TCO
#Well, there's lots of issues on Zhengzhou.
We're going to be totally leased but ---+ and at really wonderful merchandise, but a lot of it is sales based.
Remember, we been talking forever about the fact that about half of the income is going to be sales based.
As you're seeing in Xi'an, sales have begun and as successful assets in China have shown over the years, they start low and they really gain and if they're good assets, they really start to perform and they become very strong assets.
Where on that ramp-up right now with Xi'an.
We expect the ramp-up to be similar in Zhengzhou, but until it's open, it's very hard to say.
We originally forecast about 4% of the first year of unlevered cash on cash, three years later stabilization being at 6% to 6.5%.
We actually feel comfortable on Xi'an and on Zhengzhou that we're going to be there.
We actually feel better, and we've said this, at Hanam, but Hanam has a little less at risk in terms of the sales and it started out very strongly.
We had the cost reductions along the way that increased our overall expected yields.
But telling you what we're going to be on Zhengzhou as against that 4% that we threw out there.
We also have ---+ it's a complicated funding that includes loans in China that are also at a high rate.
So when you start to look at what the overall return is, you have to take all this stuff into consideration.
I think it's very hard for us to tell you today where we expect to be this year in 2017 on Zhengzhou, which is not even open yet.
I think both Macerich and us are very pleased with our acquisition.
It is a terrific, interesting asset.
We talked earlier in my comments about the food there, which is over $100 million of food is being produced there.
We think ---+ we actually believe that there's some significant development opportunities there and we are working through them.
These kinds of things do take time.
They don't get done and when you come up with the idea, you can't just go do.
You've got lots of constituencies, starting with the users, that you have to deal with, especially if they are larger users.
We are working through it, working with the community and all of that and when we have something to say, we will.
Bottom line is we're happy we bought the asset and we believe that Macerich as well.
Just to finish that thought, when we bought the asset, we underwrote the asset believing that in the near term the value creation would been in releasing tenants that rolled in the first few years up to higher rents and maybe taking occupancy up a little bit, but mostly rolling existing tenants up to market.
In the medium to longer term, we saw that there could very likely be some redevelopment opportunity.
We still believe that, that is the case but you won't likely see it in 2017.
It was always more of a medium to longer term thought.
But we're on pace of where we hope to be from a cash flow perspective and over the medium to longer term, I think you will see some opportunity there to add to our redevelopment.
All right.
I will take the first piece.
We always have higher expenses in the fourth quarter.
That always affects our recoveries, plus we have some new centers and there, so you put it in ---+ and revenue is generally flat.
It's pretty difficult for us to have that situation.
The question about Asia ---+
It's similar.
Today we are on a gross as opposed to triple net lease with most of our tenants, so it similar there and if you heard me earlier talk about percentage rent or sales-based rent being about half in China of all rent, obviously all of the cam costs are included in those as well.
We do get ---+ we are intended over time to, as the assets stabilize, to have some margin in that as well.
We'll see how it goes.
I think in general it's improving.
The new centers obviously have an effect on that.
Exactly what's going to happen with Asia is difficult to tell you right now.
But we will get back to you on it.
Well, I mean, given the quality of our real estate, most of our department stores are doing well.
Macy's made their announcements, there were no store closings.
Sears has made announcements.
We only have three Sears stores.
There were no closings.
Penney has made announcement.
We only have four Penney stores.
There were no announcements.
We don't think we're going a lot of opportunity as our peers are to buy back our boxes because generally the real estate is strong.
We were delighted to have the opportunity to buy back the Saks store in Short Hills and as I said earlier, we have very strong retailer interest.
If we have the opportunity, we will.
In all three Sears spaces ---+ one of them is Seritage, but two of them is owned directly by Sears.
In all three of those, we would be very happy to get them back.
It's not like we haven't tried.
We have tried, but we haven't been able to make a deal and again, we're not going to have the same level of opportunity that our even the high-quality peers will have.
I think generically they think they can make a profit wherever they're going to build a new store, open a new store.
I think [Sandeep] said on his call about quality real estate.
David said the same thing on his call.
It's all about great real estate and that great real estate is going to continue to take market share, because tenants are not going to go into secondary locations, especially with omni-channel retailing alive and well.
I think when you look at good real estate, it's going to get all the good tenants and whoever the emerging tenants are, they're going to be there.
The social experience that we're all creating in our real estate with entertainment, with restaurants, with the newest merchant, all of this is because they want to be where shoppers are.
They want to be in the best markets and that's the best real estate.
We feel very strongly that good brick-and-mortar is going to get better and frankly going to take market share, because as weaker real estate goes by the wayside and atrophies, better real estate is going to get stronger and stronger.
When you look at our occupancy, it may be down 50 basis points but when you look at the Sports Authority, it's 130 basis points.
If we hadn't taken back the boxes, which were extremely accretive to make that decision, then we would actually be printing an 80 basis points higher number right now in terms of occupancy.
We'd be at our highest occupancy maybe ever.
We think almost all our key metrics are up.
In fact, I think they're all up except for occupancy that I just discussed.
We think ---+ our NOI growth of 3.9% is a healthy number.
These are healthy numbers.
So we think that our real estate is showing that it's solid and that it's going to continue to improve, especially as others get weaker.
Thank you.
Thank you, Emily, and thank you all.
We'll be talking to you in the coming weeks.
Bye-bye, everybody.
