Q4 2020 Simon Property Group Inc Earnings Call
[music].
Yeah.
Good day, ladies and gentlemen, and welcome to the standard.
And then fourth quarter of 2027, Simon property Group earnings Conference call. At this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session I would now like to turn the conference over the senior Vice President of Investor Relations. Please go ahead.
Apologies for the delay of getting started this evening and thank you all for joining us presenting on today's call is David Simon Chairman, Chief Executive Officer, and President also on the call of Brian Mcdade, Chief Financial Officer and.
Chief Accounting officer before we begin a quick reminder of that statements made during this call maybe deemed forward looking statements within the meaning of the Safe Harbor, the private Securities Litigation Reform Act of 1995.
Actual results may differ materially due to a variety of risks uncertainties and other factors. We refer you to today's press release of our SEC filings for a detailed discussion of the risk factors relating to those forward looking statements. Please note that this call includes information that maybe accurate only as of today's day reconciliations of non-GAAP financial measures.
To the most directly comparable GAAP measures are included within the press release on the supplemental information in today's form 8-K filing both of the press release on the supplemental information are available on our IR website at investors that Simon dotcom for those who'd like to participate in the question answer session. We ask that you. Please respect the request to limit yourself to.
One question and one follow up question sort of you might allow everyone. The up with the with interest the opportunity to participate for prepared remarks, I'm pleased to introduce David Simon Okay. Good evening.
As all of US know 'twenty 'twenty one day.
Difficult year for all of those affected by COVID-19, including our company, even with the unprecedented operating environment, we accomplished a great deal.
Earned $9.11 per diluted share and funds from operation for the full year, which includes six cents per share dilution from our recent equity offering in November we generated over $2 $3 billion on operating cash flow.
We acquired an 80% of interest in.
The Taliban Realty group.
Made strategic investments in several of wildly widely recognized retail brands at attractive valuations and have already made significant progress in repositioning each brand and increasing.
Their operating cash flow, we raised over $13 billion in debt and equity markets opened two new international shopping day.
As the nation's expanded two others completed three domestic redevelopments.
Weighted rent.
<unk> of small and local businesses regional entrepreneur wars, and restaurant tours, who frankly needed our help to survive pay.
Page $700 million in real estate taxes, which are unbelievably was an increase from 2019, despite losing approximately 13500 shopping days in our domestic portfolio during the year due to the re.
Strict of governmental orders placed upon us and that's roughly 20% of the whole year to put it in perspective and.
And we returned $2 billion in cash.
To our shareholders and dividends. These results in the frankly these accomplishments are a testament to the entire team Simon team for the resilience relentless focus on operations and cost structure our structure.
On the safety of the communities, we serve and obviously.
Focused on giving.
Giving back to the communities.
In terms of what we did from a abatement in real estate tax point of view now, let's go to the fourth quarter.
And then we're going to turn the page.
The fourth quarter <unk> was $787 million, that's $2 17 per <unk>.
<unk> per share obviously that was affected by the dilution of our equity offering that I mentioned I am pleased that the to report.
Is that with the solid profitability in the 900 million in operating cash flow, we generated in the fourth quarter, our domestic international operations in the quarter were negatively impacted by approximately a net 95 cents per diluted share.
Primarily due to the reduced reduce lease income including sales pace rents.
And other property revenues caused by COVID-19 disruption.
<unk> also from the international operations due to.
Various restrictions placed upon those properties collection from our U S retail portfolio continue to improve.
As of last week, we've collected 90% of our net build ranch for the second third and fourth quarters combined.
Made significant progress in the fourth quarter and addressing.
Previously unresolved the mounts with certain large tenants.
We still even to this day.
Have a handful of large tenants.
Unfortunately, the yet to resolve their receivables and we are hopeful that yeah, we anticipate resolving those certainly in the next few weeks.
And you can review of the collection details on our press release.
Yeah.
That we issued now let me walk through as I have for Q2, three and four the year over year change per for the fourth quarter in the context of our portfolio NOI presentation, which you can find on page 17 again to remind you. These are on.
On a gross basis and not a company share.
Last year, our NOI was one 6 billion in the fourth quarter. This year, it's $1 2 billion. That's a decrease of 23, 9% or approximately 380 million and here of the components of the decline 220 million of.
In the aggregate from domestic rent abatements on higher uncollectible rents primarily associated with retail bankruptcies and this is an important reminder, we do not amortize.
Any of the abatements, even though through fast we you could we chose to write those off in the period that they were granted in.
And hence a day they affect our lease income in the period that we decided to go ahead and grant the abatement.
Approximately $205 million from lower minimum rents reimbursement short term leasing ancillary property revenues.
And terminations associated with bankruptcy tenants and lower sales volume.
Due to COVID-19, disruption, obviously lots of government restrictions on restaurants, and the amount of people we could have in the property and just as a reminder tool to you.
We have a great deal of seasonality in the fourth quarter. So obviously the card kiosk overage rent was impacted by again.
The the immense restrictions that we had in terms of operating our portfolio by government mandates.
And then we offset some of that decline by our.
Our diligent cost reduction initiatives operating metrics.
At the fourth quarter was basically flat compared to the third quarter 2020.
And we were down year over year average base minimum rent was 55.
And 86 up to 2% per the year leasing spreads declined primarily as a function of mix. We had some boxes last year that rolled out and are no longer in the 12 months reporting period.
Good news is leasing momentum is continuing we signed over 400 leases representing 6 million square feet.
And have a number of significant number of leases in our pipeline.
And that's a testament to our quality of our real estate.
And.
You know I do think we're starting to see our retailers get back.
To what they do best and that is operated stores, we opened two new outlets frankly in Spain and <unk>.
Bangkok.
Of which we're proud of we have an outlet under construction in England, which will open the spring Redevelopments as I mentioned to you. We completed a number of properties. We also added.
Which is essentially the Woodbury of Asia.
The timbre outlet expansion, another 178000 square feet and on another property in Japan, adding another 110000 square feet. So look for those to add to our cash flow in future years, we continue to densify our centers.
As with the opening of the multifamily residential complex in the hotel. We also have three hotels under construction.
<unk> completed the redevelopment.
And the of another Northshore mall, and we started construction on expansion of Naples.
So we're back to full.
Focus on.
Continuing to add improvements across our portfolio of worldwide.
Also I have of pipeline as you know.
The redevelopment new development that is under consideration now let me just turn to our retail investments.
I think and I hope this puts all of this in proper perspective, obviously, we have of unbelievable track record and capital allocation.
Making significant returns on investment.
During the year, we capitalized on buying four recognized retail brands.
In bankruptcy. So we bought them at attractive valuations day include Forever 21, Lucky brand's Brooks brothers and Penny each of these brands we.
We believe presents a very interesting repositioning opportunity.
And each investment has as completed at attractive valuations and we've made significant progress improving the positioning and operating results of the company and let me just give.
Forever 21, as an as an example, and as you know we bought it in February pre Covid well before we knew Covid would have the impact it did on 2020 and despite all of that.
Despite all of that.
Forever 21.
Both of them are in.
In the.
The company generated a positive EBITDA pre royalties.
Of approximately $75 million in 2020.
And we basically paid $67 million for that.
So our share of that is $30 million.
And you can divide it by 67 to give you our return on investment in Covid 2020.
Now you.
You could probably conclude that thats, a pretty good return on investment.
Now.
If you put all of our retail brand.
Investment in context, we have approximately 330 million of remaining invested capital net of cash distributions and the value of appreciation of our a b G investment.
Which has just had a recent trade and so in Marquis net to market. Our net investment in all of these activities is $330 million Anne.
All of these brands.
We will generate for us in 'twenty and 'twenty, one our share of $260 million of EBITDA. So you can take two other than 60.
Guided by 330 day.
Many of these sets of our return on investment.
Now I wanted to remind everyone that we do not.
Add back the depreciation associated with these retailer investments to our <unk>, because it's not real property.
So the contribution of that from an earnings point of view well, obviously, the much less but the EBITDA is the EBITDA.
So the other point to make in these retail investments is all of these brands generate three and a half billion dollars.
In digital sales $3 $5 billion in digital sales and all we have to do is look at.
How E commerce brands are being value today.
And I think you could all conclude and we hope you do that we've been making some wise investments here now with respect of Taubman I'm very pleased to have completed the transaction for 80% T. R. G and they are a premier retail portfolio of asset portfolio our teams.
The work started working together in fact, the them up but I can't wait to go to the Detroit Tomorrow night in the cold and snow, it's slightly colder than Indianapolis.
But I'm sure I'll be welcomed and we're off to a very productive.
The good spirited start I really do look forward to the partnership.
And growth inherent in the portfolio and I think we'll all work very well together.
As many of you know, we recently filed the S. One with the set of raised 300 million and.
In a Simon sponsored special purpose acquisition Corporation.
I stack, we are currently in the quiet period for the filing.
And are unable to speak to it.
The proposed offering at the.
This time, we've been very active in the debt and equity capital markets, raising 13 billion in the last 12, or so months and just some highlights amended and extended our credit facility with the $6 billion facility that included a $2 billion term loan.
Which was used to fund the taubman.
Transaction issued $3 $5 billion of senior notes, including the recent one $5 billion offering in January.
Addressing all of our 21.
Unsecured maturities and obviously before the Treasury really moved up we completed 715 secured loan financings refinancings for $2 billion and the and again in November we completed the common stock issuance.
The 22 million shares for $156 billion.
On that in the term loan funded the taubman deal.
Our net debt was flat compared to last year.
Exclusive of the properties that we added with the Taubman transaction and the term loan drawdown.
Fourth quarter, we ended our liquor.
Liquidity was $8 $2 billion, consisting of about 1 billion five of cash, including our share of joint venture and $6 $7 billion of available credit facility. This is a.
Net of $623 million of commercial paper outstanding quarter and dividend, we paid our fourth quarter dividend of $1 30 per share.
Which is $6 in total for the year, we paid more than $2 billion in 2020.
We're up to over $34 billion in dividends.
Of our history as a public company and we're really proud that we are we paid the cash dividend when many of our other companies either suspended or completely eliminated or dramatically reduce the dividend now finally, let's move on to 'twenty to 'twenty, one because I do.
Frankly want to turn the page on 2020.
I'm sure we all as you all do we feel confident we've turned the corner.
We expect growth in cash flow and earnings in 2021, our guidance is $9.50 to $9 75 per share. This range includes approximately 15 to 20 cents per share from our REIT.
Taylor investments again.
Keep in mind that we cant add back or we don't add back depreciation for those investments.
That's a growth range of four 3% to 7% compared to a full year of 911.
And just no more of our diluted share count.
We'll be 376, no significant acquisition or disposition activity and no further government mandated shutdown of our domestic retail properties.
He is in that guidance as you know we are dealing with certain shutdowns in Europe.
As we speak so let me just conclude.
One heck of a year.
Not repeated in any stretch of imagination.
Let's turn the corner and I want to thank my Simon colleagues.
For their continued resolve.
In running our business under these trying circumstances.
On a very tough environment, we've dealt with just basically about everything.
And I want to thank them and again, thank our shareholders for their support and.
Everyone out there be well and we're ready for any and all questions, though I'm sure people want to go home.
And warm up because it's cold.
As a reminder, ladies and gentlemen to ask a question you will need the press star one on your telephone to withdraw your question press the pound key and.
And we ask that you please limit yourself to one question and one follow up.
Our first question comes from the line of Steve <unk> with Evercore.
Thanks, Good afternoon, David or good evening.
Yeah.
How are you doing good good I guess first I just wanted to maybe talk a little bit of about the leasing momentum and pipeline that you talked about and you know just given that things are moving forward the economy seems to be getting better vac.
Vaccines are getting rolled out we're not completely out of the woods, but certainly there's light at the end of the tunnel here what sort of discussions are you on the retailers having about.
Unresolved leases and maybe more importantly, new leases to backfill the vacancy that got created over the last sort of 12 to 18 months.
Well look I think we're as I said to you we're expecting to grow our cash flow.
Are we back to normal not yet, but we're working our way back generally.
You know, it's still a very.
Serious intense negotiation on the renewals are retailers are generally generally cautious.
But the.
The ones that want to grow their business are excited and.
We hope to be able the certainly increase our occupancy from 'twenty to 'twenty one.
And it's kind of take some time to obviously get back to the war of 19.
But the healthy retailers I believe on their business and believing in the plan.
We're making deals and.
And you know this week.
Such a high quality portfolio.
The between what we have in on what we've.
Acquired with respect of T. R. G that you know we're gonna be.
We're going to get our fair share of open to buys.
Yes.
Okay. Thanks, and maybe just as a follow up I. Appreciate some of the comments you made around the guidance, which you know I was a little surprised of the tightness of the range just given the the uncertainties out there but is there anything else you can sort of provide and I realize there's a lot of inputs that go into that.
To that number in that range of numbers, but anything just on same store growth or occupancy or lease spreads just to give us a little bit of the feel for how much of the.
Deferrals that you provided or abatements kind of come back online in 'twenty one.
Well certainly the abatements better not repeat okay. So that's the that's step one I would say the generally.
Again, it's our portfolio NOI growth.
It will be.
The 4% to 5%.
We have taken a further reserve, but I'm not going to give you a number as to you know.
What we think should be of cushion to weather.
Whatever it is further bankruptcies of additional abatements to the extent that we cut it on the appropriate deal we still have some large retailers.
Frustratingly, we have not solved not because of us.
We've tried but we haven't gotten to the finish line.
So I'd say generally around 5% in the comp NOI number.
We have of reserve.
You know sales are really all over the place so it's really hard.
To give you a good number there and we would expect occupancy to.
You know to edge up and I gave you that people wanted to hear about how much was retailer I gave you of that and.
We have <unk> factored in there obviously, we made our financing assumptions those are pretty straightforward.
We have our share count.
Creased because of the offering and then we roll it into the blender and that's kind of what's.
Fit out.
We have some variability youre right. The range is tight but we did you know I mean, we did.
At a reserve to it based upon you know gut feel that where like you said not yet.
Now, we're turning the corner as kind of my phrase, but you know are we completely out of the woods.
Not not yet, but well on our way.
Oh, that's great. Thanks, very much sure.
Thank you Andrew next question comes from the line of Rich Hill with Morgan Stanley.
Hey, good evening, David Thanks for your time. This evening I wanted to maybe just spend a little bit more of time walking through the line item, where taubman and some of your other investments.
Our held.
Not because.
I am questioning them I actually think the becoming increasingly important.
So could you just maybe walk us through how we're supposed to think about that line item relative to the full <unk> guide for 'twenty, one and maybe how you think you can grow that line item.
Even even after 'twenty one into 'twenty, two and 'twenty three because I recognize there's a lot in there and it seems increasingly important.
Well look at it flow through you know listen I used to.
I'm still pretty good at it but.
Yes closer on the equity you know, they're all equity accounted so.
Now in <unk>.
And you know what.
We show a couple of different things. So we do separate out our retailer of NOI in our supplemental.
So we do do that PR G will be on our property NOI next year. We had we took no financial implications for <unk> in the fourth quarter. Obviously, I think we owned it for like 12 minutes when did they close one of them.
Alright.
See the mortgage.
I'm always faster than what we took no other than obviously our debt increased at the year end, because we drew down on the term loan to fund it.
But <unk>, but from a GAAP point of view it'll be on the equity.
And the you know on the equity all lumped together with our other equity investments.
But in all of a supplemental will have PR G on our portfolio NOI.
And the retailer will be in that separate line item.
So you want to add anything of note.
Youll see the retailers of results that David mentioned come through the NOI from retailer investments line item Rick.
Okay, I think I think I understand that and David David Obviously as you said.
2000 Twenty's Ben.
Abnormal year, but you've been in a really interesting position whereby you'd been able to buy some retailers and negotiate retailers with retailers could you maybe just walk through some of the biggest lessons learned about.
Who you want to be your tenants, how you negotiate with them on how they negotiate with you I just think it's important as we think about how to model cash flows and the out years.
Well.
I mean, that's a tough one rich and I could I could go on a lot of different directions.
Listen when you end up in bankruptcy or near bankruptcy, you've obviously made a lot of mistakes that just doesn't happen overnight.
And by and large the ones that we bought retailers that we have.
We have bought in bankruptcy so.
Then we go in there and just run it like we run Simon property group obviously.
Obviously with the help of our partners and we make fast common sensical cash flow oriented decisions and the and return on investment et cetera.
And you.
And we we have a sense of you know.
Just because of our experience in the in the in the AR.
Retail real estate World you know what.
It makes it.
Successful, what's successful real estate they should be in.
What's the right rent to pay and spaces and we bring all of those all of that to bear.
And then obviously when you're in bankruptcy you have the.
Chance to deal with the leases or other contracts.
Other contracts that are you know that are wildly expensive that you might be able to change I mean, you know the most amazing thing I shouldn't really say this.
But they're there.
Most of the amazing thing.
You know is that.
Every retailer.
That we purchased in bankruptcy.
The one all of the tech companies get 100 cents on the dollar okay.
They pay for whether it's you know whether it's services, whether it's you know for their ecommerce business whatever it is.
Of the landlords ended up us included in the.
Getting it getting it on the shorts, that's an interesting thing that the grade satellite rethink that whole process, but you know there those tech companies are so powerful that they can shut you off.
You don't play ball with them so.
Landlords US included don't have that kind of power. So I mean, I don't know if I've answered your question.
Probably as you probably of a lot of nuances to it but you know its probably I could go on for hours.
If you don't mind, let's go on to your next question on another question yes.
That's it for me David.
We can discuss offline just seems like Theres a lot of really interesting drivers of growth here and we're trying to get our arms around it. So thank you I'll get back in the queue of having the questions.
Thank you rich.
Thank you and our next question comes from the line of Alexander Goldfarb with Piper Sandler.
Hey.
Good evening, David and hope you're enjoying the the snow out there.
It's sort of it's pretty it gets less pretty when it gets closer to up to March let me, let me share.
The good yeah, but the scheme the skiing gets better so that's a positive.
So two questions here first.
On the fourth quarter it looks like on your on that rent collections, yeah that 90% of table that you guys have it looks like on the bankruptcies you now leveled off the deferrals leveled off but it looks like you guys took about $141 million.
<unk> in the quarter also noticed that your you had a big straight line write offs of many of the big lease term. So it seems like there was a lot of cleanup in the fourth quarter is that the way that we should interpret it like basically you guys got to the end of the year you shout It up and down the Hall is hey, what do we got here, let's clean the books and start 21 in the.
Good way or is that not the right interpretation because you didn't say what the actual operating in guidance for this year, you just said Europe, you're lobbying for it but it does seem like you guys cleaned up on.
A lot at year end.
Well the the bottom line is.
When it came to abatements, we took it in the period that we actually made the deal.
And you know.
If we had.
Done everything in the second quarter, we would have done. It then in the Q3. It just took an unbelievable amount of time to get you know I mean, there was a lot of horse trading a lot of big accounts got.
Saddled as you know in Q4.
And it really you know I mean, we.
It really was when the deal was done.
So.
That's the you know yeah, we certainly want to go on in 2021.
And we did as much as we could.
To finish 2020.
But those those abatements were done in the period at which we can.
Cut the deal and signed up the retailer.
Okay. So we shouldn't interpret the acceleration in the fourth quarter of lingering into next year. It was just stopped on in the quarter.
So I think I said there is.
There is some.
You know negotiations that we still have left to do.
But I think we.
We you know.
The <unk> dealt with that.
In 2020.
Based on kind of where the deal was headed so we did use some judgment.
At year end and in a couple of these cases, but it ain't done until the cash comes into you know into my bank account not Mike.
That was terrible.
My Bank account is the assignment property group representing.
Okay.
So make that perfectly clear okay.
Yeah, it's tough it's clear second question is.
You know you always treasure of your balance sheet and.
Moody's already downgrade of your back of ahead of the third quarter earnings S&P still has you on negative watch. So just the question here do you guys think about your balance sheet I mean on one hand, youre debt trades wider than what the ratings would indicate obviously the bond guys want to get the best deal that they can at the other day and you guys can access the market.
But still how I mean, if something were to happen you got like a two notch downgrade is that I mean, all of it seems like the market's pricing that in but on the other hand, you guys got a ton of debt that you were able to issue. So can you just give us some color on like the buyers of the debt and how the that people are looking out of are they just trying to get there.
We're out of the flash, while they can and the way that you've outlined your plants of the rating agencies youll be able to maintain something that starts with an a or are there. Other concerns out there that people are or that the rating agencies are talking to you about that you need to need to need to address.
Hey, Alex it's Brian look I.
Thank the less the debt deal. We just didn't hear the beginning of this of January is representative of where we've seen our spreads go I mean spreads rent of 100 basis points since the summer time.
And so I think the market is representing is the 45 of the kind of going forward with respect to the agencies. We are certainly in the deep dialog with them on.
On a regular basis and are comfortable with what they've done thus far other than I think they're looking at our deals on our ability to raise capital. So David point any sales of $13 billion last year as the tech.
Estimate to the company's balance sheet. So I think they're comfortable will speak for them, but I believe theyre comfortable where theyre at right now yes.
Okay, No no way, we're going to get downgraded.
Not a chance so.
Next question.
Okay. Thank you David.
Yeah no worries.
Thank you Andrew next question comes from the line of Derek Johnston with Deutsche Bank.
Thank you.
So what have you learned about the traffic.
Tenants.
And.
Specifically in the centers within the states that have less mandated restrictions are are there any inspiring read throughs of green shoots for those centers with tighter restrictions on say, California or northeast that you can pinpoint share.
Well I would say you know you take of state like Florida.
It was a pretty good example.
And I mean, you are getting.
The the one element that's missing is international tourism.
But if you put that aside you are getting some real you know domestic traffic increases.
<unk>.
And Youre getting and sales are quite what they were last year, but you know at this time, but you are seeing I would say to you that.
You know like the state like Florida is really showing.
Green shoots vibrant economy the.
The only element that's missing.
You know to make that really hot would be international tourism, but everything else is kind of clicking along.
And you.
It is pretty good Texas is probably the next closest.
But again it depends I mean, there Ross that also is somewhat dependent upon whether it's near the border or not and what is such a big state that you know do you have COVID-19 in this one area versus that of area, but I would say, Texas is showing green shoots as well.
But the.
Florida is a great example of I would say to you.
You know that you can.
You can't get on with the.
With business.
And you'll start to see green shoots in there and the.
There's a lot of energy there.
And no I did not go to the Super Bowl Okay.
Okay, Okay great.
So we did go back David to <unk> 19, and this was the last quarter before the pandemic was known at that time that redevelopment baas and pivot to experiential and mixed use concept. So it was really high and that's the redevelopment pipeline stood on the record $1 8 billion So high.
This pipeline in redevelopment priorities changed besides being much lower and how do you stack of prioritize redevelopment spend, especially as we see the pandemic escape velocity in front of US later this year and thank you yes.
Yeah sure I'd say simplistically as we look at restarting the pipe the pipe didn't go away, we just put it in the.
And in the freezer.
Now, we're calling it out.
And I would say to you that the biggest change.
Derek is that.
We believe in the mixed use component pretty pretty significantly to the extent that we were adding what I'd call retail, we're probably looking at those plans again to make sure that we're adding.
The appropriate amount that's kind of the the biggest change.
But I would tell you this.
You know I do feel very strongly about this that the <unk>.
High quality suburbs are going to be where the action is in the future.
And.
All of the urbanization of 234 years ago. The question was.
Why are the suburbs going the.
Exist everybody is going to live in an urban environment Yada Yada Yada I'm, telling you the suburbs are gonna be hot and our quality real estate is going to be where the action is for those well located suburban.
Centers of Commerce.
And that's going to be the big change coming out of the pandemic.
The next question.
Our next question comes from the line of Michael Bilerman with Citi.
Hey, David Good evening.
David My first question is just sort of just talking more broadly about vertical integration and I know you can't talk about the fact that in under review right now, but can you talk just a little bit broadly about doing things on balance sheet versus on joint ventures or other structures and maybe just provide you gave an update on some of the retailer investments maybe.
I'll give an update too on shop premium outlets and how that was setup conveniently before the pandemic and how that has happened and maybe just tie everything together the vertical integration.
And being able to control a little bit more of your own destiny.
Well.
Listen I would say that.
You know.
Whatever we do we look at return on investment and.
And cash flow potential.
Shareholder value potential.
And.
Cash flow growth and obviously top line growth.
And H B.
Business is.
Evaluated based upon.
What those particular characteristics are important of that that investment, but there's no reason.
We're in the REIT format. There is no reason why we can't.
Make money and other.
Areas that are consistent with what we've been doing I think we've proven that time and again have we made mistakes, yes, we have.
But we've we've been pretty good investors and we hope you know.
To you know to do that in the future.
And we're pretty good sponsors and we have.
Our relationships between the brands and our partners.
And spans the globe essentially.
Some of real estate footprint, we're in Europe and Asia.
And obviously domestic.
Well the only place I would say, we're really not in the.
South America.
But you know our retail brands.
Span span the.
You know a lot of places and.
We're focused on value and at the end of the day Michael.
If I look at I look at our retail footprint it does $3 $5 billion of commerce.
And I look at the value, we get for it and it's probably nothing.
And in some cases people view it as the negative which I can understand but they do that's their prerogative.
You know maybe there is something you know maybe we should unlock that value, where we're we're absolutely going to look at every.
The opportunity to unlock value.
To the extent, we can but we.
And figure out the right structure.
But the most important thing is to make the good investment the set.
The thing then as you know.
Where it should reside how do you get the value out.
How do you grow it and.
And all of those are on the works, but you know spark is.
On a great example, we believe in the model we can.
We believe that we can run brands across the.
No.
Our economy infrastructure.
We know that E commerce brands, they spend a lot of money on infrastructure, we know that if you combine those.
In the one.
The entity, you're you're bound to save a ton of money.
We've seen it in the overhead and the retail company so.
We're at the early days of figuring out what the right.
The structure is but in the meantime, we're going to make investments that make us money and believe me there is value there that.
You know that we'll unlock where we'll get the we'll get the credit for it.
And then just the second question just in terms of guidance.
Greatly appreciate the transparency actually putting out a number.
Of guidance, which given everything that's going on that's great.
If you think about just sort of the building blocks to that guidance.
If you look at 2019 relative to 2020 right. Yes, you had the $2 50 per share.
Almost all the $3 a share of well over 1 billion dollar decline you are picking up at least $200 million.
Going from 'twenty to 'twenty one.
But I almost want to think of couple of years of getting back to <unk>.
NOI in SFO.
And bridging that gap.
You threw out the 15 to 20 cents of retailer investments per page 17, it looks like that was pre DNA of about six cents. So call. It 10 of the 50 increase.
Coming at least from the retailer side on the positive investments you've made but maybe you can just sort of break down some of the other bigger components of what's coming back not just of I don't need specific G&A guidance for NOI, but there's obviously a pretty big moat of of earnings to get back and maybe you can.
And just share some of the about pizza.
Look I think I think the.
The biggest thing is it's not.
That is not the replicate the abatements and the bankruptcies I mean, that's the biggest component, but you know look our portfolio again gross not its share.
Did over $6 billion of 19 right.
We lost the $1 billion.
And you know all of the stuff that we did.
Net and again, we worked our you know what off to mitigate that through cost savings.
What's not been of replicate or the cost savings in the sense and.
And the debate.
And you know we were we were pretty aggressive in running the ship as lean and as tight as we could and we had no choice.
Even though people across the street we're open.
We werent allowed.
So you know we have $1 billion to make up.
This is <unk>.
And you know that.
And I think the biggest thing is going to be the can paint the big unknown is.
How long is that going to take the get lease up when we lost three 350 basis points three one of 383 re aging.
380 basis points on the occupancy sales net out.
Our vaccine rollout and everything else I mean, we get our rollout of our best guess, our comp NOI is going to be positive.
Got a reserve.
We ended the day, we're going to make the.
The 1 billion up over time, we're also going to some of the properties were going to sell the go away. So that's in there too.
On.
I can't give you you know.
Steve talk about kind of towards the out and we already gave you gave me more he's got a nicer voice than you do so I gave of more information that I, probably normally would.
The kidding, but I mean, that's kind of where we are we also we're also dealing with the international shutdown I mean.
No they're there they're picking on malls.
Like like what happened in the U S.
Again without science, but.
Theyre also shutting down of outlets.
Yes, the keep high Street, so go figure it out.
So we're still dealing with some some some craft everywhere, but I mean.
I'd say, the big thing that won't replicate.
We hope for some of the abatements.
The thing on the cost savings and sales and then build up the recent common.
Bad debt, we put all of these numbers and we also put a reserve just because we have a lot of uncertainty.
We put it on the blender on that spits out.
I can't add much more on that.
Okay. Thanks.
Sure.
Thank you Andrew next question comes from the line of Greg Schmidt with Bank of America.
Hey, good evening.
I had a question of about the redevelopment in the U S should you put your Rick Sokolov Paul on <unk>.
Kind of run through who youre thinking as possible anchor replacements are we likely may not be retail and that could be wellness healthcare E sports or whoever but who were some of the.
Replacement anchors Youre thinking in terms of your U S redevelopments.
Well I mean, Craig.
On retail.
Yes, I mean, I am sorry of real estate specific but I think what I said earlier.
Most important thing I think some of these.
We are on.
Really looking at.
With the idea of toward reducing the amount of new retail that we Mike on board.
But also.
But also.
On the restaurants, and we're making up for that with what I'd call. The.
The opportunity for suburbs to get.
Exciting again, and I think thats kind of throw a lot of the mixed use.
<unk> that were already underway, but I think we'll be accelerating so now.
Some of the anchors of doing that.
Doing new deals I mean, we're talking to the calls more talking the primer.
We're talking to all sorts of those kinds of guys to Dick's.
We sell of making sure we've got a couple of Dick's Thunder underway. So.
And I would hope that some of them more.
Thoughtful entertainment oriented.
Retailers once the Covid restrictions get back would also continue to.
<unk>.
B in our property. So it's still it's still at work, but I'm hopeful we'll have a lot more of the mixed use stuff that we're doing on where in some hot weather.
Paul very strong markets for that like.
With Trs <unk> and Nashville were on Austin, we're very strong in South Florida on.
Obviously, Texas.
So we're in some of these markets that one growth.
We are looking to facilitate growth.
And.
Well, we're going to we're going to.
Make the next evolution of our real estate.
You know that much more interesting with time.
Great and then I was just curious how long are you of interacting with the the Taubman management.
Given there.
The properties and how are the interfacing with the Simon depot.
I would say fantastic.
We are.
On.
On the leasing side talking.
Significantly.
On COVID-19 related issues.
The renewal related issues new business as you know correct, we've got a new business.
Group dedicated kind of up and coming retailers, which part of the way.
It's exciting all of those.
Retailers and this is where I do Miss Rick.
A good start.
You're kind of true.
As I mentioned.
But I will never do on his last I could never do it justice.
But.
Most of those retailers are looking to the.
Grow.
The income from the warranty partners the shake shack.
No no no on and on so.
That's very encouraging and we're talking to.
The <unk> about the relationship between.
Bobby of myself as great in fact.
Bobby Inc figures out how to get some of the very easily and it makes me look a lot with which is fantastic I look forward the having some tomorrow night.
And I think it's gonna be of Great partnership I mean, they're they're dealing with what we've dealt with.
You know in terms of coal of it's been a tough year for them, but.
I think we're all looking forward to the future.
And.
And we'll go from there and as you know that.
The family has got a lot of.
Capital tied up on the DRG and believe me they want to they want to grow that.
To me that's a win win.
Okay. Thank you.
Sure.
Thank you Andrew.
The next question comes from the line of Caitlin Burrows with Goldman Sachs.
Hi, Good evening, maybe just on the balance sheet side could you clarify whether the taubman that is included in the debt metrics on page 29 of the supplement and if it's not is it just because it happened so close to the quarter end or something else.
One of its Brian. It is not included the only debt that would be include relative to top of the was the $2 billion term loan that we drew down ahead of the closing.
And going forward will it be reflected in Washington, like the other joint venture debt.
Right.
It absolutely will.
Okay.
And then this quarter on the metric you guys had shown in the past on debt to NOI it looks like.
That is not there anymore, but I think it's about seven times using the net debt from page 28 in the NOI from page 17 I'm wondering.
And would it be higher when including the Calvin portion of those metrics and also what's your near and medium term target for outlet rich yes.
Well the faster the matter is I think.
That statistic you have to be very careful with.
Yeah.
I personally chose the right.
I think we need to look at it again because of as you know many of those properties are non recourse.
And it overstates.
The leverage and I think.
And a part of our job is to educate the investment community, how we look at the business.
And Brian and myself.
We will begin that effort.
This year.
But.
<unk>.
You know look EBITDA.
The debt to EBITDA, if you look at our its not in our financial covenants anywhere so it's the gratuitous.
Metric that is not as thoughtful on refined.
It should be.
The.
We're in the process of refining it to clearly articulate.
What it is but you've got a separate once recourse non recourse whats on J P and what's not in JV and a more thoughtful manner.
Which we'll embark upon in 2021, so you'll have a better understanding of it.
Okay, and then I guess just.
Considering where that leverage anything you'll educate us on how we should think about it.
The current interest and making the property level of acquisition in 2021 day or under what conditions would you consider raising additional equity.
We have no need for raising additional equity.
The balance sheet is in very good shape rating agencies are very comfortable with.
The transaction that we did both the finance.
The taubman and the equity deal on.
Honestly.
They put.
They put us on.
You don't watch just because of the Covid has nothing to do with taubman or the financial metrics.
And I think as.
As we get as we go beyond the shutdown I remember, we lost 20 per cent.
Loss of 20% of our of.
Ability to operate in the year.
Which is material.
Obviously, a lot not counting the restrictions.
We had to endure coming out of it.
I think once we show.
One of them.
We've turned the corner in terms of that.
You'll see that.
You know you'll see.
The negative watch go away no issue not worrying about of one iota add on.
On the property acquisition side, Hey, if I combine the good value and that's of.
Great asset and the Guy wants to sell.
No.
That's meaningful to our portfolio will take of service work.
We're in no hurry.
No need to do one thing or another.
It's.
Accretive to <unk>.
Our portfolio on our financial Wherewithal will happen to look at it.
Okay. Thanks for the Steakhouse.
Thank you and our next question comes from the line of law on Santa Maria with BMO capital markets.
Hi, good good evening. Thanks for the time, just a question on sources and uses.
You continue to pay the dividend at a lower rate than previously you expect cash flows to go up so.
Any color or thoughts you can give us around.
The dividend going forward and the other maybe.
Uses of capital I'm not sure. If you haven't heard of a sense of of what could be contributed or used to further invest in retailers. At this point. So maybe just a general conversation on sources and uses the and touching on the dividend well again, our net investment on retail is.
As.
$330 million, so I think.
You know when we have properties that are worth of 1 billion plus.
It is what it is I think I think it's important to know.
The.
We are 400 basis points.
Below.
Are moving.
Paul multiple.
As the history of.
Being a public company.
And if you look at our retailer.
What we've seen from retailers and the correlation of all had a much greater bounce back.
In terms of our performance on the.
On the.
On the stock year to date on the last few quarters and we have so.
We're optimistic that.
The future of <unk>.
We will begin to the.
Our our value will begin to be appreciated again, which has been in the past and frankly there is no reason why on wall in the future.
With respect to that and the reason I bring up the past is as follows.
If you look we've worked the best case.
Analogy that we're looking at and again no one's really dealt with COVID-19.
Before.
Because you know what happened in O weighed on eye.
Where are.
We.
We had.
Don't hold me exactly because of these numbers, but.
And all the way, we were earning around $6 of share.
O R.
You know all weighed on nine bankruptcies dilution that we had on issuing stock high interest rates.
I think we earned in the $3 54 range.
And then we ended up growing out of that earning $12. Okay.
Now we're at nine.
We earned nine of 11.
We're saying, we're going to earn 950% of 975.
And I'm hopeful that will replicate what we did in other ways.
Not only did we do in a way.
While we added immensely to the quality of the real estate.
We separated ourselves from our peer group dramatically.
We <unk> the balance sheet got better all of the same with the.
Our supply we did just that in the other we grew international I truly believe.
All of these things will happen again.
That's what we're made for and this is a long way of saying that the dividend track basically what we did on earnings.
Actually paid.
No.
Dividend and non.
Can you believe it or not and we put it in the script and that all of this crazy stuff.
And that was all.
All of that the OE.
On.
I feel like.
If history repeats itself.
Given the quality of the real estate to obtain the balance sheets of diversity, we are going to replicate the same good work we did.
Coming out of that and we will do is coming out of the Covid world.
We're already beginning to do it.
And that that's the important thing so I think that's a long way of saying.
Assuming we can completely get out of Covid, you're gonna see increases in earnings.
The get increases in dividends.
And we have the history that ultimately should repeat itself.
Thanks for that.
And then just my follow up on the lease terms can you give us any sense on how lease terms have changed if at all during the last few months end of your discussions with retailers either for newer renewals.
And how maybe that.
Trending over periods of the past location, whether it be the financial crisis of the Tech racking.
The the perspective historically it would be helpful.
Yeah, sure I would say simplistically.
Certainly prior to Covid.
More or less of the same.
There are certainly.
More of an interest of <unk>.
So a little bit shorter term sorry.
Three years and by the way, we're okay with that because.
I would rather negotiate two or three years from now.
Right now.
So.
You know there are at least in 'twenty.
The new stuff that we did in 2020 and some of those renewals some of the renewals were doing on 'twenty 'twenty. One are shorter two or three years, but I think actually.
That could be in our best interest too.
Because of obviously we've had.
Being shut down and restricted on all of this other stuff.
We don't have quite the ability to.
To Paul.
Point of sales as a way to.
The increase.
The increase rent so I think we're.
And I think it's it's.
It's actually of two way Street.
Working out fine with the vast majority of our retailers.
Thank you.
Sure.
Thank you Andrew next question comes from the line of Florida's ban the school with Compass point.
Thanks for taking my question David.
And Brian maybe if you could talk a little bit about your your debt's philosophy.
In particular, your mortgage profile, but more of.
The maturity profile of a significantly shorter than your unsecured debt.
The maturity profile.
Presumably some of that is due to the fact that mortgage debt. These days is.
Less readily available.
Maybe if you can talk about some of your upcoming.
Mortgage debt that's coming due.
The the fashion Center pentagons.
The fashion Valley in San Diego, Florida Mall of some of these big Jv's how are your <unk>.
Partners talking about.
The funding of those.
The mortgages and or the re upping of the mortgages. There how is the bank is doing that and also.
I think you've qualified that you've indicated you've got about $714 million of of mortgage debt Thats probably in fact, we know some of this is already in the news.
Is being handed back those are not obviously those premium centers, but talk if you can walk us through some of the your thinking regarding your your mortgage debt and do you think you'll have less or more than mortgage debt. After this year.
I'd say a pretty similar.
Are the couple of like the Florida mall fashion value.
Pretty straightforward doing it.
In some cases.
You know rich that 10 year deals and maybe a little shorter we did what 15 secure of refinancings, even in this period of time, So I don't.
I don't find it.
On overly.
Complicated or overly.
Concerning or.
Or any risk that there's not the ability and the risks if there's not the ability to refinance stuff.
On non recourse.
There are certain debt is non recourse that may be in special servicing.
That's kind of a contractual right for the borrower which is the.
The standalone entity, the non recourse to S. P. J. It's also of the REIT from the special servicer.
Right so.
We've done we've we've dealt with those for a number of years in some cases they'll be.
Restructure mutually agreed to and if not.
And the special servicer on we'd like to own the real estate, we're more than happy to cooperate and do it.
Professional manner, we did one just recently.
And.
It's <unk>.
Absolutely in the best interest of Simon property group shareholders those decisions that we're making on that front. So.
Very straightforward very professional honoring the contracts rights on both sides.
Bake hope to make deals and some if not then.
Yes.
Then that will no longer be part of our portfolio and we wish that new owner of the best of luck.
Great.
For me on the other.
<unk> here, obviously other unsecured portfolio of benefits on the ability to issue 30 year debt. So that's going to naturally drive the duration of higher on a weighted basis.
Thanks, Thanks, that's helpful. Brian.
The other question I guess.
Yes.
One of the.
The the unknowns from the market is what are the right cap rates of four four malls in particular word of the rate cap rates for a malls I mean, I think the market sort of.
Has glommed on the fact that that C malls are worth very little and it sounds very high very high cap rates I E low values, but the.
The question is more regarding your portfolio.
You mentioned your low <unk> multiple we've seen.
The Brookfield transaction.
At a much much lower cap rate than where you are trading at.
As you look at and we also know that there's a large.
Our portfolio of owned by west or the debt.
The Westfield portfolio on by unit volume potentially that that could be in play as well.
How should the market think about the cap rates for a malls and maybe give your.
Your view on that.
This is a known unknown right as opposed to an unknown unknown.
Right.
I would simply say there is.
You know the cap range is what we want it to be because I think were the only buyer out there.
So well look on the mirror on I'll decide what the right Kathryn the seller.
I think Brookfield.
The busy buying out.
Damaged busy buying up the P Y and I think we're the only <unk>.
As far as I know everybody.
As herd mentality of one way or another we.
Our buyers of high quality real estate and.
You know the funny thing is.
When we decide to buy something that doesn't count as to what cap rate should be.
Net we're the only buyer. So go figure that out I don't know if thats a no known already.
Or whatever but.
The fact, Nevada is we're really the only.
I mean, we're really the only buyer.
Yes.
Once the 0.2 of cap rates that we're not the buyer, but I don't never understood why were not good enough to be the arbiter of what cap rates, you're paying but I'll, let you take that out force I cant figure that out.
Fair enough, but but also presumably.
As we've seen a lot of in the in the.
In the Tech business is when you buy something all of a sudden that reinforces what the right. So you actually can determined with the right kind of breakthrough for your own value can be based on the the die youre willing to paper for somebody else.
Well listen we did close just the recent transaction and.
You know in that.
I don't know that that's a pretty good indication.
The transaction.
Correct that's correct.
All right.
Any of that but I want you, Florida. So I want you to get back to me and explain why we can't be the arbiter of cap range why it has today.
State pension fund and why it can't be sudden property.
I don't get it okay.
And anyway.
Kidding, but not really but I'm kidding.
Most of them.
So you think if I, sorry, I guess I'm slightly going over a year on year over year of lot of time.
All of it anytime.
Alright, thank you.
Sure.
And our next question comes from the line of Mike Mueller with JP Morgan.
Yeah, Hi, just a quick one you mentioned boxes were skewing the 'twenty 'twenty releasing spreads could you tell us if they would've been positive if you strip those out and just give us any color on 'twenty one activity as well.
Tom Ward of shaking his head, yes, and for those of you who know Tom Ward you can count on it they would have been positive yes.
Got it and any color on 'twenty one exploration.
In terms of renewals or yeah.
Yeah.
All of the of firms of yet in terms of what percent were done yet or not.
Just on if the trends are.
Consistent that they are still renewing of positive rates as well.
Well I don't I mean, it's factored in I don't know what I don't know I can't really answer off the top of my head on spreads, but what can we have of percent done what does anybody know off the top of head.
Mike it's over 50% done yes, Oliver over 50% of we can get you a more.
I've seen it but I'm sorry to tell you I just don't remember.
No that's that's fine but top of.
Tom can you give that to any of the percent done.
Got it I appreciate it.
Thank you.
And our next question comes from the line of Linda Tsai with Jefferies.
Hi, Thanks for taking my question.
I just wanted to clarify in terms of the 4% to 5% portfolio growth. This is overall NOI right in that same store.
Correct. We are we are given the.
You know I don't know how to show top of anymore, given that we were shut down with restrictions so.
I made the decision that we're just gonna showing the portfolio NOI on.
All of it.
Because you know.
You could argue that none of it's comp.
Because I mean, how do you know.
Or all of its kind of I don't really know what to do so the simple thing is we're just going to show you our portfolio NOI.
The cop.
Distinction towards all of the real estate on.
All of the NOI.
And hopefully that'll be helpful to you.
Thanks.
Looks like the U S. Gross contractual rents went down 2% to 3% each quarter from <unk> to <unk> what.
What accounted for the fluctuation.
Rich lindahl.
And just looking at like when you take the <unk> and.
When you look at the reconciliation page with and like the first line is.
Gross contractual rents it's the C.
Then on the <unk>, yes.
And when the gone down because of the bankruptcies yeah for sure.
Okay. So the 165 versus the 1591.
Versus.
Okay.
Why don't you talked of time I'll give you the more detailed but instinctually on would you say you have to go down because of bankruptcies of wind.
But he can he can tell that in.
Okay. Thank you sorry, one last one you mentioned that the a b G brands generated $3 5 billion in digital sales.
And on the non AVG.
And it's not a b G all of them.
Our retail brands.
So on our investment panning arrow.
The rule of law of guilt Brooks brothers Forever 21 of them altogether, and that's the three and a half pill.
Okay, and any sense of what the growth rate looks like going forward.
Well, I mean, I'm kind of torn because it's been pretty good.
I think of our stores on an open but the.
Our were shut down for a long time, but.
It's it's it's it's growing reasonably well.
Okay, we have and I think I think the important thing here is we have embedded in our company and ecommerce comp okay.
Again, I know, it's kind of complicated structure.
On 100% of everything, but we are in at a pretty reasonable.
The scale, we have on ecommerce company net.
That was $3 five millions of dollars of digital sales and that's the most important point now of top to us and the management team out of that.
I haven't put it all together so the market recognizes the value.
Mike.
Great. Thank you.
Yeah.
Thank you and our next question comes from the line of Vince to bony with Green Street.
Hi, good evening.
Just had a follow up to linda's question on the comp NOI piece I just want to make sure of understanding the guidance you stated correctly with the 5% increase in portfolio NOI for next year is that number inclusive of the incremental NOI from todman because based on my math that would make you know most or all of them.
5% increase if you do the hardening and the legacy Simon assets when the idea of flat or slightly down that is there can you clarify.
That you're trying to paint the negative picture of my friend, that's just domestic.
Simon portfolio doesn't include the town okay.
For the guidance piece.
The guidance piece correct.
I just want to make sure clarify I didn't know.
Sure. It's part of it's fair question, it's just our existing portfolio does not have anything to do with TR G.
And then in the fourth quarter, the fair to say the domestic portfolio on wise pretty close to the old comp NOI definition then.
It's always been yes, I mean, it's always been.
Always been as you know our comp NOI has been frankly, 90, 590 95 per cent of the portfolio. So.
We sat here and I looked at it Michael why don't we put comp on the line what do we take out what we don't take out it's just it's.
It's more there's just no need for it, especially given what we endured in 2020 and we'll just give you the number of portfolio whether it has a redevelopment that's taking the N of wind down or we added something to take it the NOI at it.
It's almost irrelevant on its all on the margin.
And again I know, that's I'm glad you clarified that.
Does not include <unk>.
Yeah.
The figure out exactly how to portray it for 'twenty and 'twenty one.
Okay that was maybe my next question just going forward I mean, it totally makes sense on the redevelopment piece just the lump it together, but I think the next year with todman getting added it would be helpful to have some sense of.
Ongoing operations versus the incremental NOI from Dod net bonkers.
I think that's fair statements. So we will we will figure out if we lots of it we'll make sure that we highlight what the number is.
Great. Thanks, and then maybe just one more quick one for me just could you provide a little additional color on the leasing spreads the typically maybe comparing on Friday and will commentary on malls versus outlet.
Today.
Oh, that's a good one I don't I don't know do you know off the top of head.
The bulk of it.
The reported number of minus $6 eight he talked about the fact of net do you think about some of those acres that one the mix of previously that would drive of the mall spreads negative, but the premium outlets was positive.
Okay. Thank you the top of line.
Thanks, guys.
Thanks Vince.
Thank you our.
Next question comes from the line of Handouts, St Jude with Mizuho.
Thank you. Thank you.
Thanks, David.
So I guess the question for you on the outlook for retail sales more broadly.
We've talked to some people who have expressed concern that as COVID-19 subsides and retail sales for malls and outlets specifically could be negatively impacted because there will be an outsized demand for travel entertainment and social gatherings, and that's where consumers will be spending their dollars and.
And additionally, because of Covid, there's been a lack of new fashion trends outside of the leisure sweat for most of the way the company at home, which could make apparel sales challenging for a while and then there is the concern of the further ecommerce here again, so I guess I'm curious, how you're thinking about the near term opportunity and risk for retail sales here, how that plays into your expectation for Brent and also.
The projects, you're starting and how you're populating the redevelopment project. Thank you.
And I.
You know I can't sit here and make a prediction other than what.
What I said earlier I think somebody is going to be.
You know really make a major comeback and was all about street retail of is all about.
Urbanization, I think you're gonna see of <unk>.
Moving on towards the suburbs and that'll be that'll spell good opportunity for us and.
I'm not overly concerned about.
People are going to have some disposable income and then I'll go here there on I think I think we will get our fair share of the growth that's expected when the.
When we get past the.
The COVID-19 and resume on more and more normalized not overly worried about it.
Fair enough fair enough I.
Just following up on spreads and I know you've been asked the question of several different ways, but I'm curious overall is there anything here on the recent leases, you're signing or or anything you're seeing in the numbers that suggest that spreads could trough here in 2021, I'm curious what your assessment of the prospect of well well look I think I mean again I think.
We are.
If I could put a lot of these recent.
The recent questions on in perspective, I mean.
You know in evaluating what we think we're going to earn next year is.
There's certainly science, but there's an element of art because we are dealing with.
A very uncertain.
The macro environment.
Predominantly.
Because of Covid and the impacts that it has.
On the psyche and you know how.
How much stimulus, we're gonna have theres a lot of uncertainties. There. So you know we tried to do the best we can the kind of give you on.
Portrait of of what we're going to earn and Theres a lot that goes into it I think it's you know hopefully will be in that range and we'll we'll execute like we have historically.
You know when we'll be in that range, but it's really hard to pinpoint.
Specific statistic.
One way or the other because theres just so many variables out there and we tried to we tried to put it all together in this range.
To give you a sense of what we think the earnings will be next year or this year match on site.
Alright, thank you.
Sure.
Thank you and our next question comes from the line of key being Kim with truest.
Thanks.
Good afternoon.
Just talking about your development pipeline the yield of 8% the only thing that's changed over the past couple of quarters. I'm. Just curious is that because of the projects are pretty much leased then.
Ready to go.
So there's not much risk of that yield and <unk>.
Secondly, if you had to put new dollars to work.
It's 8% on development of redevelopment.
Enough to justify it.
Well.
The answer is it hasn't changed much because the the.
The development I mean, not much has changed I mean, it's been it's been in Lockdown as you know.
In dealing with Covid, So we hope to hope to the.
Look at where we can the accretively add on the answer is no eight per cent.
There is no.
No you know guide, it's gotta be overrate or not it's gotta be what's the value of the property, what it's going to do to the property I mean, if the property is an eight cap rate property.
And you get an 8% return you're essentially treading water unless you think you're going to suddenly, making a 6% property, which which is possible on certain redevelopments.
On the other hand, if you spend in the eight on a five day.
Then you made a lot of money, so if everything boils down to the specific real estate.
That we're trying to create over a long term basis now remember we gave you. These numbers kind of more of left out of the box.
You know if you get 8% with growth I mean, that's a pretty good return.
Unlevered return going forward so.
Again, it depends on the real estate.
Okay and just.
Last question for me.
How do you think about any early thoughts on the $15 minimum wage and how you'd think of retailers can't handle it and at the end of the day how much exposure.
You might be you might have an assignment of the company.
Yeah, I really I really don't you know I'm gonna stay out of the politics.
And you know well you know I mean, I think we all were frustrated with.
The.
What was thrust upon us.
Last year the.
Because of the.
Because of the you know the.
You know the way the we got treated versus the other boxes in other warehouses.
You know the mall seem to get the brought the whole lot of.
A lot of the restrictions over more of it would seem more symbolic.
And then inside now the reality is all I want.
The level playing field.
This level of for everybody and we'll figure out how to operate in that environment.
And and I would just say if its level of the makes sense.
Then Greg.
You know I could look at that from two three or four different.
The vantage points on as long as it's a level playing field.
You know then the.
And that's all of that that's all of that that I'm focused on.
Beyond that.
Okay. Thank you sure.
Thank you.
The next question comes from the line of Michael Bilerman with Citi.
Hey, David.
Just two of the questions.
If you talk about sort of the retailers now that you own and obviously with the amount of closures at the mall side, obviously the E commerce sales were rising pretty significantly.
I have talked over the years.
About how much of the retailers brand was driven by the physical footprint and how you as a landlord work sharing in those ecommerce sales, especially when your assets are serving as the reason why some of those people may go on line and you had expressed a lot of.
A frustration.
You know not getting your fair share of that.
Now that youre sitting on both sides can you comment a little bit about how you may be restructuring the releases you know.
With those retailers to be able to a share in.
E Commerce sales and what Youre doing to the benefit from that.
Well there are.
There's no real I mean, it's there's no real change I mean, we you know.
We.
Discuss with a lot of retailers what happens if they buy online return to the store what happens if it shipped from store.
What happens if they pick up.
And reserve in store and those are all you know we have a pretty consistent approach to it.
And were you know even with the pandemic and all of the you know all of the.
All of the the pressures that we've had to deal with on the word steel.
More or less sticking to what we think is the right approach on that front.
I mean, I've never we're not in the walking to get.
Our fair share of their E commerce sales.
So I think you missed characterized it I think we're just looking to.
So not yet.
Uh huh.
When they do.
The sales.
But somehow the store is involved in that sales.
And that's all of that we're looking for that.
They go all of their business online and I've got lots of them.
But if if it if the store interaction is important to them, we don't want our sales to be.
Reduced because the stores, providing the service and therein lies the discussion and it really.
That's ongoing and it's you know and I think we're making a lot of progress.
On that front.
Alright, she didn't know if now owning more of the brands owning more retailers.
As you sort of getting involved in figuring out what is the right split on how it would all be the handle.
And I understand the credit aspect of where the sales and how it happened whether it's returns, but I would imagine that obviously your asset serve as a good marketing for those brands and in calculating what went you want that retailer to pay based on the sales that they generate within that trade area is something that.
You would want for Simon shareholders I'm, just trying to figure out how you balance the two sites today.
Well, we've been balancing things for you know years and years and years, that's what we do well.
Look I would say no.
For most retailers, having the store is extremely important because.
If they're in the market out of sight out of mind, Theres certainly read retailers.
Net are going to experiment with.
The shrinking their store print store footprint dramatically.
And assuming that they're going to pick up.
It online.
Maybe they may maybe it works I think it won't.
We'll see some we'll take the chance and they certainly have the right to do whatever they want.
The leases expire.
But I don't think they'll make it up on the Internet.
And the most and the best successful retailers are ones that really figure out how to do both really well and that's the ones that we want to do business with and our brands, we want to be in that category and in some cases, we're not quite there I mean, I would tell you that penny E Commerce business.
Is not where it needs to be.
On the same thing the store businesses in either but you know.
We're gonna mutually go after both elements of.
I would tell you that the arrow store business is.
Terrific and they're they're picking up their ecommerce business I would tell you that forever 21 doesn't quite have of fully developed E commerce business and.
And we want that to happen because we think that makes the store business better.
Not that complicated there'll be there'll be some folks that are in our industry that will say I've got 300 stores.
I've got 400 stores I can do it 100, and all of the growth will come on line.
My personal view is.
I don't think they'll succeed it's really hard to shrink to grow that.
That really that's a really hard thing to do now maybe you have to shrink to survive, but shrink to grow it to be a better company. That's a tough one but its few and far between but maybe some can make it work and if they do God bless.
And if they do then they'll probably want stores to grow again, so all of them will be back at it we'll see.
That's helpful.
Don't know if I've answered your question, but it was really.
That's really not frustration is you know.
We just want the.
The recognition that we certainly don't want to get penalized.
If the store is.
Critical component.
For that transaction to have taken place.
Great.
Thanks for the color David.
Sure.
Okay.
Yes.
Me and the whole team and all the time so thank you.
Happy new year, even though you're not supposed to do it in February and we'll talk soon thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.
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