of our business and unlike straight-line rents, it is a cash revenue.

It can cause some quarterly fluctuation as it relates to same-center NOI growth and that’s why we feel it's more meaningful to look at a 12-month calculation for that metric or at least a year-to-date calculation.

For lease terminations for the year came in at $11.8 million that was only slightly higher than our guidance level of $10 million and in fact our average annual lease termination revenues over the past five years have averaged 9.6 million.

We had a $2.6 million gain on land sale during the quarter and offsetting that gain and included in REIT G&A costs were $3 million worth of transaction costs related to the acquisition activity in the fourth quarter and that is included in REIT G&A and caused the increased to 12.1 million in total.

Bad debt expense for the quarter was $700,000 that compared to $1.1 million in the fourth quarter of last year. And as a result of refinancing activity and the interest rate environment we’ve been in our average interest rate is down to 3.5%, compared to 4.2% in the fourth quarter of last year.

The balance sheet continues to be in great shape with the strongest balance sheet in the history of our Company.

At quarter end some of the balance sheet metrics included debt-to-market cap at 33%, interest coverage ratio of 3.8 times, debt-to-EBITDA on a forward basis 7.2 times, average debt maturity 5.2 years and floating rate debt as a percentage of total debt is 17%.

We continue to see a great financing environment given our ability to borrow with such attractive rates. As I mentioned we paid off Fresno Fashion Fair and Vintage Faire early and secured a very attractive 3.49% financing on Vintage Faire, that’s a 11 year fixed rate term.

We also have some other attractive financing opportunities ahead of us this year including Lakewood Mall which is very under leveraged and currently carries a 5.43% interest rate and Washington Square, which has a 6.02% coupon, those would be financed later this year no doubt at substantial savings.

In this morning’s press release we also gave FFO guidance the range is $3.80 to $3.90 per share. This assumes no asset sales in 2015. It does include dilution of about $0.10 a share from the assets we sold in 2014. It reflects a same-center NOI growth rate of 4.25% to 4.75%.

We’re seeing the benefit of the pruning that we did to our portfolio in 2013 and ’14 and that’s reflected in this assumption and our expectation of seeing accelerating same-center NOI growth.

The guidance assumes $10 million of lease termination revenue, just slightly less than actual of $11.8 million this year, there has been no acquisitions factored into that guidance and there has been no gain or loss on early extinguishment of debt factored into guidance and you can see that those guidance assumptions are detailed in our supplement.

Again looking at the quarterly split on the FFO guidance, the first quarter is expected to be 21%, second quarter 24%, third quarter 25% and the fourth quarter 30%.

Looking at tenant sales for a moment, total portfolio sales per foot for the year were $587 that compared to 562 last year, if you look at that calculation on a same-center basis it was $587 compared to $574.

The top regions for us were Arizona and Southern California and if we take a look at total sales for the period, the quarter ended December 31, 2014 total sales was about 2.2%. So at this point I'd like to turn it over to Art. .

Art Coppola:.

Thank you, Tom. First of all I would like to briefly address the speculation in the market regarding Simon Property Group's investment in Macerich. As you likely know in November 2014, Simon announced that it had acquired a stake in our company, at this point there is really nothing more that we can share with you.

It is our policy not to comment on market rumors or speculation and we do not intend to make any further comments or statements during this call regarding Simon. With that I want to remind you that the purpose of today's call is to discuss our fourth quarter and full year's earnings results as well as our outlook for 2015.

We would appreciate it, if you could please keep your questions during the Q&A session focused on these topics. Turning now to the results for 2014 as Tom has outlined for you, it was a terrific year for our Company, it wasn’t transformational but it was certainly an evolutionary year where many important benchmarks were reached.

From an operating viewpoint, we put up some very good numbers with occupancy levels increasing, leasing was extremely strong, the environment is extremely good. Our spreads remained very-very good during the year, up 22% for the trailing 12 months.

As Tom outlined for you our balance sheet is in terrific shape and we see the opportunity in the next 18 months to even further enhance it with some very opportunistic refinancing opportunities coming up available to us. Development, we've some significant milestones during the year, some great accomplishments on portfolio management.

As we look at the development activities during the course of 2014 and our outlook for 2015, again we've some very good milestones at Tysons, our office tower is now over 80% leased, the residential tower is leasing up extremely well and the hotel is poised to open here later on at the end of this quarter or the beginning of next.

At Scottsdale Fashion Square as well as Cerritos were well underway on construction to add two new junior anchors at each of them, a sporting goods operator Dick's at each of them and a major theater complex Harkins at each of them.

Speaking of theaters, the theatre at Santa Monica Place construction there is going along well with an opening there anticipated here later on in the third quarter or early fourth quarter of this year are coupled with the second generation releasing of this center that theatre is already spawning significant renewed interest into the center particularly into the third level.

Looking to the third level of the property for example, we recently signed and are actually under construction, in the recycling of some existing restaurant space in their new Cheesecake Factory, which we think will do terrific here in this market.

We also have new major tenants such as Uniqlo that has replaced Love Culture and I'm sure there may be other retailers at Santa Monica Place that Bob may point out to you that we've either recycled or are recycling all with a view towards really taking this center up to a very significant level of improvement in the productivity.

At Broadway Plaza we had a terrific first part of our expansion there with the demolition and complete reconstruction of a parking deck that was contiguous to Nordstrom, this was necessary to create the footprint for the expansion of Broadway Plaza that was done and completed all within six or seven months which is really terrific.

At Fashion Outlets of Niagara our expansion opened up on-schedule, on-budget, well-leased, well over 85% leased. At Kings Plaza our remodel and re-merchandizing is going tremendously well and we're moving along very well on our entitlements at the Gallery.

From a portfolio management viewpoint, we further recycled out of our couple of lower productivity centers and into some high productivity properties.

With the disposition of the assets that we sold in 2014, we then turned around and during the course of the year increased our ownership at Fashion Outlets of Chicago to 100% and also to 100% in five malls in the Ontario transaction, another key investment that we made during the year obviously was the Gallery in Philadelphia and we're very bullish about that.

As I look forward to 2015 and beyond, the Company is extremely well-poised, as a result of our portfolio management that we've done over the previous three or four years, we've our balance sheet is well positioned to finance all of our activities going forward.

The leasing outlook is terrific, as I look at upcoming development activities that we have the new ones that we've announced. We announced a couple of months ago our joint venture to build a 500,000 square foot outlet center at Candlestick Park in San Francisco demand for that center from a retailers’ viewpoint has been very significant.

We’re very bullish on that. At Green Acres we moved that project up to our active development pipeline that is really the expansion of our retail campus for adding 335,000 square feet of restaurants, pads as well as operators such as Dick’s, home goods, actually furniture and others.

We’re very optimistic about the impact that’s going to happen in the retail campus. This is a center that you may remember that when we bought it a couple of years ago it was doing $500 a square foot, today it’s doing over $575 square foot leasing activity in the mall has been very dramatic.

This expansion of retail the campus we think is going to even further enhance the retail destination. We think that it will actually cause the campus to exceed 1 billion in sales over the years upfront. And we anticipate the announcement of a new anchor that will be attached and part of the closed mall itself in the very near-term.

A new project that we’ve talked about that is now in our shadow pipeline is the further densification of Scottsdale Fashion Square.

You should think of Scottsdale somewhere in the same context that you think about Tysons Corner it’s a huge retail project and we’re blessed that Scottsdale to have excess land that is going to enable us to further densify that property.

Again we talked about the expansion of the property that is currently underway and this densification we think we’ll just further enhance the retail destination.

Speaking of the destination at the Super Bowl this last week, the NFL had their Fan Fest camp and activities at Scottsdale Fashion Square on the seven acres of vacant land that we have outlined as densification opportunities.

We generated over a 0.5 million visitors to that project during the course of the four or five days leading up into the Super Bowl and it was very dramatic in terms of the traffic increases and the sales increases we enjoyed.

At Tysons Corner we are underway with perfecting the next phase of the entitlements and that’s really spawned by the confidence that we have in the leasing activities that we have particularly in the residential side.

We anticipate that at The Gallery in Philadelphia that we will be in a position to announce jointly with our partner Penn REIT, the scope of the project the size of the dollars as well as the incremental returns over the next quarter or so.

At Chicago in North Bridge it was announced during the quarter that we acquired a square block contiguous to across the street from Nordstrom which is either the number one or number two Nordstrom store in the United States in terms of sales volume. And that square block was acquired it’s about 65,000 square feet of building area.

We see that we will have opportunities to integrate that into Upper Michigan Avenue with the opportunity to have FAR on that site of about 780,000 square feet.

We are in early planning phases on that project a likely outcome will be that we would do the retail and anything vertical above that would most likely be an air rights deal with other folks during that development.

Another significant activity that happened somewhat in the development arena that will affect us in this year and next year, is that Sears announced that they along with the Macerich through our corporation Sears announced that they are going to bifurcate their stores at Freehold and Danbury two of our great centers where Sears will occupy one level of their two-level store, consolidate and rationalize into that and they have sublet the other level of their anchor store to Primark.

We think it’s a great addition to each of those centers, a high traffic generator and we were happy to cooperate with Sears as they made their deal with Primark and they will be responsible for all capital and connection with that addition.

As I think about 2015 and beyond from an operating viewpoint, I take great confidence in the same-center results that we’ve had in the previous year, the outlook that we have for this year and beyond you may remember at our Investor Day that Tom outlined a footprint for you as to how he felt and we feel that we’ll be able to achieve over the next five years the range of same-center NOI that would generally land into the midpoint of around 4.5%.

We’re very confident given our outlook for the future, as well as financial modeling as well as just the retail environment that that type of same-center NOI growth is available to us. With that I would like to open it up for Q&A operator. .

Question:.

and:.

:.

Operator:.

Thank you. [Operator Instructions] Again as a reminder, due to time constrains we ask that all participants limit themselves to two questions. You may re-signal at any time for additional questions. [Operator Instructions] And we’ll take our first question from Craig Schmidt with Bank of America. .

Q :.

Craig Schmidt:.

I guess a couple of questions on development at Kings Plaza that seems to have been scaled back a little bit maybe some explanation?.

I am not sure what you're referring to. .

Art Coppola:.

I guess, I thought the Kings Plaza was $90 million to $100 million investment, now it’s 65 million to 75 million?.

Craig Schmidt:.

No, that’s probably just an update in terms of our current view of the cost there. So, actually in looking at our supplement there the $65 to $75 million, I guess is the possible re-merchandizing or re-demising of the Sears store Craig. .

Art Coppola:.

Okay. .

Craig Schmidt:.

A :.

Art Coppola:.

The other cost that we talked about it's really the re-merchandizing and remodeling of the center and refurbishment of the parking structure. .

And maybe just a little color on what you want to do at the Westside Pavilion?.

Craig Schmidt:.

It's a great center, it's a great location, it’s about to get enhanced through the addition of the rail station that connects Downtown Los Angeles to Santa Monica Beach, the rail station has two stops and they are major retail centers, one across the street from Bloomingdale at Santa Monica and the other one, one block away from Westside Pavilion.

But it's a center that really still needs to be re-imagined, we think there are densification opportunities there, we’ve had a significant number of developers and users in the area come and talk to us about that opportunity particularly as it relates to office and residential, we’re going to be debating that and taking that through, but to pave the way for the future there we are already beginning to de-lease of short-term lease the retailers that we have there.

The center at last report was doing around $350 a square foot, which is not at all in keeping with its potential.

So, we were in early stages of reimagining this center and we anticipate that over the next year or so we will be getting some entitlements to make that possible, but this is a situation where we will have some significant positioning of the center for the ultimate repositioning of that.

We don’t have anything clear cut to outline today other than, it's not what it should be, it's a great location and we’re convinced that five years from now it will be significantly better and more profitable and productive than what it is today. .

Art Coppola:.

And we will now go to Paul Morgan with MLV. .

Are you into a number of the projects that are in your shadow pipeline and you’ve got on a pro rata basis I guess about $600 million in what you provide in your sub, I mean how should we think of that number as changing over the next year or two, I mean as you roll off Tysons out of it and then put some of these other projects into it.

What’s kind of if you look out over the next two or three years what is the number we should think of as kind of being in that asset pipeline?.

Paul Morgan:.

We’re constantly taking a look at opportunities Paul to enhance our portfolio and I think that we’re going to make an effort here on a quarterly basis to keep it fresh.

I think I said in previous calls that we feel very comfortable with the range of putting into place $250 million to $500 million a year of redevelopment, densification and new development spend and that’s kind of the range as we get some color it comes into some of these to be determined such as Philadelphia and Candlestick, we’ll be able to refine that number better for you.

But the bias is toward the uptick in terms of the opportunity and we’re just trying to identify for you the activities and the real projects that we see in the portfolio and as we see new ones coming to give you a heads up in the supplement. .

Art Coppola:.

And then there has been a lot of press past month or so about some of the apparel retailer, bankruptcies and store closings in the malls and maybe you could just provide a little bit of color, I mean you have provided your same-store guidance and then you tried to break out, I mean it looked like there maybe was a little bit more seasonality and what you suggested is that to some of the closings that might take place in the beginning of the year and then how would you characterize kind of the your expectations for a mark-to-market on some of the space you will be getting back?.

Paul Morgan:.

Well I am going to ask Rob Perlmutter to address that for you and maybe as part of that to give you an update on what happened with the store closings that were talked about at the beginning of last year the Love Cultures and the Coldwaters and such and then also the characterization of the productivity of these store closings that we see coming, the upcoming year their lack of productivity the fact that they are in great centers and our view on the opportunity to merchandize them.

.

Art Coppola:.

Sure Paul, this is Perlmutter and just to start with last year probably the three most significant store closures or bankruptcies were Love Culture, Coldwater and Juicy and that represented about 27 stores portfolio. Generally the stores were located in some of our better centers.

So the real estate was strong, we have -- as we sit today about 62% of that has been released in terms of signed leases or deals that have been approved by both the tenant and the landlord and are in documentation. So, we picked up about two-thirds of it.

In terms of economics, we're looking at about a high mid single-digit increase in total occupancy cost so there is a reasonably good pick up but one of the key elements for us is an improvement in quality in terms of bringing in more productive retailer.

So, to give you a sense some of the new tenants we have brought into those spaces include Soft Surroundings, Anthropology, H&M, Boston Proper, Soma, Aviva, Hanna Andersson , St. John's, Vera Bradley, Karen Millen, Kiehl’s, Godiva, Pandora and Uniqlo.

So we have really been able to upgrade the merchandize mix significantly because of the ability to reclaim the real estate and combine that with some uptick in rentals.

In terms of the 2015 bankruptcies a couple of comments that the five retailers that have been the most significant include Wetseal, Body Central, Deb Shop, Delila’s, Caché the comment that I would make is none of these bankruptcies come as a surprise, these are all retailers who have been struggling for many years, their sales within our portfolio averaged $212 a foot, our centers are just under $600 a foot.

So, we planned in terms of our budgets and our 2015 forecast these store closures and again we believe it will present an opportunity to bring in more productive retailers who ultimately will pay more rent. .

Robert Perlmutter:.

Q :.

Paul Morgan:.

That means there is a little bit of a difference probably I guess in the productivity of some of those guys that are bankrupt this year versus some other ones that were last year I mean is that going to be reflected in different mix in terms of the malls maybe some of the space might not have quite the same demand or is it just going to be more upside?.

A :.

Robert Perlmutter:.

Well, obviously a re-location is unique in that group Westfield was probably the most significant store in terms of store count. So they were in a variety really throughout our portfolio I think we had them in just under half of our centers.

So, they probably have the most diverse real estate, conversely Caché is generally in the top tier centers and presents a very strong opportunity. We had a very small exposure to the other three. .

Okay, and then generally these are kind of reflected you are reiterating what you just provided I guess in terms of your same-store guidance is reflective of this the bankruptcy that have been announced today?.

Paul Morgan:.

Yes, we budgeted conservatively for example I think Westfield we only factored in one month of rent from the Westfield portfolio in our guidance so, it hasn’t impacted and that's why you see some of the seasonality earlier in the year Paul. .

Tom O'Hern:.

Great, thank you. .

Paul Morgan:.

And Paul I don't want to downplay it but this happens every year and we see this coming usually two to four years before it happens.

So, you know that a tenant is underperforming obviously well before a liquidation or a liquidity of that occurs and you're ready for it and look the question is, is that a tenant that is located in a property where demand exceeds supply and virtually across the board everyone of our properties demand exceeds supply.

So, the outlook is that look it's an opportunity take back a space before the natural exploration and to bring in better tenants than were there before has outlined by what Bob indicated that we did in 2014 recycling of Love Culture, et cetera. .

Art Coppola:.

Operator:.

And we will take our next question from Ki Bin Kim with SunTrust. .

Q :.

Ki Bin Kim:.

Just a general question on stock issuance I mean because of certain circumstances with Simon I mean your stock is doing very well and imply cap rate trading at 4.5%, and while your balance sheet is in good shape you do have a lot of uses of capital coming up soon in all the new projects, so why not issue stock here and are there certain things that when you're in the middle something like this with Simon maybe nothing happens or something happens but does that preclude your from issuing stock out?.

Well first of all, look as we have said in our prepared remarks which I really have we're going to focus today on fourth quarter and full year results and we're not going to really comment on anything that relates to Simon.

As it relates to how we think about funding our development pipeline, we're sitting on virtually unused line of credit we've the opportunity to raise very significant financing proceeds from maturities that are coming up in the next 18 months. Tom, add on a few….

Art Coppola:.

A :.

Tom O'Hern:.

Yes, we have got -- well winning shares is unencumbered that would support a very sizable loan we've got Lakewood which is significantly under leveraged Washington Square.

So, some of our big or better assets are unencumbered or have light leverage in loans coming due so we've got the opportunity to put non-recourse long-term low coupon fixed rate financing on there and generate proceeds that can be used for the redevelopment projects. .

And from a portfolio management viewpoint historically over the last three or four years you could think of the recycling of the disposition proceeds while not perfectly matched, that's essentially what has been funding our development pipeline over the past several years and even though from an earnings viewpoint that’s not necessarily earnings accretive day one from an NAV viewpoint than from a future earnings viewpoint which I think is beginning to be reflected in our current same-center numbers is the right move to make.

When we think about stock issuance it’s really is there a reason to do it. In November of last year we had that discussion with Ontario then we funded an acquisition with all stock because it made sense for the balance sheet and it was actually accretive to do it. In today’s environment it would be potential for that same situation to exist.

So that’s kind of the way we think about it. .

Art Coppola:.

Q :.

Ki Bin Kim:.

Okay. I mean I will try and keep it more towards Macerich but so it sounds like you….

A :.

Art Coppola:.

No, I understood. .

Q :.

Ki Bin Kim:.

Yes, yes….

A :.

Art Coppola:.

I appreciate that.

At this point in time as it relates to stock issuance again I’d point you back to what we did in November and that made some sense we issued stock, it was accretive at the time and made sense to the balance sheet, but we’re not prone to be issuing stock just because we like the price but if there was a capital there where we have an investment opportunity and we decided that it made sense to fund that through the issuance of stock, like that something that we would consider.

.

Operator:.

And we will now go to Todd Thomas with KeyBanc Capital Markets. .

Q :.

Todd Thomas:.

First question on guidance, sort of two parts; and first, in terms of the same-store NOI growth forecast of 4.25% to 4.75%, how much of the contribution are you expecting from occupancy gains in that number? And then also in terms of the lease term fees in the quarter, just curious whether that was sort of one transaction that really accounted for a good portion of that or what really caused the big jump and how much of that was in the same-store pool?.

A :.

Art Coppola:.

First, your question related to occupancy in the 2015 guidance.

The overall number were occupancy neutral but we are expecting to continue to reduce the amount of temporary occupancy we have as I said it was 5.1% at year-end and our goal is to take that down between 50 and 100 basis points we typically double the rent we achieved when we convert space from temporary occupancy to permanent occupancy.

I think your other question had to do with lease termination payments in the fourth quarter. We had an active fourth quarter in leasing front. It was also fairly active in terms of generating termination payments that wasn’t from any one tenant. We did get a decent size termination payment from Juicy but then there were quite a few others.

And again as I mentioned that’s a fairly normal number for us the year came in at $11.8 million we’d average $9.6 million annually over the course of the last five years our guidance in 2015 is again includes $10 million as our assumption for that.

The piece that hit in the fourth quarter that related a same-center pool which I think was another part of your question was $5 million that compared to about $600,000 last year.

But again that’s one of the reasons we look at that statistic on an annual basis rather a quarter is the lease termination revenue and there is a cost for that because you give up occupancy.

So, it hurts your NOI in another way although it benefit you in terms of getting that cash compensation upfront, we really think that’s a statistic we have to take a trailing 12 month number or a full year number to really have a meaningful look at what’s going on there in terms of same-center growth. .

And then second question just on acquisitions I think Art last quarter you hinted at there being a potential acquisition in one of your gateway markets and it sounded like a more traditional sort of operating asset I know you announced San Francisco and the acquisition of interests in the Chicago outlets and the Ontario Teachers deal but just any additional update or thoughts on that other acquisition that you had mentioned is it still in the works maybe you can just shed some light on what’s happening there?.

Todd Thomas:.

A :.

Art Coppola:.

I’m not sure exactly what I was referring to at the time it could have been the consolidation of our partners’ interest at FOC but it also could have been on our last call the announcement of our involvement in the Candlestick development opportunity in San Francisco.

But whatever I had in mind at that time was done, and either I may have been referring to Candlestick or FOC I will say since you prompt the question, do we see anything new this year.

I think there is an opportunity that there will be a new development project that we will announce this year that will be in a significant market and that will be a fashion outlet. .

Okay. Thank you. .

Todd Thomas :.

A :.

Art Coppola:.

And I’m going to get a printed transcript of what I just said so that I’ll be ready for your question next quarter. Thank you. .

Operator:.

And we will now go to Jim Sullivan with Cowen. .

Q :.

Jim Sullivan:.

Two question, first of all in Primark, Art if you could help us I think in your comments you indicated that there was the deal with Sears with your approval and Primark's initial location that they announced sometime ago was in Boston and that's kind of a street retail at more of a traditional downtown department store location and I think it's about 110,000-120,000 square feet.

The sub-leases or the leases from Sears are closer to 70,000 square feet, so I guess my question is going forward to the extent you've been in dialog with Primark at all about their ambitions in the U.S., should we be expecting them to stay with that kind of smaller footprint, number one? And number two, would you expect that you'll be doing some deals directly with them in the coming year or two years?.

A :.

Art Coppola:.

I do expect that we will do additional business with them in the upcoming year or two. Their footprint really varies based upon the opportunity. The location they picked in Boston was a pretty prime location.

Right now they're focused in the Northeast, they required as I understand a very large distribution center in Pennsylvania and they're very serious about their commitment here. So I do anticipate that away from Sears doing deals with them, make sure that we will do deals with them directly.

I'd say 70,000 feet is probably on the low-end of the type of deals that they would be doing with us. It's hard to predict a range, but they could be 30,000-40,000 bigger than that in certain markets. .

Q :.

Jim Sullivan:.

Okay then second question for me, obviously we've had a very strong U.S.

dollar now for some time and certain individual asset in your portfolio as well as certainly some geographic markets call them kind of gateway markets have benefited looking back over the last several years from international inward bound travel and that foreign shopper and I'm just curious as you think about the business well any impact you saw in the fourth quarter? And as you think about the business going forward, whether you assume that that strong dollar is going to dampen demand or the amount of sales you're going to do from what's been really strong source of demand?.

A :.

Art Coppola:.

I think for our portfolio, the answer is no, that I do not anticipate seeing any significant impact in terms of the dollar with the exception of one property in that’s Fashion Outlets at Niagara which does rely whether significantly on Canadian cross-border traffic and with the currency changes there it's just more expensive the shopping opportunity in Niagara Falls and so you do have -- we have felt some impact on our sales there, but conversely as I think about our more international tourist centers, centers such as Santa Monica Place, centers such as Scottsdale Fashion Square, Tysons Corner and Fashion Outlets of Chicago.

Fashion Outlets of Chicago sales are on fire. Traffic is up 30 some percent.

We this week versus last year for the last three or four months Santa Monica Place traffic and sales are very-very robust same as true with the Scottsdale Fashion Square, Tysons Corner so I mean those are the centers that I think of that benefit from international tourism and those shoppers are generally well healed.

They plan their trips well in advance and when they're here it’s for usually extended stays and one of their favorite pass-times is spending money. .

Okay….

Jim Sullivan:.

The numbers speak for themselves just -- we disclosed sales per foot by property so you can look at the centers that you know are beneficiaries of international tourism and you can see the impact. .

Art Coppola:.

Operator:.

And we will now go to Steve Sakwa with Evercore ISI. .

Q :.

Steve Sakwa:.

I was wondering if you could just talk about the Group 5 assets and I know you haven’t planned for any dispositions at least in your guidance, but just how do you think about these assets conceptually in the portfolio? The NOI on these centers were down 3% this year, sales were up modestly and I'm just wondering given the attractive financing environment today, why not look to prune these sort of while the opportunity is there?.

A :.

Art Coppola:.

We've talked about that in previous calls in terms of the fact that we really see that our disposition and portfolio management has been is roughly complete, but you're right look I see if it made sense four years ago and last year and the year before to recycle out of lower productivity and slower growing assets in the more robust opportunities then it makes sense today.

At this point, it's not in our guidance this year in terms of any planned dispositions, but we have said that look we this as a reservoir of capital that we do intend over the next five years to recycle out of those assets and into either new opportunities or more productive assets. So it's just a question of timing Steve.

And as this point in time, the market is getting increasingly comfortable with buying these types of assets. So we also compelled to rush into further dispositions here, it's not in our guidance but it's clearly in our long-term plan and I would define our long-term plan to be in over the next three to five years,.

I guess just a push a little bit I mean five years it's not clear the financing environment will be as robust as it is today.

So is it just a lack of having the capital that you need the capital to put it into deals is it just not wanting to take earnings dilution short-term, is it just the lack of buyer pool you think for these kind of assets?.

Steve Sakwa:.

No, no, no, they are not for sale, that’s what it is, they are not for sale.

And when we get in-bound enquiries which we get them every day, we tell them that, look at this point in time these are not for sale that doesn’t mean that that’s not going to change, and is it in our guidance for 2015? No, but look we have demonstrated more than most that we are perfectly willing to do what we believe is the right thing and that is to repatriate capital keep it for our shareholders and to plough back into great opportunities and I think that we have a unique track-record in our space and that is something we’re going to continue, but it's not in our guidance for this year.

Having said that, look, if there is an unforeseen opportunity to redeploy capital in a profitable way that’s a great source of capital to fund that. .

Art Coppola:.

And now if I could just ask maybe Bob to just to kind of follow-up on some of the bankruptcy related questions, as you just kind of look at your tenant watch list today, I realize that we have had maybe more bankruptcies than we have been accustomed to the last couple of years and some of those situations while they had been out there for a while, maybe came to ahead at the same time, when you just sort of look at your watch list today, how would you characterize it big or smaller than it's been in the past?.

Steve Sakwa:.

Well, a couple of things, I think if you look over the last couple of years prior to 2014, we had abnormally low bankruptcy. So, while it's elevated I don’t think we feel it's elevated to a degree that’s different than the longer-term history.

I think many of these tenants are struggling for different reasons whether they are in certain respects obsolete, like a RadioShack or if their more of women’s apparel store that’s not distinguishable from their competition.

So everyone is a little bit different, but I think our list has been pretty consistent over the last 24 months and I think each tenant is there for a different reason, but at the end of the day the disposition process and the improvement in the portfolio we think mitigates our exposure to whatever degree of weakness the tenants have. .

Robert Perlmutter:.

And we will now go to Mike Mueller with JP Morgan. .

When do you see the office and residential components at Tysons stabilizing?.

Mike Mueller:.

Well, the office is well over 80% leased right now.

So to me it’s stabilized and then the residential occupancy will fill up over the course of this year so anticipate that it will be fully occupied by the end of the year or stabilize than occupied, Tom do you have anything to add to that?.

Art Coppola:.

No, I’d agree with that, I mean office will probably continue to pickup over the course of the year and go from 80% to probably 90% by year-end. .

Tom O'Hern:.

And then Tom for 2015 guidance, are there any material land sales assumed in there?.

Mike Mueller:.

No. .

Tom O'Hern:.

And we will now go to Alex Goldfarb with Sandler O'Neill. .

So question for you, in LA you’ve got a lot of redevelopments going on, obviously down south of you, Del Amo you got Century City, you have got Beverly Center, you guys originally did Santa Monica Place and now obviously you're launching Westside.

How do you think of all the redevelopment and all the capital that’s going into the market as far as -- do you envision that each center is going to focus on a different shopper point or is it simply because of the traffic the sharper rings are very tied to each center and therefore there is not as much competition as all these different entities reinvest in their assets?.

Alexander Goldfarb:.

So let's first of all keep it mind, that there are four, or five or six major retail centers in Southern California that are under significant either redevelopment or about be redeveloped.

They are generally all are in extremely good locations and they are unbelievably high barriered entry locations, they are generally all in the middle of some wonderful demographic.

But of all of the names that you just mentioned, I do think that The Grove, Beverly Center, Century City, Santa Monica Place and maybe even Del Amo they are all kind of chasing the same customer and I think that therein lies the opportunity for Westside Pavilion as to distinguish itself from that and not to chase that same customer.

So, we have a wonderful demographic in the very-very really high dense well affluent and educated population in the immediate area of Westside and then you have the impact of the rail which is going to give access to Westside from all the way from Santa Monica to Downtown LA and we see people using the rail to go to Westside from both directions.

Landmark is one of the theatres is one of the top two independent film theatre venues in the United States.

So we see it as a great opportunity and as you think about the four or five developments and remember they're all redevelopments not new supply it's really generally recycling supply, remember, it's in the middle of the market that is the ninth largest economy in the world. So, it’s money that is getting put into a pretty vibrant economy. .

Art Coppola:.

Q :.

Alexander Goldfarb:.

And then the second question is for Tom. Tom, you spoke about some of the refinancings that you have upcoming. But just if you step back and just look at your debt schedule, you've got a meaningful amount of debt that's floating at a time when interest rates are at all-time lows -- although we all say that, and then they go lower.

At the same time, your duration -- or the maturity is only about five years.

So what are you thinking as you look out over the next year of activity? Where do you think that debt maturity average is going to go? On the floating rate that is out there, what are ways that you can bring that down to lock in today's rates?.

A :.

Tom O'Hern:.

Yes Alex, for one thing if you financed every asset you owned for 10 years, you know what your average maturity would be? It would be five year. .

Exactly. .

Alexander Goldfarb:.

So that's what we've been doing and that's pretty much a normal level that you're going to get to but the floating rate debt is temporarily high because we paid off Vintage Faire and Fresno right before year-end and we used our line so when we financed Vintage Faire on March 1st, that's going to straight to reduced floating rate debt, so that will flip right there.

So, you have seen us be extremely active in the financing market, if you look at our maturity schedule it's very attractive in terms of how it's evenly layered out as you get past, you look at 2019 that's the highest level at about $700 million in maturities everything else is under that going all the way out to 2025, that's why we picked 11 years for Vintage Faire that drops it into 2026 and then the 2016 bucket, which looks somewhat high right now is going to be reduced when we refinance Washington Square we will probably go out 10 or 11 years on that and then our line of credit in 2018 causes that year to be a little bit lumpy but we're going to continue to go along when it's available and I think you're going to see the floating rate debt come down fairly significantly just as a matter of refinancing some of these assets we've been talking about.

.

Tom O'Hern:.

Operator:.

And we'll now go to Vincent Chao with Deutsche Bank. .

Q :.

Vincent Chao:.

it looks like bad debt in the guidance is about $4 million. I think, Tom, if you could correct me -- I think it's about $5.7 million or $6 million or so this year.

So just curious how those two tie in since the bankruptcy outlook seems to be going up, but the bad debt is going down a little bit?.

A :.

Tom O'Hern:.

Well, bad debt for us is it's a specific calculation and some of these tenants that we're talking about potentially going out here in the first half of this year we've already reserved for them so bad debt expense for many of those tenants hit in 2014.

By the time they go out it's too late I mean so you have basically reserved against that and we've averaged in 2012 for the year was $3.5 million of bad debt 2013 was $4.8 million, this year was a little bit higher 5.1 and as we go through and look at specific tenants we're very comfortable with the $4 million that we've guided to in 2015 and it's not too far off from our average over the last five years.

.

And then just jumping a little bit over, back to the shadow pipeline -- you guys are showing about $500 million or so at 100%, but quite a few TBDs, and quite a few of the larger projects on the TB side.

I'm just curious, just as a -- I know you are not giving out the number, but just from an order of magnitude, it seems like you could fairly easily double that $500 million.

And then if you throw in the fashion outlet project that may be coming down the pipe here sometime this year to be announced, and then there's Goodyear that's still out there somewhere.

Just curious, is that the right way to think about just, again, order of magnitude?.

Vincent Chao:.

Yes, other than Goodyear it is down the road significantly but definitely when we put a number on The Gallery later on this year maybe sooner rather than later on Candlestick maybe sooner rather than later at a total cost level for those two that could easily result in a doubling the shadow pipeline, yes. .

Tom O'Hern:.

Q :.

Vincent Chao:.

Okay, thanks.

And so just looking at the expected deliveries on the one that we do have some clarity on, it does seem like that just given that how they are all bunched in that 2017, ’18 timeframe that the $250 million to $500 million could potentially go higher than that is that, am I thinking about that wrong?.

A :.

Tom O'Hern:.

No, you are not. And you know what we are going to do a little better job over the next quarter of helping to answer that question of what the normalized development spend is per year on a five year period from this point for you. So, we’ll get to you a little better answer.

We’re trying to get your heads up on projects as they are clear to us even though if we don’t know the exact number. But I understand your need and modeling to do that we’ll work on that and get you some better model numbers all of you. .

Operator:.

And we’ll take our next question from D.J. Busch with Green Street Advisors. .

Q :.

D.J. Busch:.

I just wanted to follow up on some of your earlier comments on the equity issuance. Aside from Ontario Teachers', you have a couple other long-term JV partners in some of your best assets.

Given where the equity is trading today, have you been more proactive or had discussions with some of these partners about a similar opportunity to sell their current ownership stake and take an equity position in the entire portfolio?.

A :.

Art Coppola:.

No. .

Okay. And then….

D.J. Busch:.

A :.

Art Coppola:.

Would we be willing to do that of course. .

Yes. .

D.J. Busch:.

A :.

Art Coppola:.

But it’s not, look it’s their choice as to where they prefer to have their capital and what vehicle they prefer to have it in and the other folks they’re very happy with the investments that they have and they’d love to have more with us. .

Okay. .

D.J. Busch:.

A :.

Art Coppola:.

But at a real estate level, not necessarily a conversion of real estate for common equity. .

Q :.

D.J. Busch:.

And then, Tom, just one more question, if I may, on the secured market you mentioned that financing was attractive at your Investor Day and then again today. You know, the 10-Year is down over 50 basis points since then.

I was wondering if you just could provide a little bit of color on -- you know, if spreads widen and pricing is similar to what it was in November, or if secured rate is falling even further down as the T has gone down?.

A :.

Tom O'Hern:.

Well they have, I mean at some point you hit some floors come in, but a recent example of Vintage Faire was very competitively bid even though we were pushing for kind of an off market term at 11 years D.J.

which is not normal but a lot of CMBS bidders on that saw it was very competitive and I think rates have even come down a little bit since then we locked in about a month ago. So it’s really very-very competitive out there. .

Q :.

D.J. Busch:.

So maybe not 50 basis points, but -- so the spread has widened, but not to the extent of the full decline in T?.

A :.

Tom O'Hern:.

Correct. .

Operator:.

And we will take our final question from Haendel St. Juste with Morgan Stanley. .

Q :.

Haendel St. Juste:.

as you look to manage your portfolio for cash flow optimization, what do you think the margin impact will be over the next two, three, four years as your redevelopment activity slows and as your re-merchandising efforts take hold? Your margins have been kind of low to mid 60s, excluding certain fees of late.

How much upside should we be thinking about on that front?.

A :.

Art Coppola:.

My guess is that there is at least as a result of the portfolio, recycling and just everything, all things considered, at least 300-400 basis points improvement available there I will tell you that as it relates to that to operating margin perhaps not a number that most people focus on in running regional shopping centers historically it is certainly a very topical number these days for a lot of self made analysts but if you force me to focus on that metrics, I would tell you that there is definitely 300-400 basis points of improvement available there.

As I think about the development pipeline I would point out that some of the new shadow projects are still a couple of years down the road from being put into place and we’re constantly thinking about development opportunities and redevelopment opportunities.

So the whole purpose of that one of the major purposes of the portfolio management on selling assets was to enable us to have the capital to profitably move from slower growing less productive assets in to plough into proven winters.

But also to have the management to focus in time to think about fewer opportunities but bigger opportunities and really to focus on great developments and we’re constantly on the lookout for those there will be, there is one that there is an addition of a new specialty anchor that will be coming at quarter mid-year in the next month or two that we’ll be talking about not a huge capital spend but is a redevelopment of sorts an expansion of sorts and it’s just in our DNA, our history is taking great properties great real-estate and then bringing them up to their full potential, so we're constantly on the lookout for that.

Does that answer your question?.

Q :.

Haendel St. Juste:.

Yes, it certainly gives me some color, some food for thought and just one more -- if I could follow up on some of the conversation earlier about bankruptcies. I'm looking at your lower lease term fee guidance for this year, $10 million versus $11.8 million last year. It seems to imply, obviously, fewer store closures.

It seems a bit counterintuitive in the environment of higher retailer bankruptcies. I'm kind of curious the thought there.

Is that because your current portfolio is a bit less exposed to weaker retailers, given some of your recent asset sales? Does that explain it?.

A :.

Tom O'Hern:.

Haendel that number is just really an average and it's hard to predict in fact when a tenant goes bankrupt you usually don’t get a lease termination payment from them. They get to walk away.

That comes when you are able to negotiate with a tenant who's still in business, but they're either reducing the amount of space they're taking and are not productive in your location.

So again that's based on what we have seen in the last five years it's about the average of what we have seen it's not really indicative of the bankruptcies that we've talked about because typically there you don’t get anything. .

Q :.

Haendel St. Juste:.

I appreciate the time..

:.

A :.

Art Coppola:.

Thank you all..

:.

A :.

Tom O'Hern:.

Art we started a little bit late so if we can take one more. .

Operator:.

I will take another question from Christy McElroy from Citi. .

Q :.

Michael Bilerman:.

:.

A :.

Art Coppola:.

Because that would involve speculation on my part about speculation it involves me speculating on what somebody else is thinking and that's a relatively dangerous endeavor. .

Q :.

Michael Bilerman:.

:.

:.

A :.

Art Coppola:.

:.

Well, I guess the question is whether you have been engaged at all with them in those conversations or not, right? So if they have approached you for a waiver, do you give it to them or not? So those are things that, I guess, Macerich would do in terms of reaction to it and if you have had no reaction and no discussions, then that's fine.

Then I would just want to know that as -- in the marketplace.

I'm not asking for what Simon is doing; I'm asking sort of how you have reacted and what you have done about it, knowing that they have taken a stake?.

Michael Bilerman:.

A :.

Art Coppola:.

We've kept our focus on our business.

We are 100% focused on our business and that's where we've been spending our time that's where we're going to spend our time and look I'd love to engage and chat about speculation but given the fact that I've already indicated I'm not going to talk about it this is my answer is really just consistent with the buzz kill announcement that I gave you at the beginning of my prepared remarks.

.

Maybe just generally, in terms of how the Board -- you know, this is not the first time that there has been scuttle in the marketplace. I go back to 2003, 2004, I remember covering the stock, and there was a lot of chatter in the marketplace about strategic alternatives and things like that.

Maybe just help us understand from a Board perspective how the Board looks in evaluating different things in creating shareholder value?.

Michael Bilerman:.

A :.

Art Coppola:.

I don’t know that's probably more than one question but in any of that it's into the category of something that would be speculation and just not appropriate for me to comment on. I would say that if you look at the makeup of our Board we have a terrific Board.

We have a very representative Board, a very thoughtful Board, a very sophisticated Board, there are a lot of adults in the room and they're connecting themselves historically as they should in protecting shareholder value back in 2009 they didn’t panic like so many other companies did in sell survival equity they were very thoughtful about thinking about shareholders and they do that every meeting and every conversation.

.

Operator:.

Well, that does conclude today's question-and-answer session. At this time, I'll turn the conference back over to Mr. Art Coppola for closing or additional remarks..

:.

.

Art Coppola:.

Thank you.

Again thank you for joining us as you can tell we're very proud of our results for 2014, again while it was not a transformational year maybe it was certainly a year where a lot of benchmarks were set and our view for the future is very-very bright and very-very positive and we look forward to sharing our thoughts about our business with you in the meetings that we'll be having with you over the balance of this year so thank you again for joining us.

.

Operator:.

Ladies and gentlemen, this does conclude today's conference. We thank you for your participation..