Q4 2021 Simon Property Group Inc Earnings Call

Greetings and welcome to the Simon property group fourth quarter and full year 2021 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press star.

Zero on your telephone keypad as a reminder, this conference is being recorded I would now like to turn the conference over to your host Mr. Tom Ward Senior Vice President Investor Relations. Please go ahead Sir.

Good evening and thank you for joining us today presenting on today's call David Simon Chairman, Chief Executive Officer, and President also on the call are Brian Mcdade, Chief Financial Officer, and Chief Accounting Officer.

Reminder, that statements made during this call maybe deemed forward looking statements within the meaning of the safe Harbor of the private Securities Litigation Reform Act of 1995, and actual results may differ materially due to a variety of risks uncertainties and other factors. We refer you to today's press release, and 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 date reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included within the press release and the supplemental information in today's form 8-K filing both the press release and the supplemental information.

There are available on our IR website.

Mr. Simon Dot Com our conference call. This evening will be limited to one hour for those who would like to participate in the question and answer session. We ask that you. Please respect our request to limit yourself to one question I'm pleased to introduce David Simon.

We had a very busy and productive quarter to and a very successful year, we recorded occupancy gains record retail sales and demand for space from a broad spectrum of tenants is robust.

In our other platform investments had strong results with.

We generated nearly $4 $5 billion in funds from operation in 'twenty, one or $11 94 per share the $4 5 billion is a record.

The amount for our company.

The four year and coming off a difficult year of.

2020.

These results are a testament to our relentless focus on operations cost structure active portfolio management smart investments coupled with a.

A coherent strategy.

Fourth quarter funds from operations were a $1 billion 160.

Sorry, 116 billion or $3 90 per share included in the fourth quarter results was a net loss of <unk> 10 cents per share from a loss on extinguishment of debt and a write off of pre development cost partially offset.

Set by an after tax gain on the sale of equity interest or domestic operations had another excellent quarter to conclude the year, our international operations improved in the quarter domestic property NOI increased 22 four per.

<unk> year over year.

I'm sorry for the quarter.

And 12% for the year, including our share of NOI from <unk> in our international properties portfolio NOI increased 33, 6% for the quarter and 22, 3% for the year.

Mall and outlet occupancy at the end of the fourth quarter was 93, 4% and increased sequentially at 60 basis points.

And 260 basis points a year.

Year over year average base minimum rent was $53.91.

At $8 two that if you included variable rent for the year, we signed more than 4100 leases.

For a total of more than 15 million square feet. This was the highest amount of leasing activity activity we have done.

Over the last six years retail sales reported retail sales continued in the fourth quarter mall sales for the fourth quarter were up 8% compared to the fourth quarter of 2019 and up 34% year over year.

Reported retail sales per square foot reached a record level for <unk>.

2021.

At $713 per foot for our mall and outlet business and $645 for the mills.

These results are obviously are impressive, particularly given the lack of.

International Tourism.

For 'twenty one.

Occupancy costs at the end of 2021 are the lowest they've been in five years at 12, 6% year end.

We opened two new developments in 2021, one in the UK and our premium outlet in South Korea construction.

It continues on our 10th outlet in Japan opening this fall enormity, France opening this spring of 'twenty three we completed five significant redevelopments, we added densification components with the opening of two hotels and the completion of the NHL.

<unk> headquarters in practice facility.

<unk> continues on the Densification at Phipps Plaza, which will open. This fall we have a significant pipeline of redevelopment projects, which will be funded from our internally generated cash.

Cash flow, let me turn to our other platform investments.

They produced terrific results in 2021, namely J C. Penney spark AVG and <unk> G G.

Which is Ru Gil.

Gilt Groupe J C. Penney's results were impressive their liquidity position is growing now at $1 6 billion company Delever their balance sheet as no borrowings on their line of credit CEO , Mark Rose and strengthened his management team with a new CIO and.

And Chief Digital Officer, RG G, including.

Shop premium outlets marketplace.

Growth continues and we expect continued investment in 2022 to drive customer acquisition and sales growth Spark group will be the operating partner for rebar in the U S. It's a tremendous opportunity for spark to develop sportswear footwear.

Their expertise the Reebok integration will require additional investment by spark as it expands its capability and reach.

<unk> Taubman Realty group, which we own 80% posted great operating metrics and results, which also beat our underwriting reported retail sales was $942 per square foot, a 31% increase year over.

A year occupancy also increased 210 basis points for the year.

Now turning to the balance sheet, we've been active in the debt markets, we amended and extended our $3 5 billion dollar revolving credit facility with lower pricing grid for five years, we issued $2 $75 billion of senior notes 750 million.

A 50 million Euro notes completed the refinancing of 25 property mortgages for a total of $3 3 billion.

At an average interest rate of three one.

4% repaid more than $4 billion in debt and de Levered by $1 5 billion and with the recent January notes offering our liquidity stands at 8 billion.

Now just to turn to dividend, we paid out $2 $7 billion.

Cash common stock dividends last year today, we announced a dividend of $1 65.

<unk> per share for the quarter a year over year increase of 27%. This dividend is payable on March 31, now just to go through guidance for 2022 our <unk> guidance is $11.50 to 11.

In and 70 cents per share when looking at our 22 <unk> guidance. It is important to note the following items as compared to 21 actual results.

Approximately 32 cents per share gain related to the reversal of a deferred tax liability at clay Pierre approximately 32 cents per share and gains related to our investment in authentic brands. These gains were partially offset.

<unk> by approximately 14 cents per share and debt extinguishment charges, resulting in adjusted <unk> of $11 and 44 per share for 'twenty. One 'twenty. One also included a significant increase.

And overage and percentage rent compared to prior years and lease settlement income of approximately 10 cents higher than historical average our guidance reflects the following assumptions domestic property NOI.

Our growth of up to 2% approximately 15 to 20.

Drag on <unk> from additional investments in RG G.

S. P O J C Penney and the Reebok integration costs with spark all to fund future growth the impact of a continued strong U S dollar versus the euro and yen compared to 21 levels.

And continued muted international tourism, no significant acquisition or disposition activity.

Finally, I really want to thank the entire Simon team for their tireless work.

They continue to do for our retailers shoppers and communities every day and for bouncing back.

In 'twenty one after a very difficult 2022 make no mistake about it 21 was a great year.

I think Tom knows but I think.

Our <unk> guidance was.

Which was consistent with basically the analytic community around $9 60 per share and we reported $11.94 per share. So that's a heck of a year I'm very excited about our plans for 'twenty, two and the future growth prospects.

Specs of our company and we are ready for any questions.

Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue in the interest of time, please limit yourselves to one question.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Our first question comes from the line of Steve Sochua with Evercore ISI. Please proceed with your question.

Thanks, Good afternoon, David and team.

Thanks for the detail or at least the additional disclosure on the guidance.

I guess, just sort of tying back to the leasing comment you made about the 15 million feet.

Being kind of a record year for the last six years, you know what are your expectations for leasing activity in 'twenty, two and how that might tie into further occupancy gains and then I also noticed that the leasing spread information that you used to provide in the supplemental wasn't there anymore and I was just wondering if you could comment on kind of pricing trends.

That you're seeing thanks.

Sure So I think.

You know, we're very optimistic Steve about 'twenty two leasing.

A lot of new business with a lot of new.

Tenants.

Is a is the goal we expect to increase occupancy compared to year end 'twenty one.

Obviously, the last couple of years with Covid we've been.

You know when you know.

Obviously been working with our retailers so we.

We haven't quite had.

You know the level of pricing power that we'd like to see we're starting to see that strengthen from our standpoint.

And.

We're still looking for win win between us and our.

And our clients.

But we.

We feel better that will we will continue to drive rental growth.

You know over time and as you know we took a bad debt.

The world in bricks and mortar was not going to and so we you know when we did.

Deal with a lot of renegotiations that that came about because of COVID-19 .

We got we tried to make it back on sales because we believed in our business and and that's why you've got to look at that.

You know what we're what we're achieving on the either percentage or overage rent.

Which historically, we havent taken into account in our spreads.

And one of the reasons why we have done away with the spreads that and the fact that there is no industry uniformity and more importantly, there is very few retail retail real estate companies that are doing it but.

We bet on our company, we made the right debt.

Produce the results that we wanted to see in 'twenty, one frankly.

Above our expectations and.

The strength of our portfolio and the demand is there so.

Now, we just got to execute it I do think there is so much going on that I'd be remiss not to say it still takes a while to get stores open.

With all the activity, we will see some of that in 'twenty two but.

We're going to see a tremendous amount of.

Great new stores in the 'twenty three time period.

Yeah.

Okay.

Great.

Thank you.

Our next question comes from Caitlin Burrows with Goldman Sachs. Please proceed with your question.

Hi, everyone, maybe just a question on the guidance and the retailer contribution part David I know that you mentioned because the 'twenty. Two guidance include the 15 to 20 drag from additional investments. This year I guess I was wondering if you could just go through kind of what contribution.

The retailers had in 'twenty, one what the guidance assumes for 'twenty, two and any more kind of back.

Background, you can give on what's causing that drag realize that its for future growth.

What the impact in 'twenty two.

Well, yeah, I mean, the the the drag is all about future investment so.

We outlined a little bit on the call, but we're in a growth.

We're in a growth mode with.

Rule of law guilt and shop premium outlets Dot com.

So we're.

We're acquiring customers, we're marketing more and we're building the technology out.

Or are those three platforms with great sales growth and marketplace growth, but that takes investment so.

So that's one element of it the second element of it as as you know J C. Penney is building out its beauty beauty business as well as its digital business. So again, it's the belief in the brand.

That's going to.

That is going to.

You know create the.

These unique opportunities and we're going to invest in doing that.

And then.

Then finally the bigger.

The the Reebok integration will reduce the operating earnings from spark.

Just temporarily in Oh too as it deals with consolidate.

Consolidating its operation.

We now have an office deal hasn't closed yet it's going to close at the end of the month.

We have excess real estate. So we have to work through all of that but the return for 'twenty three on that.

It will be much more than whatever the investment is so all of these have the payback on our G. G stuff is 16 months they track it.

<unk>.

We track it by the nickel Penny.

Same I mean very dangerous.

Businesses, but you got to invest for future growth. That's what we're seeing in terms of operational outside of that.

Caitlin, where basically more or less.

Budgeting the same EBITDA NOI levels.

For our investments.

Our other other platform investments other than these.

Investments that I just mentioned.

Got it and just one quick thing you mentioned, the Reebok integration will reduce spark earnings in.

Q2.

I meant 22, I'm, sorry, 'twenty two got it.

Thank you.

No problem.

Our next.

Question comes from Rich Hill with Morgan Stanley . Please proceed with your question.

Hey, good evening, David I wanted to talk about the dividend for a moment you've raised it for three consecutive times.

I think we've discussed in the past that.

Well below where you were in 2019, despite free cash flow being similar to where you were in 2019.

Can you maybe just elaborate on why not increase the dividend more here are recognized in a previous answer you were talking about in a growth mode and investing in businesses, but is there is there a trajectory directory to get back up to $8 30, where you were I think prior to Covid.

Yeah, I mean again.

<unk>.

It would be my expectation over time that will we will reach those levels I think it's just a button.

London of.

Caution.

But if you look at Q over Q.

So it was 27% increase so I know sequentially, it's not but that's what we tend to do historically is we tend to be.

Be flat in Q1.

Area, we measure our taxable income.

And as earnings.

Percolate.

We tend to raise with our taxable income so I think.

I think we're really adopting what we've done historically, but our payout ratio is low.

Our liquidity is strong.

And I would expect hopefully.

You know that our dividend will continue to see increases.

The increase is now it was dramatic increase.

From 'twenty to 'twenty one so.

Hoping will continue a very positive trend.

Got it. Thank you and just one more question if I think back to this time last year you guys had initially guided to $959 75.

You put up.

Really healthy number this year, we see an 11 36 ex the one timers you mentioned I'm not sure if we see eye to eye on that but that's pretty close.

Yes.

Is there what would give us what would you give you any confidence that this could that 2022 could surprise to the upside just like 2021 or do you view this year as more.

So to speak than in 2021.

Well the years never bank right. So.

Look I think the big variable.

That is always there is.

Basically sales because we we still have.

Because we still have some COVID-19 oriented of the leases that have not.

Rolled over that we still are a little more dependent on sales.

And then we would have said three or four years ago. So that is why.

We're a little more cautious because we don't know.

I'd like to say, we're as good as we are we're not we can't.

Predict with certainty sales, but.

So I think I'm hopeful that.

When we talk to retailers they still feel very good about the economy and what's going on obviously theres a lot of volatility.

The world today.

We're not immune to that so we just have to have to wait and see but.

We are building off a terrific.

You know terrific 'twenty, one so we will see you know.

I am hopeful that we will continue to produce.

Growth.

Assuming the.

Everything holds together externally.

With the with our economy and so on so.

There's no certainty, but I feel pretty good about where we stand.

Okay. Thank you.

Sure.

Our next question comes from Michael Bilerman with Citi. Please proceed with your question.

Great. Thank you David good afternoon.

I wanted to come back to sort of.

The growth that Youre getting from a lot of these unique and differentiated investments that youre, making.

Sort of how it ties back to this year's earnings forecast, but also that growth in the future.

You gave us a couple of pieces, but they're all a little bit different type of altogether.

You use one for now and maybe we can pivot off of that but if you just looked at your peso from investments, which is on page 29 of.

Which I recognize includes clip here, but includes sorry page 28 that includes all of these other investments youre, making youre looking at 2021, that's about $550 million.

46.

You've now thrown out for the upcoming year that 15 to 20 drag from these investments that are being made and I am just trying to reconcile what well how much is in the $11 60, a share for all of these which are both retailer investments as well as clip here.

Sort of range are we thinking about.

That's obviously gross but then netted down by I guess, 15% to 20 for these other investments I'm just trying to cheer altogether.

Well I mean, it's pretty straightforward.

We really did not hear you well, but just to clarify what we did pick up.

The NOI from investment.

It's only clip here and it includes our small interest in H B S, which is de Minimis.

Other platform our investment attributes.

Okay.

The other NOI from other platform investments would include RG G Spark JC Penney.

Our share of the AVG so.

You know.

That's that's that line just to clarify.

I did hear that guys did you hear the question.

I didn't hear asset.

Okay.

Does that help you.

Let me I'll.

Tried to be clear David.

Michael If you went back to the office.

Yeah.

Hi.

Yes, Mike.

Sound, a little little clear okay.

I don't know maybe you can.

If you can.

I'll read it out loud.

Did I hear you.

Bob.

I'm in the office.

How about if I pick up my phone is that better for you David.

Slightly yes.

Alright, well I will take slightly.

But I'm just trying to get you on page 28, you actually lifted the SSO contribution right $550 million from everything right.

<unk> 46, so I'm just trying to triangulate what you earned in 'twenty, one and how that compares to the $11 60 in 'twenty. Two you have given US a couple of Nuggets of information the 15% to 20 drag.

But it doesn't net out to actually whats in guidance for these investments as well.

Well again, the tax effect of that.

Yes.

There's no surprise, our math is very simple.

I am sorry, we made money in all of these investments now you have to pay attention to it. Unlike other people that make investments that lose money, we actually make investments that make money. These are the NOI there they're not the tax line is it's below that.

This is like an EBITDA number that we tried to show the market. That's all that this is and it's there for your information.

And again.

Roy from other platforms I would describe as the NOI from investments as claim here in <unk> and.

And we footnoted corporate neither NOI sources, so I don't know what else do you want because I'm looking at a different pace.

The guys are happy to take the question offline.

Okay. Yeah, I was looking at page 28, not the NOI page, that's where the confusion was coming from David.

Maybe just one of those.

Okay I see the <unk> investments right. So that includes all of the <unk> from all of these great investments Youre, making in there is not a negative question. David that this is a this is a positive.

Sounds like yes.

Yeah that that that includes everything.

Up together and then take the tax impact and again its NOI, so it's pretty interesting.

Obviously, <unk> not but we're happy to walk you through.

Well that's exactly now we've gotten to the question, which is that's why that's the number we do know right. So there's no ambiguity.

It's EBIT, so remember retailers have.

Depreciation that we don't add back in.

So on and so forth, but the guys and the guys will be happy to walk you through.

Offline Michael.

Okay.

David can you just talk generally you know your opening comment in the press release is all about unlocking value.

And you've already done some of that through the transactions. How do you think about the initiatives that you want to focus on this year and what value is sitting in this platform for assignment shareholders.

Well I mean, you know.

Given our level of cash investment.

If you were to look at it you know.

On our private equity basis right.

We've made.

20 X on our investments so.

So you know.

They're continuing to grow.

And spark I think is a good example.

<unk> on our G. G. R have great platforms that can continue to be a leader in their business right.

Right.

And ultimately the market.

We'll see if we need to at some point in time.

Monetize these or.

Highlights the value, but its embedded here.

You know at multiples that the market is ascribing to us, but quite frankly that the external market is probably.

Probably valuing at more than.

What it is today right and that's where it's all of the questions that I'm asking David These are positive things that you've done that we get asked by the investment community I was trying to ask for more disclosure to try to get to ascribe that value that you want so that's it's coming from a good place and use.

Usually I'm good at math, but.

I never say never suggested you arent I'm, just having a hard time hearing you that was the only negative timing okay. Okay.

Thank you goodbye so so.

So sorry about that.

But again, we're happy to walk you through it.

So you can you can you can it can help you understand what we're doing.

Our next question comes from Derek Johnston with Deutsche Bank. Please proceed with your question.

Hi, everybody and good evening, so I'll I'll I'll abandoned the retail investment question for now but.

For Q1 9, pre pandemic, David that readout pipeline was $1 $8 billion at its peak now it's $944 million in <unk> and that's just a really modest increase from <unk>. So you know as you talk about record that Bo and very healthy cash flow. How are you looking at capital allocation priorities going forward.

Should we expect ramping redevelopment some transformational.

Clearly some more retailer investments dividend.

Buybacks you mentioned no acquisitions, how do you view the priorities here.

Well.

The good news is.

Our pipeline is.

It was kind of back to where it was in 19. However.

Remember in 19, we finished some stuff right. So naturally that falls off and then we didn't add anything really until this year.

But I think you'll see steady progress in adding.

And remember we only add when we start construction on the project or we internally approve it or were about so we would expect to be able to add to that.

Number this year.

So you'll see that I would I'd be disappointed if it didn't grow.

And size and stature.

And mostly in mixed use so we still I would still say that's the number one priority.

We're going to invest in our existing platforms that we have.

Whether they're spark or APG or RG G. So those those are businesses that we have a lot of faith in and we will continue to invest in those.

We're still doing.

A lot of investment.

Of.

In the.

And updating the technology aspects of our shopping centers that will continue to do.

That's important to us we expect to raise the dividend.

We've been really quiet on.

The acquisition front and Thats life.

That's perfectly fine with us.

We'll see how the market.

Transpires, but we have no real.

We feel really good about our portfolio and if there's something that.

It's a nicely reasonably priced we'll take a look at it but it's not say lobby.

And then I think we're going to build on.

The other platform, it's not necessarily a retail platform.

But.

We're in the midst of kind of.

We're working through some opportunities.

Stay tuned.

Interesting. Thank you.

Thank you.

Our next question comes from Alexander Goldfarb with Piper Sandler. Please proceed with your question.

Hey, Hey, David.

I'm torn because you.

<unk> said one question first I have to but im going to restrain myself and just ask one unless Tom will give us something to go ahead.

Im going to go back to.

To the retailer question.

You guys made a lot of headway on your brands he added $160 million of.

NOI EBITDA, whatever you want to call. It from the retailer platform last year and you guys seem to have pretty quick turnaround of the brands. So one.

Does it surprise you how quickly these brands have turned around given that there are number of.

Won't mentioned retailers, but brands out there are retailers, who have been trying to restructure for years and haven't been successful, whereas in short order you guys have and two does this give you a better insight into your tenant negotiations such that now you have much more informed view of when youre in negotiations with the <unk>.

What their true potential is versus what they may be telling you what they are at the table.

So on the fast turnaround I would say yes.

But remember we bought these in bankruptcy, which.

Most of them in bankruptcy so.

That allows you to.

Clear out a lot of the issues.

And gives you a.

Kind of a clean slate to grow from.

Say that the management team that we put together at spark is excellent and they know how to integrate.

And.

Between our oversight from AVG and <unk>.

SPG.

We've got a we've got it.

Good Formula that's working.

Their performance has absolutely no.

Relevance or insight at all when it comes to our.

Our negotiation or our insight into how to deal with retailers.

So that's that's just that's just a flat out no Alex I could see how you might add.

Ask that question, but it really it really doesn't.

Because each brand has there is unique.

And.

They they don't necessarily have a direct competitor that.

That would be helpful and we just don't we don't think like that.

Because as you know every space and every mall is different and.

Market rents are all over the place so simple answer to that is no.

Okay, and Tom will you allow me a second there are a lot of questions you got to move on.

He is he's got to he's got a puppy dog look toward me. So based on that we will allow you. Thank you okay.

Big picture.

Obviously, a lot of what's going on in retail.

The crime and all these headlines is out there my question for you is your sense from.

From talking to the industry and obviously talking to local officials is the view that it is on the industry to try and beef up security and solve this or do you sense that the local authorities are finally, realizing they need to do more from their end.

Well look I think we are.

Top notch in this area, though unfortunately as good as we are we cannot.

We cannot avoid.

What's happened so we're all subject to this.

I think it I don't think it's an industry issue I think it's a local jurisdiction issue.

And.

It's a nationwide issue.

And I believe the tide is turning.

We are all over this the safety of our.

Consumers and.

Obviously the retailers.

<unk> is priority number one.

Not immune to it as much as we would like to be.

We have a very sophisticated.

Operations Center Intelligence Center that deals with this if you ask the retailers.

They would.

They would tell US tell you that I think Alex that.

We're number one in this area, but we're.

We're not immune I would love to be immune.

But we as a.

Nation has to address this.

And it's happening you know obviously.

A lot of different areas I don't want to get into politics at all but.

But I don't think it's an interest I don't think the industry can solve it.

I do think it's got to be at the local and national level.

And I do think.

We've got we've got a hold.

Everyone accountable that this kind of stuff cannot be tolerated.

But it believe me we are all over it.

But where we are.

Some of these things are just impossible.

No.

Two.

To to avoid however, what you don't hear from US Alex is all of the ones that we Florida.

No.

<unk>.

Dozens and dozens of multiple ones and we.

We do an excellent job, but it's.

Yeah.

We have to deal with some unfortunate consequences.

These acts.

Thank you.

Sure.

Our next question comes from the line of Juan Sanabria with BMO capital markets. Please proceed with your question.

Hi, Thanks, just hoping to ask a little bit about ramps from leasing spreads again.

The base rent was flat sequentially at just under 54 box do you think that's that's now bottomed or stabilized.

Had it upwards from here.

And on the releasing spreads.

I think you talked about apex being in the number for the deals signed in the fourth quarter or a quarter and not quite sure what when does that translate into.

And to the baseline rent when would that kind of sunset out.

And how are you guys thinking about internally on that on that spread number that still longer disclosed.

What's the expectation for what you generated in 'twenty, one and what your expectation is for 'twenty two.

Well.

First of all we focus on NOI growth.

So that's number one.

And we expect to have NOI growth. So that's the first I'd say to you I think you could youre not maybe we weren't clear, but the $54 is somewhat.

It's just the base minimum rent that our portfolio.

Average it's it does not include overage or percentage rent if you included that.

Based on 21 results.

54 would be 62.

Okay. So that that's that relationship there.

No.

I try to listen carefully to your question, but it just it just goes to show that.

54 is missing this component.

And we thought it was material enough to pointed out.

And so when do you think that.

<unk> comes in is the number one does that mean well that's all right.

Yes, that's all a function of lease exploration. So you know.

We tend to.

We tend to raise if someone has an overage rent or they have a percent rent deal that's expiring.

We try to raise that.

The base minimum rent.

Sure we try to capture as much in the base minimum rent.

From the overage that's generated you don't always get all of it but you do some of it. So it's you know it should ease up over time, but it's really a function of the big overage rent pay.

Payers and when their leases expire.

Thank you.

Certainly.

Our next question comes from Floris Van <unk> with Compass point. Please proceed with your question.

Thanks, Thanks for taking my question guys.

David You just mentioned NOI growth.

And.

Obviously, you know them.

<unk>.

I still think theres a lot of value in the business here, but.

Again, you might be slightly guilty by the way.

So do I, so do I for us okay.

No no I know you think theres a lot of value in that.

I'm trying to help you get that out but yes.

The 2%.

Walk me again.

The 2% NOI growth that you have in your assumptions.

For 'twenty two if you have your basically you you have fixed bumps in your in your leases typically around 3%.

Get it for all of them.

Little bit shy of 3%, maybe but all things cetera, spare, but if everything else stays the same occupancy stayed the same.

You should get around two 5% to 3% NOI growth, yet you're only guiding for 2% growth.

I think it's very simple the real simple answer is.

Sales and we do a very sophisticated model. If we have sales levels that are above this year, we will we will overachieve that number.

But you know again were in February .

And we tend to be.

Try to be cautious on that number but thats really.

And then there are increases in cost.

We're dealing with.

You know as well for us. So for instance, I mean security expenses are up.

You know, but.

Based on you know, we just had a discussion with Alex on that.

Obviously.

We have wage inflation janitorial. So we have pressures on expenses just like everybody else, we got no break.

You know on the real estate tax front.

The local municipalities, even though we were closed.

For months in many cases in 2019, and 20, but our real estate tax expense keeps going up so you know.

We have pressures there.

That we're just we're just trying to be relatively thoughtful about how to deal with and then and then the percent overage sales number going into every year is a little bit of the unknown and we're trying to bake some conservatism into that thought process.

So David.

Well again.

But a lot of your costs would be recaptured through Cam you've got fixed cam that increases at inflation. So you're.

That would imply that your fixed well no no no no.

No we don't have CPI adjusted.

Yes, 3% bumps you have 3%, while you're right we have bumps.

But if it goes up 6% and were going up three we lose 3% so yes.

Yeah.

So again I mean, it's all.

It's all factored in but I would say there is a little bit of margin pressure and again.

Hopefully I have been clear on the sales front.

David So maybe maybe if you could touch on one little area, which I've.

Looked at you or at least you have $6 8 million square feet of leases that are longer than a year, but that are sort of temporary tenants specialty leasing.

Which are at an average rent of around.

Off the top of my head 17, 17 Bucks, it's 10% of your small shop portfolio that is at a third.

Your average rent that you're getting.

What happens when those leases go to market or become full tenants theoretically they should go up by.

300% does that is that the right way to look at it Yeah look I think that's a great opportunity for our company, we did a very good job.

It's kind of a flex business.

We're still under occupied we still have you know.

A number of tenants like that that are.

You know important to the community, but you know but.

As is.

More permanent tenants.

Come to come to the market, that's a great opportunity for the company for US. This is a real interesting thing a lot of that stuff is happening now.

So think about it this way in 'twenty, one and 'twenty, we got decimated by Covid right.

We.

Came back unbelievably strong in 'twenty one.

Much better than anyone would have predicted.

And.

Reinforce our business model I would I would I would venture to say.

<unk>.

But we still have we still have a lot of short term leasing or what I'll call specialty leasing, but that as we re leased that space that comes in midstream.

It comes in first quarter second quarter third quarter of 'twenty two.

Because remember our retail base a lot of it sat on the sidelines all of 'twenty.

And didn't really start opening up open to buy in 'twenty one.

And by the time, you build out a store in a mall, it's a six to nine month process. So.

As much given where we are today.

I would say to you and we never.

This is solely amortize away I think but we still have a transition year in 'twenty, two but it's not an excuse I've never use that as an excuse but believe me as we continue to lease up to permanent retailers away from spec.

Actually.

We're going to generate more income, but it's not all going to fall in 'twenty two.

Now did I explain myself well guys would you add to it.

Okay.

So so sometimes and articulate so.

Yeah, and again, that's not an excuse but but that's how but 'twenty two is going to be continue to be a transition year.

Like 'twenty one.

It was but we kicked it we kicked the crap out of 'twenty one it was unbelievable year spectacular.

Based on where we were okay for us.

Next question please.

Our next question comes from Handel St. Joost with Mizuho. Please proceed with your question.

Hey, good evening. Thank you for taking my question.

David.

A question on OCR, you mentioned OCR strategy is something we haven't talked about in a while and that.

12, 6% you mentioned, that's the highest level in five years I guess I'm curious how important is OCR today in tenant conversations are they willing to maybe or even consider some of these look back OCR is and any question any color on what do you think that.

Okay got it might go near term do we ever get back to the mid to upper teens levels. Thanks.

Yeah look I think I think.

It reflects.

An earlier comment which is we are starting to see a little more.

A little more pricing power as demand goes up and the fact that.

You know that.

You know the overall business is better so.

No. It's a good insurance policy in that.

<unk>.

The retailers are producing very positive results in our portfolio.

We don't want to put them.

You know on the edge.

<unk>.

We've taken we've taken our lumps over the last few years and now we're just trying to.

To balance it a little bit better.

And then what we've seen over the last couple of years. So it's a good it's a good indicator that we got some room to go but that's all it is.

Got you and if I could follow up I don't know if you've mentioned it earlier, if you'd be willing to share or are you still doing any of those shorter term leases that you were doing doing co, but with the lower upfront rent thresholds, but with the lower percentage rent thresholds that you can make out in the in the event the improving sales or is that in the past now.

It's essentially a thing of the past, though there is always the.

A case here or there, where we might we might have a deal in 'twenty three for space, but are there.

But theyre not ready I'm, sorry, they're not ready in 'twenty three.

So we have a retailer in the space. So 22 might be an extension of that while we finalize the lease for 'twenty three and that's a little bit what I was talking about with floor as well.

After next question please.

Our next question comes from Vincent to Bone with Green Street. Please proceed with your question.

Hi, Good evening I wanted to follow up on floors is question I believe you mentioned that a sale tenant sales repeated 2021 level, you would likely exceed the 2% guidance for domestic property NOI I just wanted to get a better understanding of maybe what sales level do you have baked into <unk>.

Current guidance and it would seem that you are the base cases actually declined sales compared to last year. So I'm trying to just get a little more.

Color there would be helpful well, we do it.

Really do it.

No why but we do do it kind of by tenant.

And I do simple simple thing is if we do see sales above this year.

We would hopefully.

Putting aside the comment about rising expense cost.

If you kept our expenses.

Flat, we would see a better you know.

A more robust.

NOI comp portfolio NOI growth simple answers that.

And we do have some baked in conservatism.

In that number but again.

It's.

We do this.

We do this budgeting process.

Late in the year.

Some people they do it earlier than our life, but we.

It's always a it's Nick case of sales its an art versus science the good news, though when we talk to retailers.

They are they are planning up sales compared to 21, okay and.

That's positive and if they produce their own plan.

We will see the benefit of that.

But so is it fair to say that you are forecasting sales to be negative and maybe that's the base case guidance or am I misreading into that.

Yeah, I would say.

Around the 2% level, it's relatively flat.

Okay. That's helpful. If I could maybe try to squeeze one more quick one in there I'm just curious sort of like the overdraft component.

How much was over at rents in terms of total lease income like what percentage of that for this last year.

We don't give that out but.

If if we do all asked the guys if they want to give it out we tend not to do that.

But.

It.

I would say was similar to what we would use to see from that.

When we had big international tourism at our Big International properties from a percent point of view.

Okay, guys is that right.

Okay.

And then it really.

Went away. So it is kind of back to where we were maybe 456 years ago.

That's really helpful. Thank you for the time mhm to real time for one more question.

Okay. Our final question comes from Mike Mueller with Jpmorgan. Please proceed with your question.

Hi, quick one rent per square foot was lower year over year in the malls outlets, but it was higher in the mills and I'm curious, what's driving that dynamic.

I'm, sorry could you repeat I didn't you broke up there for a second.

Yeah, your rent per square foot for malls and outlets is down year over year, but for the mills, it's up year over year.

Yes.

In the mills.

They include all of the boxes. We include all the box shouldn't say that we will include all the boxes.

So.

Every square footage, it's not whereas in the outlet mall, it's basically just the the.

The interior space that the department stores. So that's that's.

They have a few big tenants that may be <unk>.

Driving the increase but that business has been very healthy.

And we're very pleased with the results there.

Got it that was it thank you sure.

Ladies and gentlemen, we've reached the end of the question and answer session and I'd like to turn the call back to Mr. David Simon Chairman for closing remarks.

Hey, Thank you I know, there's a few that.

Are still looking to get some some questions answered so Brian and Tom will be available of course, I am as well.

Thanks for participating in our call today.

This concludes today's conference you may disconnect your lines at this time and thank you all for your participation.

Okay.

Okay.

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Greetings and welcome to the Simon property group fourth quarter and full year 2021 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press star.

Zero on your telephone keypad as a reminder, this conference is being recorded I would now like to turn the conference over to your host Mr. Tom Ward Senior Vice President Investor Relations. Please go ahead Sir.

Good evening and thank you for joining us today presenting on today's call is David Simon Chairman, Chief Executive Officer, and President also on the call are Brian Mcdade, Chief Financial Officer, and Adam Rumley, Chief Accounting Officer.

A quick reminder, that statements made during this call maybe deemed forward looking statements within the meaning of the safe Harbor of the private Securities Litigation Reform Act of 1995, and actual results may differ materially due to a variety of risks uncertainties and other factors. We refer you to today's press release, and 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 date.

Conciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included within the press release and the supplemental information in today's form 8-K filing both the press release and the supplemental information are available on our IR website.

Third is that Simon Dot Com our conference call. This evening, you'll be limited to one hour for those who would like to participate in the question answer session. We ask that you. Please respect our request to limit yourself to one question and I'm pleased to introduce David Simon.

We had a very busy and productive quarter to and a very successful year.

We recorded occupancy gains record retail sales and demand for our space from a broad spectrum of tenants is robust and our other platform investments had strong results.

We generated nearly $4 $5 billion in funds from operation in 'twenty, one or $11 94 per share.

$4 5 billion is a record.

Amount for our company for the four year and coming off a difficult year of 2020.

These results are a testament to our relentless focus on operations cost structure active portfolio management.

Smart investments coupled with.

A coherent strategy.

Fourth quarter funds from operations were $1 billion 160.

Sorry, 116 billion or $3 90 per share included in the fourth quarter results was a net loss of <unk> 10 per share from a loss on extinguishment of debt and a write off of pre development cost partially offset.

Set by an after tax gain on the sale of equity interest or domestic operations had another excellent quarter to conclude the year, our international operations improved in the quarter domestic property NOI increased 22 four per.

<unk> year over year.

I'm sorry for the quarter.

And 12% for the year, including our share of NOI from <unk> in our international properties portfolio NOI increased 33, 6% for the quarter and 22, 3% for the year.

Mall and outlet occupancy at the end of the fourth quarter was 93, 4% and increased sequentially at 60 basis points.

260 basis points.

Year over year average base minimum rent was $53 91.

At $8 two that if you included variable rent for the year, we signed more than 4100 leases.

For a total of more than 15 million square feet. This was the highest amount of leasing activity activity we have done.

Over the last six years retail sales reported retail sales continued in the fourth quarter mall sales for the fourth quarter were up 8% compared to the fourth quarter of 2019 and up 34% year over year re.

Ported retail sales per square foot reached a record level for <unk>.

2021.

$713 per foot for our mall and outlet business and $645 for the mills.

These results, obviously are impressive, particularly given the lack of.

International Tourism.

For 'twenty, one occupancy costs at the end of 2021 are the lowest they've been in five years at 12, 6% year and we opened two new developments in 2021, one in the UK and our premium outlet in South Korea.

Construction.

It continues on our 10 outlet in Japan opening this fall enormity, France opening in spring of 'twenty. Three we completed five significant redevelopments, we added densification components with the opening of two hotels and the completion of an NHL.

Headquarters and practice facility progress continues on the Densification at Phipps Plaza, which will open. This fall we have a significant pipeline of redevelopment projects, which will be funded from our internally generated.

Cash flow, let me turn to our other platform investments.

They produced terrific results in 2021, namely Jcpenney spark AVG and <unk>.

As Ru guilt.

<unk> group Jc's pennies results were impressive their liquidity position is growing now at one $6 billion company Delever their balance sheet as no borrowings on their line of credit CEO , Mark Rosen strengthened his management team with a new CIO.

And Chief Digital Officer, RG G, including.

Our.

Shop premium outlets marketplace.

Growth continues and we expect continued investment in 2022 to drive customer acquisition and sales growth Spark group will be the operating partner for rebar in the U S is a tremendous opportunity for spark to develop sportswear in footwear.

Their expertise the Reebok integration will require additional investment by spark as it expands its capability and reach.

<unk> Taubman Realty group, which we own 80% posted great operating metrics and results, which also beat our underwriting reported retail sales was $942 per square foot and a 31% increase year over.

A year occupancy also increased 210 basis points for the year.

Now turning to the balance sheet, we have been active in the debt markets, we amended and extended our $3 5 billion revolving credit facility with lower pricing grid for five years, we issued $2 $75 billion of senior notes 750 million.

$50 million Euro notes completed the refinancing of 25 property mortgages for a total of $3 3 billion.

At an average interest rate of three one.

4% repaid more than $4 billion in debt and de Levered by $1 5 billion and with the recent January notes offering our liquidity stands at $8 billion now just to turn to dividend, we paid out $2 7 billion.

<unk>.

In cash common stock dividends last year today, we announced a dividend of $1 65 per share for the quarter a year over year increase of 27%. This dividend is payable on March 31.

Now just to go through guidance for 2022.

<unk> guidance is $11 50 to $11 70 per share when looking at our 22 <unk> guidance. It is important to note the following items as compared to 21 actual REIT.

<unk>.

Approximately 32 cents per share gain related to the reversal of a deferred tax liability at clay Pierre approximately 32 cents per share and gains related to our investment in authentic brands. These gains were partially offset.

Set by approximately 14 <unk> per share and debt extinguishment charges, resulting in an adjusted <unk> of $11 44 per share for 'twenty. One 'twenty. One also included.

A significant increase in overage and percentage rent compared to prior years and lease settlement income of approximately 10 cents higher than historical average our guidance reflects the following assumptions.

Mastic property NOI.

Our growth of up to 2% approximately 15 to 20.

Drag on <unk> from additional investments in <unk>.

In Spo Jcpenney and the Reebok integration cost at spark all to fund future growth.

The impact of a continued strong U S dollar versus the euro and yen compared to 21 levels and continued muted international tourism, no significant acquisition or disposition activity finally, I really want to think.

The entire Simon team for their tireless work that they continue to do for our retailers shoppers and communities every day.

And for bouncing back.

In 'twenty one after a very difficult 2022 make no mistake about 'twenty, one was a great year and I think Tom knows but I think.

Our <unk> guidance was which was consistent with basically the analytic community around $9 60 per share and we reported $11 94 per share. So that's a heck of a year I'm very excited about our <unk>.

<unk> for 'twenty two.

And the future growth prospects of our company and we are ready for any questions.

Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue in the interest of time, please limit yourselves to one question.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Our first question comes from the line of Steve <unk> with Evercore ISI. Please proceed with your question.

Thanks, Good afternoon, David and team.

Thanks for the detail or at least the additional disclosure on the guidance.

Just sort of tying back to the leasing comment you made about the 15 million feet being.

Being kind of a record year for the last six years, what are your expectations for leasing activity in 'twenty, two and how that might tie into further occupancy gains and then I also noticed that the leasing spread information that you used to provide in the supplemental wasn't there anymore and I was just wondering if you could comment on kind of pricing trends.

That you are seeing thanks.

Sure.

<unk> I think.

We're very optimistic Steve about 'twenty, two leasing a lot of new business with a lot of new.

Tenants.

Is is the goal we expect to increase occupancy compared to year end 'twenty one.

Obviously, the last couple of years with Covid we've been.

When.

Obviously been working with our retailers so.

We haven't quite had.

The level of pricing power that we'd like to see we're starting to see that strengthen from our standpoint.

And.

And we're still looking for win win between Us and our.

And our and our clients.

But.

We feel better that will continue to drive rental growth.

Now over time.

As you know we took a bad debt.

The world in bricks and mortar was not going to and so we.

We did.

<unk>.

Deal with a lot of renegotiations that came about because of COVID-19 .

We got.

We tried to make it back on sales because we believed in our business and.

And that's why you've got to look at that.

What we're what we're achieving on the either percentage or overage rent.

Which historically, we havent taken into account in our spreads.

And one of the reasons why we have done away with the spreads that and the fact that there is no industry uniformity and more importantly, there is very few retailers and retail real estate companies that are doing it but.

<unk>.

We bet on our company, we made the right debt.

It produced the results that we wanted to see in 'twenty one frankly.

Above our expectations and.

The strength of our portfolio and the demand is there so.

Now, we just got to execute it I do think there is so much going on that I'd be remiss not to say it still takes a while to get stores open.

With all the activity, we will see some of that in 'twenty, two but we're going to see a tremendous amount of.

Great new stores in the 'twenty three time period.

Great.

Thank you.

Our next question comes from Caitlin Burrows with Goldman Sachs. Please proceed with your question.

Hi, everyone, maybe just a question on the guidance and the retailer contribution part David I know that you mentioned.

The 22 guide an increase of 15% to 20 drag from additional investment. This year I guess I was wondering if you could just go through kind of what contribution the retailers had in 'twenty one what the guidance assumes for 'twenty, two and any more kind of.

Background, you can give on what's causing that drag realized that it's for future growth.

But what the impact in 'twenty two.

Specifically, well, yeah I mean.

The drag is all about future investments so.

We outlined a little bit on the call, but we're in a growth.

We're in a growth mode with.

Rule of law guilt and shop premium outlets Dot com. So we're.

We're acquiring customers, we're marketing more and we're building the technology out.

Those three platforms with great sales growth and marketplace growth, but that takes investment so.

So that's one element of it the second element of it as you know Jcpenney is building out its beauty beauty business as well as its digital business. So again, it's the belief in the brand.

That's going to.

That is going to.

Create.

These unique opportunities and we're going to invest in doing that.

And then.

Then finally the bigger.

The Reebok integration will reduce the operating earnings from spark.

Just temporarily in <unk> as it deals with consolidate.

Consolidating its operation.

We now have an office deal Hasnt closed yet it's going to close at the end of the month.

We have excess real estate. So we have to work through all of that but the return for 'twenty three on that.

We will be much more than whatever the investment is so all of these have the payback on <unk> stock is 16 months they track it.

<unk>.

We track it by the nickel.

Penny.

Same I mean, very good businesses, but you got to invest for future growth. That's what we're seeing in terms of operational outside of that.

Caitlin, where basically more or less.

Budgeting the same EBIT.

I levels.

For our investments.

Our other other platform investments other than these.

Investments that I just mentioned.

Got it and just one quick thing you mentioned the Reebok integration of reduced earnings in <unk> did you mean Q2.

I've met 22, I'm, sorry, 'twenty two got it.

Thank you.

No problem.

Our next question comes from Rich Hill with Morgan Stanley . Please proceed with your question.

Hey, good evening, David I wanted to talk about the dividend for a moment you've raised it for three consecutive times.

I think we've discussed in the past that.

It's well below where you were in 2019, despite free cash flow being similar to where you were in 2019.

Can you maybe just elaborate on why not increase the dividend more here, yes, I recognize in the previous answer you were talking about in a growth mode and investing in businesses, but is there is there true that trajectory to get back up to $8 30, where you were I think prior to Covid.

Yeah, I mean again.

<unk>.

It would be my expectation over time that will work.

Reach those levels I think it's just a button.

Abundance of caution.

But if you look at Q over Q.

It was 27% increase so I know sequentially, it's not but that's what we tend to do historically is we tend to.

Be flat in Q1.

Area, we measure our taxable income.

And as earnings.

Percolate.

We tend to raise with our taxable income so I think.

I think we're really adopting what we've done historically, but our payout ratio is low.

Our liquidity is strong.

And I would expect hopefully.

You know that our dividend will continue to see increases.

The increase is now it was dramatic increase.

From 'twenty to 'twenty one so.

Hoping will continue a very positive trend.

Got it. Thank you and just one more question if I think back to this time last year you guys had initially guided to $959 75.

You put up.

Really healthy number this year, we see an $11 36 ex the one timers you mentioned not sure if we see <unk> in that but that's pretty close.

Yes.

Is there what would give us what would you give you any confidence that this credit that 2022 could surprise to the upside just like 2021 or do you view this year as more.

Inked so to speak than in 2021.

Well the years never banked right. So.

Look I think the big variable.

That is always there is.

Basically sales because we we still have.

Because we still have some COVID-19 oriented of the leases that have not.

Rolled over that we still are a little more dependent on sales.

Then we would have said three or four years ago. So that is why we're a little more cautious because we don't know.

I would like to say, we're as good as we are and we're not we can't.

Predict with certainty sales, but.

So I think I'm hopeful that.

When we talk to retailers they still feel very good about the economy and what's going on obviously theres a lot of volatility in the world today.

<unk>.

We're not immune to that so we just have to have to wait and see but.

And we are building off a terrific.

Terrific 21, so we'll see I.

I am hopeful that we will continue to produce.

Growth.

Assuming the.

Everything holds together externally.

With our economy and so on so.

There is no certainty, but I feel pretty good about where we stand.

Okay. Thank you.

Sure.

Our next question comes from Michael Bilerman with Citi. Please proceed with your question.

Great. Thank you David good afternoon.

I wanted to come back to sort of.

The growth that Youre getting from a lot of these unique and differentiated investments that youre, making and just sort of how it ties back to this year's earnings forecast, but also that growth in the future.

You gave us a couple of pieces, but they're all a little bit different type of altogether.

To use the one for now and maybe we can pivot off of that but if you just looked at your <unk>.

So from investments, which is on page 29 of.

Which I recognize include the core PR, but includes sorry.

Sorry page 28 that includes all of these other investments youre, making youre looking at 2021 at about $515 million.

46.

You've now thrown out for this coming year that 15 to 20 drag from these investments that are being made.

I'm just trying to reconcile.

<unk> is in the $11 60, a share for all of these which are both retailer investments as well as clip here.

Sort of range are we thinking about.

That's obviously gross but then netted down by I guess, 15% to 20 for these other investments I'm just trying to figure it all together.

Well I mean, it's pretty straightforward.

We really did not hear you well, but just to clarify what we did pick up the NOI from investment is only clip here and it includes our small interest in HPE Fs, which is de Minimis.

Other platform our investment attributes.

Sure.

The other NOI from other platform investments would include <unk> spark jcpenney.

Our share of the AVG so.

That.

You know that that's that line just to clarify.

I did hear that guys did you hear the question.

I didn't hear asset.

Okay.

Does that help you.

Yeah, let me I'll try to be clear David.

Michael If you went back to the office.

Yes.

Okay.

Yes, Mike.

Sound, a little little clear okay.

I don't know maybe you can.

Have you tested this will read it out loud.

But we cannot hear you.

I'm in the office.

How about if I pick up my phone is that better for you David.

Slightly yes.

Alright, well ill take slightly.

But I'm just trying to get you on page 28, you actually lifted.

<unk> contribution right $550 million from everything right.

<unk> 46, so I'm just trying to triangulate what you earned in 'twenty one.

How that compares to $11 60 in 'twenty two you have given US a couple of Nuggets of information the 15 to 20 drag.

But it doesn't net out to actually.

Guidance for these investments.

Well again, the tax effect of that.

Yes.

There is no surprise, our math is very simple.

Im sorry, we've made money in all of these investments now you have to pay attention to it. Unlike other people that make investments that lose money, we actually make investments that make money. These are the NOI there they're not the tax line is below this.

This is like an EBITDA number that we tried to show the market. That's all that this is and it's there for your information.

And again.

Roy from other platforms I would describe as the NOI from investments as clay pier in HPE Fs and we've footnoted corporate neither NOI sources. So I don't know what else you want because I'm looking at a different pace.

The guys are happy to take the question offline. Okay. Yeah I was looking at page 28, not the NOI page, that's where the confusion was coming from David.

Maybe just one.

Okay I see the <unk> investments right. So that includes all of the <unk> from all of these great investments Youre, making in there is not a negative question. David that this is a this is a positive.

<unk>.

Of.

Yes.

Yes.

That includes everything.

Lumped together and then take the tax impact and again its NOI, so it's pretty interest.

And then obviously <unk> not but we're happy to walk you through and Thats exactly.

Now we've gotten to the question, which is that's why that's the number we do know right. So there is no and be good.

It's Steve.

So remember retailers have.

Depreciation that we don't add back in.

And so forth, but the guys and the guys will be happy to walk you through offline Michael Okay.

David can you just talk generally your opening comment in the press release is all about unlocking value and.

And you've already done some of that through the transaction how do you think about.

The initiatives that you want to focus on this year and what value is sitting in this platform for Simon shareholders.

Well I mean.

Given our level of cash investment.

If you were look at it.

On our private equity basis right.

We've made.

20 X on our investments so.

So.

And they're continuing to grow and spark I think is a good example on <unk> or have great platforms that can continue to be a leader in their business right.

Brian .

And ultimately the market.

We'll see if we need to at some point in time.

Monetize these or highly.

Highlights the value, but its embedded here.

At multiples that the market is ascribing to us, but frankly that the external market is probably.

Probably valuing it more than then.

What it is today right and that's where it's all of the questions that I'm asking David These are positive things that you've done that we get asked by the investment community I was trying to ask for more disclosure to try to get to ascribe that value that you want so that's it's coming from a good place and.

Usually I'm good at math.

I never I never suggested you arent I'm, just having a hard time hearing you that was the only negative comment okay. Okay.

Thank you goodbye.

Sorry about that.

But again, we're happy to walk you through it.

So you can you can you can it can help you understand what we're doing.

Our next question comes from Derek Johnston with Deutsche Bank. Please proceed with your question.

Hi, everybody and good evening, so I'll I'll I'll abandon the retail investment question for now but.

<unk> 19, pre pandemic, David that readout pipeline was $1 $8 billion at its peak now it's $944 million in <unk> and that's just a really modest increase from <unk>.

So you know as you talk about record <unk> and very healthy cash flow. How are you looking at capital allocation priorities going forward should we expect ramping redevelopment some transformational.

Clearly some more retailer investments dividend.

Buybacks you mentioned no acquisitions, how do you view the priorities here.

Well.

The good news is.

Our pipeline is there.

It's kind of back to where it was in 19 however.

Remember in 19, we finished some stuff right. So naturally that falls off and then we didn't add anything really until this year.

But I think you'll see steady progress in adding in.

And remember we only add when we start construction on the project or we internally approve it or whereabouts.

So we would expect to be able to add to that.

Number this year.

So youll see that I would I'd be disappointed if it didn't grow.

And size and stature.

And mostly in mixed use so we still I would still say that our number one priority.

We're going to invest in our existing platforms that we have.

Whether they're spark or AVG or RTG. So those those are businesses that we have a lot of faith in and we will continue to invest in those.

We're still doing.

A lot of investment.

In the.

And updating the technology aspects of our shopping centers that we will continue to do.

That's important to us we expect to raise the dividend.

We've been really quiet on.

The acquisition front and Thats life.

That's perfectly fine with us.

See how the market.

Transpires, but we have no real we feel really good about our portfolio and if there's something.

That fits in nicely reasonably priced we will take a look at it but it's not say lobby.

And then I think we're going to build.

Another platform, it's not necessarily a retail platform.

We're in the midst of kind of working through some opportunities.

Stay tuned.

Interesting. Thank you.

Thank you.

Our next question comes from Alexander Goldfarb with Piper Sandler. Please proceed with your question.

Uh huh.

Hey, Hey, David.

I'm touring because you guys said one question first I have to but I'm going to restrain myself and just ask one unless Tom we get somebody to go ahead.

I'm going to go back to <unk>.

The retailer question.

You guys made a lot of headway on your brands he added $160 million.

<unk> of NOI EBITDA, whatever you want to call. It from the retailer platform last year and you guys seem to have pretty quick turnaround of the brands. So.

One.

Does it surprise you how quickly these brands have turned around given that there are number of we won't mentioned retailers, but brands out there are retailers, who have been trying to restructure for years and haven't been successful, whereas in short order.

Half and two does this give you a better insight into your tenant negotiations such that now you have much more informed view of when youre in negotiations with the tenants what their true potential is versus what they may be telling you at the at the table.

Yeah. So on the fast turnaround I would say, yes, but remember we bought these in bankruptcy, which.

Most of them in bankruptcy so.

That allows you to.

Clear out a lot of the issues.

And gives you.

Kind of a clean slate to grow from I would say that the management team that we put together at spark is excellent.

How to integrate.

And.

Between our oversight from AVG.

And SPG.

We've got we've got it.

Good Formula that's working.

Their performance has absolutely no relevance or insight at all when it comes to our.

Our negotiation or our insight into how to deal with retailers.

So.

That's just that's just a flat out no Alex I could see how you might.

Ask that question, but it really it really doesn't.

Because each brand that is there is unique.

And.

They.

They don't necessarily have a direct competitor.

That.

That would be helpful and we just don't we don't think like that.

Because as you know every space and every mall is different.

Market rents are all over the place so simple answer to that is no.

Okay, and Tom will you allow me a second or are there a lot of questions you've got to move on.

Got it.

Got a puppy dog look towards me so based on that.

We'll allow you thank you.

Big picture.

Obviously, a lot of what's going on in retail and.

The crime and all these headlines is out there my question for you is your sense.

From talking to the industry and obviously talking to local officials is the view that it's on the industry to try and beef up security and solve this or do you sense that the local authorities are finally, realizing they need to do more from their end.

Well look I think we are.

Top notch in this area, though unfortunately as good as we are we cannot.

We cannot avoid.

What's happened so we're all subject to this.

I think it I don't think it's an industry issue I think it's a local jurisdiction issue.

And.

It's a nationwide issue.

And I believe the tide is turning.

We are all over this the safety of our.

Consumers and.

Obviously the retailers.

As priority number one we're not immune to it as much as we would like to be.

We have a very sophisticated.

Operations Center Intelligence Center the deals with this if you ask the retailers.

They would.

They would tell US tell you that I think Alex that.

We're number one in this area but.

We're not immune I would love to be immune.

But we've got we as it is.

As a nation has to address this.

And it's happening.

Obviously.

A lot of different areas I don't want to get into politics.

At all but.

But I don't think it's an interest I don't think the industry can solve it.

I do think it's got to be at the local and national level.

And I do think.

We've got we've got a hold.

Everyone accountable that this kind of stuff cannot be tolerated.

But but it believe me.

We are all over it.

But we know.

Some of these things are just impossible.

No.

<unk>.

To avoid however, what you don't hear from US Alex is all of the ones that we Florida.

<unk>.

<unk>.

Dozens and dozens of multiple ones and we.

We do an excellent job, but it's.

We're.

We have to deal with some unfortunate consequences of this.

Zacks.

Thank you.

Okay.

Our next question comes from the line of Juan Sanabria with BMO capital markets. Please proceed with your question.

Hi, Thanks, just hoping to ask a little bit about ramps.

Leasing spreads again.

The base rent was flat sequentially at just under 54 box do you think thats, that's now bottomed or stabilized.

Added upwards from here.

And on the re leasing spreads.

I think you've talked about <unk> being in the number for the deals <unk> signed in the fourth quarter or a quarter and not quite sure why.

When will that translate into.

The baseline rent when would that kind of sunset out.

And how are you guys thinking about internally on that on that spread number that's no longer disclosing.

What's the expectation for what you generated in 'twenty, one and what your expectation is for 'twenty two.

Well.

First of all we focus on NOI growth.

So that's number one.

And we expect to have NOI growth. So that's the first I'd say to you I think you could youre not maybe we weren't clear, but the $54 is somewhat.

It's just the base minimum rent that our portfolio.

Average as it does not include overage or percentage rent if you included that.

Based on 21 results.

At 54 would be 62.

Okay. So that that's the relationship there.

No.

I try to listen carefully to your question, but it just it just goes to show that the 54 is missing this component.

And we thought it was material enough to pointed out.

And so when do you think that eight Bucks comes in is the number one does that but that's all that's.

That's all a function of lease exploration so.

We tend to.

We tend to raise if someone has an overage rent or they have a percent rent deal that's expiring.

We try to raise them.

The base minimum rent.

Or we try to capture as much in the base minimum rent.

From the overage that's generated you don't always get all of it but you do some of it so it's.

It should eke up over time, but it's really a function of the big overage rent.

Payers and when their leases expire.

Thank you.

Certainly.

Our next question comes from Floris Van <unk> with Compass point. Please proceed with your question.

Thanks, Thanks for taking my question guys.

David You just mentioned NOI growth.

And.

Obviously, you know them.

I still think theres a lot of value in the business here, but.

Again, you might be slightly guilty by the way.

So do I, so do I for us okay.

No no I know you think theres a lot of value.

I'm trying to help you get that out but yes.

The 2%.

Walking again.

The 2% NOI growth that you have in your assumptions.

For 'twenty two if you have you're basically you have fixed bumps in your leases typically around 3%.

Get it for all of them, but you are a little bit little bit shy of 3%, maybe but all things cetera, spare, but everything else stays the same occupancy stayed the same.

You should get around two 5% to 3% NOI growth you are only guiding for 2% growth.

I think it's very simple the real simple answer is.

Sales and we do a very sophisticated model. If we have sales levels that are above this year, we will we will overachieve that number.

But again we're in February .

And we tend to be.

Try to be cautious on that number but thats really.

And then there are increases in cost that.

We're dealing with.

You know as well for us. So for instance, I mean security expenses are up.

No.

Based on you know, we just had a discussion with Alex on that.

Obviously, we have wage inflation janitorial. So we have pressures on expenses just like everybody else, we got no break.

On the real estate tax front.

The local municipalities even though.

We are closed.

For months in many cases in 2019, and 20, but our real estate tax expense keeps going up so you know.

We have pressures there.

We're just we're just trying to be relatively thoughtful about how to deal with and then and then the percent overage sales number going into every year is a little bit of the unknown and we're trying to bake some conservatism into that thought process.

So David.

Again.

But a lot of your costs would be recaptured through Cam you've got fixed cam that increases at inflation. So you're.

That would imply that your fixed well no no no no.

No we don't have CPI adjusted.

Yes, 3% bumps you have 3% you're right.

We have bumps.

But if it goes up 6% and were going up three we lose 3% so yes.

Yes.

So again, it's all it's all factored in but I would say there is a little bit of margin pressure and again I.

Hopefully I have been clear on the sales front.

David So maybe maybe if you could touch on one little area, which.

I looked at your at least you have $6 8 million square feet of leases that are longer than a year, but that are sort of temporary tenants specialty leasing.

Or at an average rent of around.

Off the top of my head 17, 17 Bucks, it's 10% of your small shop portfolio that is at a third your average rents that youre getting.

What happens when those leases go to market or become full tenants theoretically they should go up by.

300% does that is that the right way to look at it yes look I think that's a great opportunity for our company, we did a very good job.

It's kind of a flex business.

We're still under occupied we still have.

A number of tenants like that that are.

Important to the community, but but but.

As is.

<unk>.

More permanent tenants.

Come to come to the market, that's a great opportunity for the company for US. This is a real interesting thing a lot of that stuff is happening now.

So think about it this way in 'twenty, one and 'twenty, we got decimated by Covid right.

We.

Came back unbelievably strong in 'twenty one.

Much better than anyone would have predicted.

And.

Reinforced our business model I would I would I would venture to say.

<unk>.

But we still have we still have a lot of short term leasing or.

What I'll call specialty leasing, but that as we re lease that space that comes in midstream that comes in first quarter second quarter third quarter of 2002.

Because remember our retail base a lot of it sat on the sidelines all of 'twenty.

And then really start opening up open to buy in 'twenty one.

And by the time, you build out a store in a mall, it's a six to nine month process.

<unk>.

As much given where we are today.

I would say to you and we never.

This is cell anti delay I think but we still have a transition year in 'twenty, two but it's not an excuse I would never use that as an excuse but believe me as we continue to lease up to permanent retailers away from spot.

Absolutely.

We're going to generate more income, but it's not all going to fall in 'twenty two.

Did I explain myself well guys would you add to it.

Yes.

Okay, so so sometimes and articulate so.

Yes, and again, that's not an excuse but but that's how but 'twenty two is going to be.

<unk> to be a transition year.

Like 'twenty one.

It was but we kicked it we kicked the crap out of 'twenty one it was unbelievable year spectacular.

Based on where we were okay for us.

Next question please.

Our next question comes from Handel St. Joost with Mizuho. Please proceed with your question.

Hey, good evening. Thank you for the question.

David.

On OCR you mentioned OCR strategy is something we haven't talked about in a while and at 12, 6% you mentioned, that's the highest level in five years I guess I'm curious how important is OCI today in tenant conversations are they willing to pay or even consider some of these look backed OCR is and any question any color on what do you think that.

OCR It might go near term do we ever get got it back to the mid to upper teens levels. Thanks.

Yes look I think I think.

It reflects.

An earlier comment which is we are starting to see a little more.

A little more pricing power as demand goes up and the fact that.

That.

The overall business is better so.

Yeah, it's a good insurance policy in that.

Sure.

Sure.

The retailers are producing very positive results in our portfolio.

We don't want to put them.

On the edge, but we've taken we've taken our lumps over the last few years and now we're just trying to.

To balance it a little bit better.

Then what we've seen over the last couple of years or so.

It's a good it's a good indicator that we've got some room to go.

All of this.

Okay got you and if I could follow up I don't know if you mentioned it earlier, if you'd be willing to share or are you still doing any of those shorter term leases that youre doing doing co, but with the lower upfront.

Russell, but with the lower percentage rent thresholds that you can make out in the event the improving sales or is that.

Pass now.

It's essentially a thing of the past, though there is always.

A case here or there, where we might we might have a deal in 'twenty three for space, but.

But theyre not ready I'm, sorry, theyre not ready in 'twenty three.

So we have a retailer in this space, so 22 might be an extension of that while we finalized the lease for 'twenty three and that's a little bit what I was talking about with floors as well.

After next question please.

Our next question comes from Vincent to Bone with Green Street. Please proceed with your question.

Hi, Good evening I wanted to follow up on floors is question I believe you mentioned that a sale tenant sales repeated 2021 level, you would likely exceed the 2% guidance for domestic property NOI I just wanted to get a better understanding of maybe what sales level do you have baked into it.

Current guidance and it would seem that your base case is actually a decline in sales compared to last year. So I'm trying to just get a little more.

Color there would be helpful well, we do it.

Really do it.

No why but we do do it kind of by tenant.

And I do simple simple thing is if we do see sales above this year.

We would hopefully.

Putting aside the comment about rising expense cost.

If you kept our expenses.

Flat, we wouldn't see a better.

More robust.

NOI comp portfolio NOI growth simple answers that.

And we do have some baked in conservatism.

In that number but again.

It is.

We do this.

We do this budgeting process.

Late in the year actually to some people they do it earlier than my life, but we.

It's always in the case of sales its an art versus science the good news, though when we talk to retailers.

They are they are planning up sales compared to 21.

Okay.

That's positive and if they produce their own plan.

You'll see the benefit of that.

But so is it fair to say that you are forecasting sales to be negative maybe that's the base case guidance or am I misreading into that.

Yeah, I would say.

Around the 2% level, it's relatively flat.

Okay.

Okay. That's helpful. If I could maybe try to squeeze one more quick one in there I'm just curious like the overdraft component.

Much was overt rents in terms of total lease income like what percentage was that for this last year.

We don't give that out but.

If if we do all asked the guys if they want to give it out we tend not to do that.

But.

<unk>.

I would say was similar to what we would use to see from that.

When we had big international Tourism that are big International properties from a percent point of view.

Okay, guys is that right.

Okay.

And then it really.

Right away. So it's kind of back to where we were maybe 456 years ago.

That's really helpful. Thank you for the time.

But the real time for one more question.

Okay. Our final question comes from Mike Mueller with Jpmorgan. Please proceed with your question.

Hi, quick one rent per square foot was lower year over year in the malls outlets, but it was higher in the mills and I'm curious, what's driving that dynamic.

I'm, sorry could you repeat I didn't you broke up there for a second.

Yeah, your rent per square foot for malls and outlets is down year over year, but for the mills, it's up year over year.

Yes.

In the mills.

They include all of the boxes. We include all the box shouldn't say that we include all of the boxes.

So.

Every square footage, it's not whereas in the outlet mall, it's basically just the the interior space that the department stores. So that's.

Thats.

So they have a few big tenants that may be.

Driving the increase but that business has been very healthy.

And we're very pleased with the results there.

Got it that was it thank you sure.

Ladies and gentlemen, we've reached the end of the question and answer session and I'd like to turn the call back to Mr. David Simon Chairman for closing remarks.

Thank you I know, there's a few that are.

We're still looking to get some questions answered so Brian and Tom will be available of course, I am as well.

Thanks for participating in the call today.

This.

Today's conference you may disconnect your lines at this time. Thank you all for your participation.