Q4 2022 Simon Property Group Inc Earnings Call
Speaker 1: Ag.
Speaker 2: Greetings. Welcome to the Simon Property Group Fourth Quarter 2022 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. Please note this conference is being recorded. I will now turn the conference over to your host, Tom Ward. You may be good.
Speaker 3: Thank you, Small. Thank you, Dean from Atlanta. Thank you for joining us to see me, presenting on today's call of David Simon, chairman, chief executive officer in president. Also on the call of by McDade, chief financial officer, and Adam Roy, chief accounting officer.
Speaker 4: A quick reminder that statements made during this call may be deemed forward-looking statements within the meaning of the Safe Harbor of the Private Securities Refugation Reform Act of 1995, and actual results may differ materially due to a variety of risks, uncertainties, and other factors.
Speaker 5: 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 may be accurate only as of today's date. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures has not been investigated.
Speaker 6: are included within the press release and the supplemental information in today's Form 8K filing. Both the press release and the supplemental information are available on our IR website at investors.simon.com. Our conference call this morning, this afternoon, 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... single- Chuck
Speaker 7: Resort. I'm pleased to report our fourth quarter and full year results. We generated approximately $4.5 billion in FFO in 2022 or $11.95 per share.
Speaker 8: On a comparable basis, full year FFO per share was $11.87, an increase of 3.8% year over year. We returned approximately $2.8 billion to shareholders in dividends and share.
Speaker 9: and total dividends today.
Speaker 10: since our IPO now totals approximately $39 billion. We invested approximately $1 billion, including accretive development projects and expanding our other investment platform into the growing assetsh
Speaker 11: and investment management businesses with our Jamestown partnership. These consistent, strong results are a testament to the quality of our portfolio, a relentless focus on operational and cost structure, disciplined capital allocation, and our team's commitment to the future.
Speaker 12: to our shoppers and communities. Fourth quarter funds from operations.
Speaker 13: were $1.27 billion or $3.40 per share. Included in the fourth quarter results was a net gain of 25 cents per share, principally from the sale of our interest.
Speaker 14: in the Eddie Bauer Licensing JV in exchange for additional equity ownership in Authentic Brands Group. We now own 12% of Authentic, valued at approximately $1.5 billion.
Speaker 15: Let me walk through some variances for this quarter compared to Q4 of 2021. Our domestic operations had a very good quarter and contributed 23 cents of growth, driven primarily by higher rental income and with some lower operating expenses.
Speaker 16: These positive contributions were partially offset by higher interest expense of three cents.
Speaker 17: and a 15 cent lower contribution from our other platform investments.
Speaker 18: 2021 was a great year for our retailers. However, in 2022, Forever 21 and JC Penney were affected by inflationary pressures and consumers reducing their spend. Despite not achieving the same profitability
Speaker 19: that we did in 2021. We are pleased on how we and the management teams dealt with the unanticipated external environment.
Speaker 20: Turning to domestic property NLI, we increased 5.8% year-over-year for the quarter and 4.8% for the year. For the ONOI, which includes our international properties and constant currency.
Speaker 21: grew 6.3% for the quarter and 5.7% for the year. Occupancy for malls and outlets at the end of the fourth quarter was 94.9%, an increase of 150 basis points compared to prior year.
Speaker 22: and an increase of 40 basis points sequentially. The meals occupancy was 98.2% and TRG was 94.5%. Average base minimum rent was $55.13.
Speaker 23: per foot, an increase of 2.3% year over year. For the year, we signed 4,100 leases for more than 14 million square feet. Over two years, we've now signed 8,000 leases for more than 29 million square feet, and we have a significant number of leases.
Speaker 24: in our pipeline that will open for late 2023 and 2024 openings.
Speaker 25: Reported retailer sales momentum continued. We reached another record in fourth quarter at $753 per square foot. The malls and outlets combined an increase of 6.
Speaker 26: 6% year over year, all platforms achieved record sales levels, including the mills at $679 per square foot, which was a 5% increase. TRG was a 1095 per square foot, and 11% increased.
Speaker 27: And our occupancy at the end of the fourth quarter was 12%. We opened a new development
Speaker 28: In 2022, our 10th premium outlet in Japan, construction continues our new outlet in Normandy, France, West of Paris. This will be our second outlet in France and our 35th International outlet, our International Outlet Port platform.
Speaker 29: is a hidden jewel for SDG. As a friend of reference, it is bigger and much more profitable with much higher sales per square foot than another public company's portfolio. We completed 14 redevelopments and we will complete.
Speaker 30: another major redevelopment project this year at some of our most productive properties. In addition, we expect to begin construction this year on six to eight mixed-use projects. All of this will be funded with our eternally generated cash flow.
Speaker 31: Now turning to other platform investments in the fourth quarter, it contributed 23 cents per share in FFO compared to 38 cents in the prior year period. Over the year, OPI contributed 64 cents to the FFO.
Speaker 32: in FFO compared to $1.07 in the prior year. We are pleased with the contribution from our OPI investments, especially given our de minimis cash investment we've made in these companies.
Turning to the balance sheet, we completed refinancing on 20 property mortgages for a total of $2.3 billion at an average interest rate of 5.33%. Our A-rated balance sheet is as strong as ever, our fixed balance sheet is as strong as ever.
Coverage ratio is 4.8 times and we ended the year with approximately $7.8 billion of liquidity.
In 2022, we paid approximately $2.6 billion in common stock dividends. In cash, we announced $1.80 per share this quarter, which is a 9% increase in stock dividends.
over the same period last year. The dividend is payable at the end of March, at the end of this quarter on March 31. We also repurchased 1.8 million shares of our common stock in an average purchase price of $98.57 in 2022.
Moving on to 23, our comparable FFO guidance is $11.70 to $11.95 cents per share or guidance reflects the following assumptions. Domestic property and a wide growth of at least 2 percent.
increased interest expense compared to 2022 of approximately 30 to 35 cents per share reflecting current market interest rates on both fixed and variable debt assumptions.
Similar OPI investment contribution, FFO contributions compared to 2022, the continuing impact of the strong US dollar versus the euro and the yen, no significant acquisition or disposition activity, and a diluted share count of approximately.
374 million shares. To conclude, we had another excellent year effectively navigating external headwinds that included rising interest rates, strong U.S. dollars, inflation, and a somewhat softening economy. We had consistently posted industry-leading results.
through our hard work, innovation, great people, and great assets. And we are continuing to be excited about our plans for 2023. If you come to Atlanta, you will see what we're doing. And it's a great example of the future growth prospects of our company.
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One moment while we call for questions.
Our first question comes from the line of Ronald Camden with Morgan Stanley . Please proceed with your question.
Great. Just starting with the guidance of at least 2% sort of organic growth next year, obviously occupancy is already back to 95%, just a little bit more color on that. How much is that occupancy gain? How much is that? Well, here's the last segment.
rent bombs just trying to get a sense of what's driving that thanks
Well, I think it's all of the above. It's rent bumps, it's accidents to gain. We still, and this is very important to underscore, we still have a lot of openings scheduled for the latter half of 23 and the early...
part of 24. So we're not going to see the full contribution of those tenants open until essentially really a run rate of 24 if they sometimes 24. Now you ask why?
because we have a high quality group of retailers opening these and it takes a while to build out their quality stores. But its occupancy gains its rental increases.
It's a reduction in our temporary tenant income because we're leasing space permanently. And it's basically assuming that a lot goes into this, but it's basically assuming relatively flat playoffs.
Now if you remember last year we said up to 2%. This year we obviously blue pasted it was total for the domestic properties of clearly 5% roughly 5% or 0.8. So we're hopeful we'll do better but again we still have
All right, next question comes from the line of Steve Sakwa with Evercore ISI. Please proceed with your question.
Yeah, thanks. Thanks for that answer, David. I guess as you think about your other platform investments and some of the monetizations that you talked about with authentic brands, how do you sort of think about those on a go-forward basis against maybe making new investments in new retailers that...
So to speak, both as a big shareholder, but also, you know, we're 50% owners together, 50 for us, 54 authentic in Spark.
And we have a different ownership structure with JC Penny. We don't really have any plans to spark to buy additional retailers. We're very opportunistic on that. We had a very busy year last year with Reebok.
because we knew we had some losses to incur this year. So hopefully we'll be past that this year. But we really don't have any plans to
If we do it will be opportunistically.
Most of our work has been on
You know, with...
You know, on the bankruptcy front or where somebody wanted to unload a business.
And, but generally there's not a lot of distress in retail right now. But, you know, I'm not saying it won't.
develop in the year but you know there's some brands out there that are in trouble that obviously people know about but we don't see playing in any of those situations.
Our next question comes from the line of Derek Johnson with Deutsche Bank. Please proceed with your question.
Hi, good evening everybody. Can we get a more granular update on Fits Plaza? The repositioning has been open for I'd say most or at least part of 4Q. So I guess, you know, how is it tracking versus plan? You know, what changes in traffic?
Are you seeing or any notable change of inline rents? Any deets would be appreciated and I guess lastly, you know, the project seems to have increased your plan for accelerating you know, some other mixed-use endeavors, I guess with Jamestown, any more information would be helpful. Thank you.
yeah it really just opened at the end of November but it's really you know
It's really new. The office literally the first ten had just moved in January , mid-January or just in a tour of that.
We still have a lot of lease up. Just to give you a rough number, pre-investment, FIPS did in the low 20s of NOI. We think it'll be stabilized close to 60.
And, you know, we'll have invested around $350 million in it over that period of time. So again, we don't, we're a big company. We don't really get into like granular detail, but you know, we, we basically increased it. We'll increase the NOI by about $35 million.
We announced Hermes opening into the plaza and part of the wing that, you know, really was difficult to lease with Belk's as the anchor. We had an unbelievable lifetime resort. If you haven't seen what they build.
or their product, both with lifetime work, the pool, and the restaurants, and the services, and the salon, and obviously all the fitness activities, I'd encourage you to do so. We have a Class A plus office.
the best in Buckhead that just opened. So again, low 20, 60, $350 million investment is the math. Now again, we're doing...
We're doing, and the message James found. James found investment is...
in the investment and asset management business. So these mixed use developments that I mentioned in my call text.
We're doing all of those, you know, with by ourselves or with
partners that we've used before. So that really isn't with Jane's town. Again, we looked at the Jane's town relationship, future endeavors that we can do together or in partnership. But we're very active in building out our platform now.
Seattle is an example we're about to, you know, start a residence in, you know, hotel which finally got approved and that's going to start construction. You know, we can go through the list but all that Simon property group own just like that.
FIPS, which we own 100% of Nodu, we own obviously the lifetime, you know, as a lease, and then the office building we own too, which is all 100% owned asset.
I don't want you to confuse those two. But that's the rough math on FIPS.
And then the true lease up of FIPS, again, which goes back to my earlier comment.
on the NOI. The true lease up of Fips because you have
you know, East Amelon and some of the high-end brands building out their stores.
It's not a three month deal. It's in many cases nine months per year the true The true
The offering that FITs will have will really show in 24 when all of these retailers open their stores. So Christian Louboutin, Hermes, and you know, Acris, and on and on and on. But most of those will either open late 23 or 24.
And that's when FIPS really will be finished. You know, these things don't just, they don't just flip the switch and it opens. So that gives you a sense of it. We think that true pro forma, this will, you know, will ultimately manifest itself in year 25 or... So, that's when FIPS really will be finished.
or even in 26. Our next question comes from the line of Alexander Gofarb with Piper Sandler. Please proceed with your question.
Good evening. Good evening out there David.
So question on the retailer brand portfolio, and your equity stake in authentic brands, you guys have a headwind.
Sorry, not a headwind. You guys have fluctuating contributions from retail, it's just based on their actual sales, right? Because it's not rents, it's based on sales. Yet I'm assuming you get some sort of recurring cash flow from the intellectual property that you own in authentic brands, managing the brands and all that. So
I'm just trying to understand, as you guys sell more of the brand equity and exchange it for a bigger stake of authentic brands.
How does your income mix switch from being solely sales dependent to being more consistent, whether it's managing or other certain sorts of more regular fee income versus volatility from, you know, however many genes or shorts are sold in the given quarter?
are you introducing a bit into a tutorial? Does I like you, Alex? So there we go. Spark operates the domestic business of the brands. Lucky.
Eric Costello, Forever 21, you know, down the list, okay, or Brooks County, etc. Get licensed.
The brands from Authentic and it pays a royalty fee to Authentic.
And then we and our partner are authentic and it pays rent to landlords including Simon. We don't have a lot of pay rent to.
Forever 21 could be in a Bernardo property. In fact, it is in Times Square and it pays rent to Steve Roth and Bernardo.
And that business.
has operating costs and we share in that 50-50 with
with authentic. So we actually now that we converted and exchanged our license.
that we own together. Now we have historically done the licensed business on a JP basis.
We've decided over time to exchange that into stock of authentic. And that's why we were not a shareholder in authentic, but eventually have become a 12% shareholder in authentic through the exchange of our interest in the JB licensed business.
over time to exchange that into stock of authentic. And that's why we were not a shareholder in authentic, but eventually have become a 12% shareholder in authentic through the exchange of our interest in the JV licensed business for stock into authentic.
Authentics, a big company. You know, we've got a billion dollars of revenue close to theirabouts. But it owns the license of, you know, many, many brands beyond Spark. You know, it owns...
You know, it's partnership with David Beckham, it's partnership with Shaquille, Elvis Presley, you know, Juicy Couture, and you know, on down the list you can Google it, it'll give you all the names. And Spark is essentially the retail operating company.
So when you think of Spark, you should think of it similar to any other retailer like American Eagle or anybody else that operates stores, operates e-commerce.
It does wholesale. The only difference is it pays a royalty to authentic. It does not pay a loyalty to sign a property group. So the only vagaries.
with the rapid increase in gas prices and inflation and the uncertain economic environment. So I know we're not allowed, but can we let Alex, I'm asking Tom Ward, who's the police of the call, can we ask Alex if he understands this now? Yes. Okay, Alex, do you understand this? Was I perfectly clear?
So if I take away what you're saying, SPG lives really on the retail sales and performance. You're at 12% stake and AB doesn't generate any fees to you. So again, the focus is really the earnings derived purely from sales. There's not any sort of recurring. Well, I mean, it's just...
to be running the business.
which includes stores, e-commerce.
wholesale and certain other ventures.
all Santa
Because we equity account, they're very profitable company with high, you know, high, you know, high gross margins. It's an asset like company essentially. We take our share of earnings from them net income.
because they are, you know, taxpayer, et cetera. But together, all of those businesses...
Spark.
If our RGG, which is our partnership with Michael Rubin, who owns Fanatics.
All of that rolls through OPI and OPI contributed 64 cents out of $11.87. So you know it's in that range to give you a sense. So 64 cents.
out of $11.85. So, but that hopefully that helps explain it. But..
You got it?
I got it. I was surprised...
Thank you.
Our next question comes from the line of Vince Tiboni with Green Street. Please proceed with your question.
Hi, good afternoon. Could you provide some color on leasing economics and how those are trending in the current macro environment? Just given current NOI guidance is about 2%, which is lower than average contractual bumps and there should be some occupancy upside. This just seems to imply.
at least the economics aren't great, but let's contrary what you said on recent calls. So can you just help me?
better understand kind of the dynamics at play here with guidance and maybe where leasing economics are right now.
Yeah, look, I would say we have positive spreads across the portfolio in renewables.
Um yeah
And you know new new leases versus existing leases for new space
But again, we also have operating expense increase because we're not immune to security costs, increases, housekeeping.
you know, all of the normal operating expenses.
To some extent our Fitches Camp Bumps don't cover that. We're also projecting, you know, flat fails.
You know obviously to the extent that sales outperform that will outperform as well and We you know have these cases when we're adding great retailers great restaurants to our Portfolio you have to take out the tenant
That was you know in many cases temporary have to take that out and you hit basically have nine months of downtime Where you have no income for now? You know like we did last time then we set up to two we did 4.8
I'm hoping to do better, but those are basically the determinants and that's why we said better than 2%. We have some operating expense increases, real estate taxes.
Unbelievably, continue even though we're the goose that continues to lay the golden eggs for all of the communities in which we operate. You know, our taxes continue to go up. Well, we have operating expenses that go up with inflationary pressures. We have downtime, we have flat sales.
And we lose temporary income while we're retending and going to physical, you know, whether we're going to permanent income. All of that's great news, but our rent spreads are positive, renewals are positive, and we, you know, and that's been the difference.
We then obviously will throw COVID out, but even the trend prior to COVID renewals were in our underpasser as you know this.
No, I mean, and the demand continues to be very good.
I think there's one follow up. Like it is variable lease income. Do you expect that to continue to trend down just as you one line, maybe some COVID lease modifications? Or how should we think about that part of the puzzle to going forward?
We have budgeted it basically down slightly because number one is to the extent that a tenant renews the lease, we're getting some of that overage into
You know, into the base rent. If you remember out of bankruptcy for ever 21, pays basically percentage rent to all of its landlords, us included. It had a tough year last year, as I mentioned earlier.
And we're budgeting basically flat this year. So there's a lot that goes on that kind of, you got again separated between over and percent rent. It's a little bit of a crystal ball.
You know, there are always retailers that do well, some that slow down. You know, we're pretty good at anticipating who's going to be great and who's not, but you know, we're not the ones, other than Forever 21, we're not the ones putting the stuff in the stores itself. Okay.
Forever 21, you can blame it on us, okay?
So I hope that helps. No, thanks. No, this is very helpful. Thank you.
Thank you.
Our next question comes from the line of Craig Mailman with Citi. Please proceed with your question.
Great, thank you. David, you had mentioned, you know, Forever 21, JC Penney's managed to summon inflationary headwinds in their business. I'm just kind of curious whether you're purviewed or through Spark and other investments. Just how do you think the retailers?
that you're invested and maybe other tenants that people have concerns about or have been talking about in the news are positioned heading into 23 from a gross margin management perspective and just balance sheet and how much risk you see in this current environment versus maybe the headline fears that are in the market.
Right now we feel really good about our retailers. I think they were very focused on entering 23 with, you know,
good clean inventories. We feel like most of them have managed that. I ask my leasing folks all the time, any pullback on demand. It's not really happened.
So we feel good about that. Demand continues to be generally very strong. And I think they, really, because of the bounce back out of COVID,
really
you know, got the benefit of kind of getting their house on orders. So I think on a credit side.
You know, we're feeling very.
You know, comfortable, right? Brian ? Yeah. Yeah, watch list is the lowest. It's a bit of a year. The TENC community rebuilt this financial position very clearly and is coming out of India in a much better place. So nothing yet. And obviously you've got.
a couple of big names out there, but we really had very little exposure to them.
In some cases, we'd like to know most of them are in the box. They're mostly in the service center. So we have the ones that we have. We'd like to buy the box back. We can do some other within. So I'd say generally.
You know, knock on the wood. I think credit side is pretty good and demand is good.
And they ran, you know, they, December was very spotty for a lot of retailers. On the other hand, after Christmas, you know, most had a really good January . And again, I think the mistake we made, Simon Property Group made.
We shouldn't dwell on this too much because again, 64 out of 1187, 64 cents out of 1187. But it's important just so, you know, we'll do a little mea culpa. We made the mistake that thinking...
21, you know we budgeted basically flat to 21 and 21 was for a couple of the brands there
just extraordinarily profitable. We made some tactical mistakes at Forever 21. We brought in a new CEO to rectify those mistakes. She's doing a terrific job. So we're very pleased there.
We also are very pleased with JCPenney. It's unbelievably profitable EBITDA. You know You can see the EBITDA. There's some public filings out there But you know it is it didn't have the 21 year of 21
But we're very pleased we're where that company is positioned.
And we're extremely pleased with the management team and all that they're doing to reinvigorate the brand. That means so much to that consumer in those communities. And we're taking a different tack than others. Because water is cool basically me and me when I need to
that have managed or owned that brand, or actually reinvesting in that company to make it...
You know, to make it...
very important for those communities. So very pleased with how we're positioning Penny, but it, you know, we've had.
You know, I don't know if I can disclose it, but it had a lot of you to go. Okay, so You know and our partner Brookfield will let Brookfield take the electric field and that's it if they do their you know, I'm kidding, but You know, but it was very profitable from the need at that point of view. So
We're very pleased there with the brands, but we did make the mistake of thinking 21 would repeat and then obviously you know you had a lot of volatility from a macro point in 1922 with you know huge increases in interest rates.
huge increase in price and food and energy cost that the consumer was whips are.
And, you know, and we felt the impact of it.
It's stabilized now, we believe.
Thank you.
Our next question comes from the line of Craig Smith with Bank of America. Three for C with your question.
Thank you. Given the China reopening, I wonder if you could outline how these visitors could impact your coastal premium outlets and your dominant coastal malls.
Well, I think we haven't seen the benefit, but just walking...
You know, we, I mean, I don't want to get into the kind of geopolitics of what's going on, but we're, we think there's a real benefit to, you know, our landmark assets that, you know, that have, you know, that have.
always been
shopped by the Chinese consumer or the Asian consumer. We're starting to see that a little bit, but we're not planning to that to really accelerate 23, but we're hopeful that it will.
Thank you.
Our next question comes from the line of Flores and Nykom with Compass Point. Please proceed with your question.
Thanks, David.
You had talked last quarter actually in response to a question I asked about recovering back to 2019 levels of same property NOI, which we reckon to be about $6.2 billion. Obviously that does not include
some of your retailer investments. But depending on how you slice it, I'm just trying to do the math here, but you're at least 200 million.
short even if you include those retailer investments. If you can walk us through it, that would imply that you would get to around 3.7% NOI growth to get back to those levels. You're clearly not guiding to that yet. You're guiding to 2%. But what are the headwinds?
if you will.
You really should just focus on domestic.
It took to put the retailers in there, you know, there's too much volatility and it's not something we look to. What are focused on are domestic property on a line of attitude to 2000 and 19 numbers before we were shut down by the pandemic.
The short answer is we will get there on a run rate by the end of this year.
That's the short answer. You shouldn't put the retailer in a line there. You gotta remember we have basically no cash investment in Spark.
an answer, right? You shouldn't put the retailer and a line in there. It's, it's, again, that's, you got to remember we have, you know, we have basically no cash investment in Spark. So,
You know, and I know we can talk about it all day, but it's it's when you think about time and property group, we want you to think about those investments as they get with purchase. Okay? You get this great property company that owns all those real estate that's redeveloping it. Great balance. Thank you.
the ability to make smart investments with an unbelievable return on investment.
outside its core business.
And that's what you get with a seasoned team that's experienced.
from recession to credit crisis to a shutdown and a pandemic.
Okay, and we've managed it.
through it all. So the bottom line is our domestic property in a Y because of the delayed in some of these openings. We will get back.
on a same property basis, because remember, the other thing for us, we have properties in and out, so you can't go back at 19, the portfolio is different, but if you do the same portfolio that we own today, versus the same portfolio that we own 19, Capable will be there by the end of this year.
Okay, and that would say...
And David, that includes, the 6.2 billion was included your stake in Tobin as well. But I'm just curious now. We're not even willing to eat Tobin in it. This is just the domestic, practically, and a lot. So we're not even including our international...
and a lot. So what we can give you, if you combine the mils
Outlets and malls, the method, portfolio.
that we owned in 19 and that we still own in 22, we will get there on a one-way at the end of the year.
Simple as that. We're not that far off, but we have delayed openings.
And depending on where sales come in, it's even possible we make it this year.
And that's the only way to look at it, really.
I don't disagree. If I can, the S&O pipeline, has that changed from the last quarter as well? You mentioned some of your space is opening later in 23 and in 24. Obviously that has the potential to impact your NOI growth going forward by 2023.
five to 7% depending on the rent that you signed, plus your fixed rent bumps, the math that we have suggests that 2% is
It's the extreme low side of what's probably going to happen over the next two to three years.
Yeah, I mean certainly if you look at it over that period of time, you would call to, you know, way outperform. And again, I'll just go back to last year. We try to be as thoughtful in doing this.
But there are, you know, there are variabilities to it. College rent being the biggest.
But we also have some certain inflationary pressures that we as landlords and property owners have to deal with that I mentioned earlier.
And again, you know, you have downtime.
But I would hope that we would beat our number just like we did last year. In 2019 at ourson correct sp pianoia
And just like we have in store.
Our next question comes from the line of Michael Goldsmith with UBS. Do proceed with your question.
Good afternoon. Thanks a lot for taking my question. In the past you've talked about 80% of the NOI being generated by the top 50% of the properties. Does this remain true and can you talk about the demand trends and pricing power that you have in the top half of the portfolio relative to the bottom half?
Well, I don't give anybody has any questions. Yeah, might as well go to the whole truth. You know, our top 100 access to the re-referring roughly any number of reps in a while. Yeah, so it's more than 50. 50 properties in a row. It's more than 50. So I say...
Demand across the board is good. Obviously the behind-the-hand poverty has more demand. But we're generally, you know, our lease is still to this day.
Our occupancy cost is low and our rent spreads across the board are generally positive.
Regardless of that you know, the sales perfomance.
Our next question comes from the line of Mike Euler with JP Morgan. Please proceed with your question.
Yeah, hi, just a quick one. For your platform investment FFO forecast, are you expecting any significant non recurring costs like you had in the 2022 results?
No.
Okay, thank you. That's a good question, but we want to take care of that.
And our next question comes from the line of Pandel St. Just with Mizuho. Please proceed with your question.
Hey, good evening David and team. Hope you're well.
I was hoping maybe you could share some thoughts on deploying capital in the current macro. We noticed you didn't buy back any stock in the fourth quarter, so I guess I'm curious, what your level of interest in stock buybacks is here today. And second, I know you mentioned that there's no sizable acquisitions or disposition in the guide, but I'm curious what your view of the transaction market from all this, at least today, clearly.
sector on...
You know it's great that there's others out there that are, you know, real estate industries that are trying to grow externally. You know as an example what was today that was announced.
You know, it's good to see we're not the only ones that, you know, that like to, you know, like to, um, you know, make things happen externally. So that's good. That's good. I think our strategy has been, um,
essentially confirmed by other players in our industry, where size and economies of scale see the benefits. So it's always good to see, we saw it in the warehousing world, we saw it in the...
Now we might see in the storage world, so it's great that you know we see that you know from a stock buyback I think our dividend is
You know, it's really where we're focused, growing that. One thing I mentioned hopefully in my conference text that you heard was we paid out $39 billion in dividends, staggering number when you put it in perspective.
That does not include any stock buyback, that's just pure dividends. I'd say that's obviously the focus, but if the stock comes under pressure, we still have the ability to deal with that. So that is in our arsenal.
We got a lot of mixed-use properties, I'd say generally.
Relatively quiet on the acquisition front. We did create our partnership with Jamestown, which we're focused on.
this year and obviously the years to come to grow that relationship.
But, you know, we've got a lot going on and, you know, and the capital to continue to create external opportunities.
And we've been, you know, we haven't batted a thousand, but you know, we've certainly moved the needle profitably with our investments and created unbelievable return on investment.
both in the real estate. You know, it's still one of the best deals ever done.
In real estate was our deal on premium outlets.
You know, which I'm happy to walk through the math, not today, but still one of the best, you know, multiple deals.
ever done in our industry and at that time, you know, we were wildly criticized for it. But one of the best deals done in the public company space.
Got it, got it. No, I appreciate that, but it sounds like at a high level, without putting words in your mouth, that the focus of your capital investing today is going to be more the redev, less the stock buybacks, less the acquisitions.
Question, just a follow-up maybe on the FFO guide itself. I appreciate some of the headwinds, the unknowns, the op-ex, the interest expense, etc. But I'm trying to get a sense of what else might be limiting the FFO growth this year, which is basically flat year-of-year versus the process.
Yeah, it's really really
It's really simple. It's interest rate. We're losing roughly 30 to 35 cents per share just from either floating rate debt that's now higher or our own assumptions of what our refinancing costs are going to be.
The good news is we're refinancing all of our debt, the market's there, but the cost of debt is higher. So that's really, if you cut through it all, and when you look at kind of where the market was, very few analysts.
updated their numbers at all for higher interest rates but you know they I don't have to tell you they bloomed over the last 12 months.
No, I appreciate that. Why did we get a bit of clarity, though, perhaps on bad debt? How are you thinking about that this year within the guide? FX, headwinds, and maybe at least – Yeah, I think we got it all figured out. We have a little higher bad debt expense budgeted this year than last year.
Thank you. Our next question comes from the mind of Juan Santa Bria with DMO Capital Markets. Please proceed with your question.
Hi, thank you. Just hope you show a little color on expected capExp and just in general for maintenance and then the development spend that we should be budgeting and what kind of returns or NOI contributions we should be thinking about on the Dabry Dab stuff. It will flow through a deterioration as we...
I always look at our 8K, because the development spend, we'll add to that, but obviously when you start a real estate project, it's over a two year, you know, sometimes three year process, so all that's disclosed in the 8K.
And the Catholics, including TA, will probably be roughly with what it was 22 if not a little bit less.
Okay, thank you. Our next question comes from the line of Greg McGinnis with Scotiabank. Please proceed with your question.
Hey, good evening, David.
Regarding the large number of stores opening late 23 and early 24, what's that expected in a Y contribution or DOA? It's your attributed to these leases that are signed and not yet been paid.
Could seem, but I at leased a hundred million.
on an all-ire deal. I guess I don't want to. Okay. Thank you. And then is there any contribution and expectation from the James Stammer investment? And then if you could talk about like this place here, let's build some guidance as well. That'd be appreciated. Because that's all in James Stammer is increasing.
So that's one. Teclaepia, it is consistent with their guidance that they'll be developing when they announce their earnings this in the next couple of weeks.
So that's one. Teclaipia, it is consistent with their guidance that they'll be developing when they announce their earnings in the next couple of weeks. There is some FX headwind still baked in there, Greg.
Some people with boundaries. Yeah All right, thank you
All right, thank you. Thank you.
Our next question comes from the line of Keevin Kim with Truist. Please proceed with your question.
See you then.
Hopefully a quick one here. When I look at your 2023 lease expiration, your portfolio still has about 10.5% expiring, which hasn't really budged in the past couple of quarters. I remember from the last call you said these things can take time, especially with larger national accounts. I was just curious if you could share an update and how we should mentally think about a realistic set of outcomes here.
Well, listen, we're negotiating for the benefit of our shareholders, their negotiating for the benefit of their shareholders. And a lot of these things we have.
I'll say handshakes and it's a process of being paper. So you should feel good that there's no smoking gun, there's nothing there that's going to lead to a fallout. That's just the process.
and renewals are going. We're in fact ahead of our 23 renewals now compared to where we were last year, but some of the 22s. And at some cases, because 22s took so long and we're doing 23s.
So together and it's a process but it's going well and relationships are progressing appropriately.
Where should we expect your portfolio occupancy to end up by the end of this year?
23 slightly up.
I don't have the number, but Brian may have it for you later.
Okay, thank you.
Okay, that's one. I guess for over six, but we had one more question and we want to finish the Q&A.
She had been our final question comes from the line of Linda's side, but the effort should be proposed.
Hi, thanks a lot for taking my question. On the guidance, the range you provided based on comparable FFO per share, in the coming quarters when you have a better sense of mark-to-market gains or losses, will you also show guidance for estimated diluted per share for the full year like you did in prior quarters?
Yeah, well, you know, last, you mean our mark to market equity investments?
Yeah, sure. I mean, we outlined it, we separated, you know, we'll do comparable and real numbers. So you'll see both. Hopefully it will only be up.
but
But, you know, last year we did take a reported FFO. Do you remember? $6.1 million. What was the share on that? $0.08. $0.08.
We will outline those for you so you will see them.
flight. Thank you.
And we have reached the end of the question and answer session. I'll now turn the call back over to David Simon for a close remarks.
Thank you and again I'm sure there are a lot more...
detailed questions, please call Brian and Tom and they'll be happy to walk you through more details.
questions please call Brian and Tom and they'll be happy to walk into more details. Thank you.
And this concludes today's conference, and you made this connection line at this time. Thank you for your participation.