Q1 2023 Simon Property Group Inc Earnings Call
Speaker 2: Greetings and welcome to the Simons first quarter 2023 earnings conference call.
Speaker 2: At this time, all participants are in a listen-only mode.
Speaker 2: A brief question and answer session will follow the formal presentation.
Speaker 2: If anyone should require operator assistance during the conference, please press star and then zero on your telephone keypad.
Speaker 2: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Tom Ward, the SVP of Investor Relations. Thank you and you may proceed, sir.
Speaker 3: Thank you, Claudia. And thank you for joining us this evening. 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 Roy, Chief Accounting Officer.
Speaker 3: A quick reminder that statements made during this call may be deemed forward looking statements within the meeting of the state's farther of the private security litigation reform act of 1995, and actual results may differ materially due to a variety of risks, uncertainties, and other factors. We are free to today's press release.
Speaker 3: and our SEC filings for a detailed discussion of the risk factors relating to those forwarded statements. Please note that this call includes information that may be accurate only as of today's date. Reconciliation 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 8K filing.
Speaker 3: Both the press release and the supplemental information are available on our IR website at investors.simon.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.
Speaker 3: I'm pleased to introduce David Simon. Thank you, good afternoon, and I'm pleased to report our first quarter results. We are off to a good start with results that exceeded our plan. First quarter funds from Operation were $1.03 billion or $2.74 per share.
Speaker 3: Let me walk through some variances for this quarter compared to Q1 of 2022. The domestic operations had a very good quarter and contributed 15 cents of growth primarily driven by higher rental income.
Speaker 3: Our international operations also performed well and contributed two cents of growth. These positive contributions were partially offset by declines from the headwind from a strong US dollar of two cents, higher interest rate expense of five cents.
Speaker 4: lower lease settlement income of $0.06 compared to Q1 of 2022. And we had a mark to market gain on publicly held securities of $0.06 for the quarter.
Speaker 4: and a 13 cent lower contribution from our other platform investments compared to Q1 2022. Let me walk you through some of that and remind everyone that for OPI results, we are generally on our plan. Please keep in mind, OPI was up against very tough comparisons.
Speaker 4: from last year's Q1, this quarter also includes one-time transaction cost from ABG's recent acquisition activity, JC Penney's deployment of their new beauty initiative and investments related to physical stores, IT and one-time reorganization expenses.
Speaker 4: all flowing through our FFO number. The retailer part of our OPI investments has seasonality associated with it generally with losses in the first quarter and the majority of our profit in the fourth quarter and should be modeled accordingly.
Speaker 4: Overall, we continue to expect OPI to meet our 2023 guidance. We provided at the beginning of the year, which is similar, which will be a similar FFL contribution that was compared to 2022. Now, domestic property and a line increased 4%.
Speaker 4: year over year for the quarter. Portfolio N-Y, which includes our international properties at constant currency grew 3.9 percent for the quarter. Our mills, malls and outlet occupancy at the end of the first quarter was 94.4 percent, an increase of 110 basis points compared to the prior year.
Speaker 4: Mills was 97.3% and TRG was 93.3% at importantly average base minimum rent was $55.84 per square foot an increase of 3.1% year over year leaching momentum continue to cross the portfolio
Speaker 4: More than 25% of our leasing activity in the first quarter was new deal volume. We're seeing strong, broad-based demand from the retail community, including continued strength from many categories. By the end of the second quarter, we expect to be approximately 75% complete with our 20-23 expiration. Retail sales momentum continued, reported retail sales per square foot reached another record in the first quarter.
Speaker 4: $1100 per square foot, a 6% increase. Good news is tourism is returning with our tourist oriented centers outperforming the portfolio average in terms of sales. Our occupancy cost at the end of the first quarter was 12%. We opened our West Paris designer outlet Normandy, France last week, our 35th International Outlet Center during the quarter construction restarted on our upscale outlet center in Tulsa, Oklahoma.
Speaker 4: The traditional secured mortgage markets continue to support the refinancing of our assets across geographies and property types. Our A-rated balance sheet is as strong as ever. We ended the quarter with $9.3 billion of liquidity. Today we announced our dividend of $1.85 per share for the second quarter, a year over a year increase of 9% to dividend is payable on June 30th of this quarter. Guidance for this quarter given the results of this quarter and our current view of the remains.
Speaker 4: excellent and brick and mortar stores are where shoppers want to be and even with the economic uncertainty we are running ahead of our internal plans.
Speaker 4: Excuse me here, I have some kind of frog in my throat, but we're ready for questions.
Speaker 2: Thank you very much, sir. We will now be conducting a question and answer session. If you would like to ask a question, please press star and then run on your telephone keypad. Please ensure to limit your question to just one question per analyst.
Speaker 2: A confirmation tone will indicate your line is in the question queue. You may press star and then 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys. One moment please while we poll for questions.
Speaker 2: The first question comes from Katelyn Burrows from Goldman Sachs. Please proceed with your question, Katelyn.
Speaker 5: Hi, good evening everyone. Maybe, regarding upcoming lease maturities and what that means for potential cash flow changes going forward, the ABR for 23 maturities is around $62 versus the portfolio overall at $56. So, would you think it's fair to say that the rest of the 23 maturities may face a headwind on renewal, but then the 24 maturities.
Speaker 5: which are 12% of rents and have an ABR of $54, have significant opportunity. I'm guessing it's not that straightforward. So wondering if you could discuss that rent maturity and mark-to-market outlook.
Speaker 4: Our renewals and new leases will add $570 million of basically gross rental income. In that is included some renewals which is the roll off of some of the numbers that you quoted. We are renewing above our overall, above our expiring rents. So even with that said, we expect to continue to have positive rental spreads even with the higher number for the balance of this year and certainly in 24.
Speaker 6: Is there anything that you could discuss with us on kind of price point, either luxury versus more moderate tenants, anything by region, you know, anything by product type, whether it's, you know, the mills, the outlets, uh, the traditional malls, you know, just looking for a little color given what we're going through and kind of what your tenants are telling you.
Speaker 6: was the strongest demand is and maybe to the extent that there are any weak spots, you know, what would you call out? Well, I mean, I know this is...
Speaker 4: open stores like that and all of those brands whether LVMH Group, Kaling, you know, Richemont, etc. They're looking at 23, 24, 25. We're making commitments. Nothing there is really abated. So all systems go on that front even though they're running up against laptops compared to Q1. You look at the restaurant category, very strong demand, lots of new deals.
Speaker 4: life-time fitness, you know, the best of the best. You know, shields, department store demand, bond hours happening. Then you look at the F. Weasier, Viori, Aloe, Lulu Lemmon, you know, all Brooks Brothers, you know, all of that pretty much cost them on, you know, we're seeing new stores. So um
Speaker 4: I said this at the end of last year, early this year, even though cops are going to be tougher this year in terms of sales compared to last year, the demand on leasing really has not changed. We're seeing the entertainment.
Speaker 4: So, you know, we feel, you know, it's, it's, it's, we're feeling very good. You know, obviously we're cautious. We don't expect sales like they were over 21 and 22. And we plan accordingly, but demand. We check every day and there's, you know, certainly a couple here or there that slow down, but nothing of nothing really no worthy. You know, the F North Face, Timberland, Cotton on they're all.
Speaker 4: You know, they're all growing and it's all pretty healthy.
Speaker 7: Great, thank you. Thank you. Thank you. The next question comes from Ronald Camden from Morgan Stanley . Please proceed with your question, Ronald. Great thanks. I remember last quarter we talked about domestic property and why growth.
Speaker 7: of at least 2% and you're thinking about looking at one two already at four. Just maybe can you give us an update how you're thinking about that number for the rest of the year. And looking at the guidance raised, how much is that property, core property, and a Y versus?
Speaker 7: maybe other factors. Thanks.
Speaker 4: Sure. Yeah, we're going to be 2%. And I would hope we would do at least 3 plus. I mean, there is some. It's very interesting. The first six months from a retail point of view, cost will be tough. But we think the second half for the retailers.
Speaker 4: We'll be more positive. Lots of economic...
Speaker 4: in the way we initially budgeted, we should be, you know, hopefully at least 3% if we have an uptick in sales, we'll do better.
Speaker 8: Thank you. Thank you.
Speaker 9: Thanks, and good evening, David. How are you? I'm doing well. So first, thank you for all the detail on the retailer platform and the emphasis on the seasonality that's helpful. My question is bigger. You guys seem to have a lot of positive trends.
Speaker 9: with the redevelopment program coming back, retailer demand healthy, obviously, some of your competitors are having trouble on the capital side, and strengthens your portfolio. So my question is, as you look over the next few years to invest incremental capital, is your focus still on the best returns or internal in your...
Speaker 9: in your existing malls and adding more densification, or are you starting to see some external opportunities where it may make sense to use capital, and whether that's domestically or abroad, sort of curious.
Speaker 4: Yeah, I don't see, let me do it in pieces with no particular order. I do see, I still do feel strongly that the best use of our capital is making our existing portfolio better and better. I think
Speaker 4: We have spent $8-plus billion over the last several years upgrading the portfolio and doing new development. So we continue to see that as our best...
Speaker 4: That's, you know, we have spent, you know, eight plus billion dollars over the last several years upgrading the portfolio and doing new development. So we continue to see that is our best use. I don't see.
Speaker 4: And as I mentioned in the call, we have a residential pipeline that looks really attractive and hotels.
Speaker 4: that are generating really good creative values of around 2,000 units. Now that's not going to happen overnight, but that's going to happen over the next few years. So that, to us, is a real opportunity.
Speaker 4: really good creative values, you know, of around 2000 units. Now that's not going to happen overnight, but that's going to happen over, you know, the next few years. So that, that, that is a real opportunity.
Speaker 4: I don't see much of our external capital doing any kind of acquisition opportunities internationally. I still think we'll grow.
Speaker 4: our international Asia outlet portfolio with redevelopment and new development over time.
Speaker 4: Essentially recycling the capitol, the capitol that we have there and a credom.
Speaker 4: recycling the capital, the cash flow that we have there in the creative new development.
Speaker 4: And, you know, we're looking at everything domestically here and nothing really has width. I think I could say this. We're at our whistle here to make us, I can say that, right? Okay, so nothing here that would... You said it.
Speaker 4: I said it to a good point. Nothing here that would really like, we're not jumping up and down to do external, you know, external transactions. So it's mostly the thing stuff that we've been doing.
Speaker 4: And you know, and just keep plugging away on that. And look, I do think we have to respect the capital markets.
Speaker 4: You know the capital markets are telling all companies to be more prudent to do more creative Investments and we are listening very closely to that Okay, thank you. Thank you
Speaker 2: Thank you. The next question comes from Vince Tiboni from Green Street. Please proceed with your question, Vince.
Speaker 9: Hi, good afternoon. I wanted to follow up on your comment regarding the 2000 residential and hotel units in the upcoming pipeline. Just curious how quickly you could start these projects, how much spend this could potentially represent. This is something that you're going to maybe do to join ventures or we'll be holding on to the balance sheets and any color on some of these points would be helpful. Sure.
Speaker 4: All right, so I think we will do selective JVs on certain of the residential.
Speaker 4: development. It also may be that we could potentially bring in third party equity too.
Speaker 4: So that would, you know, we'll look at each deal individually, but that's certainly a possibility.
Speaker 4: it's really probably a five-year build process.
Speaker 4: but yet we're...
Speaker 4: you know, frankly being a little bit cautious. We're, you know, we're still permitting some things in California. And, Analújosa has found a treeshopper and heOne
Speaker 4: And the Northwest, so we don't, we're going to just see how the world is, but we don't have to make a decision yet. And I would think at the end of the day.
Speaker 4: I'd rather Brian give you a more scientific number because a lot of these are part of redevelopments too. And so to really isolate the hotel, apartment, or rental stuff, I'd want to give you a number, but my instinct would be probably about $1.5 billion.
Speaker 4: But I think Brian can give you more detailed number, but somewhere in that range. And these go from Austin, Texas to Orange County, California to Seattle, some hotels in
Speaker 4: in Florida, some residential in Florida, multi-family. So it's kind of where you'd expect it to be where supply and demand is in our favor. But we're considering building a hotel in Cape Cod.
Speaker 4: You know, because we think there's a good supply demand imbalance there. So it really is...
Speaker 4: across and every, I think, generally, as we get that real estate through our redevelopment efforts.
Speaker 4: The big focus is on where we can add some
Speaker 4: some, you know, mixed uses because we do think like what we did in Buckhead.
Speaker 4: It's having a tremendous impact on the overall value of that real estate. So not only does it, is it a creative from a value point of view just on...
Speaker 4: the cost to the return on the bill versus what the value that is after it's built, but also the residual benefits that we see from the mall.
Speaker 4: That's a complicated one. We are worth, that's a complicated one, but where every day we make progress. So it's terrific real estate, very complicated transaction, but we continue to make progress, but no final decision has been made to do it, but I expect one to be made over the next few months. Great, thank you. Thank you. Thank you. Thank you. The next question comes from Craig Mailman from City. Please proceed with your question, Craig.
Speaker 7: Thanks. It's actually Nick Joseph on here with Craig. David, just on executive comp and the $24 million one-time cash bonus related to OPI, I know at least one of the proxy analysis firms has raised some concerns on it. So I was hoping you could give us more color on OPI but because OPI is jumping on157. Sapphire Written for new version
Speaker 4: So, could rationale behind it in terms of the amount and the structure of it that had a devolverator this week? Yeah, look, I think this was...
Speaker 4: You know, essentially paid 23, 24 executives last February , so about 15 months ago.
Speaker 4: fully disclosed in an 8K. Our rationale and reasoning by the COP committee was fully disclosed in our file proxy, as well as a supplemental letter to our shareholders.
Speaker 4: Why this? Why that? But if you look at the history of the company, you look at executive comp, you look at our stock program, you look at our burn rate, you look at our GNA as a function of our NOI or our asset value, we are at the lowest of the low. Anybody can pick out one particular number they don't like, but if you look at it in totality, we are absolutely proud of it.
Speaker 4: you know, how we run this business. If you want to get more detail I encourage you to talk to the head of our comp committee or our lead independent director. Amy shareholder can do that. But I would encourage everyone to look at the totality of our history and then come to whatever conclusion they think and work.
Speaker 4: We're very happy to talk to anybody that would like to go through it from a shareholder point of view.
Speaker 2: Thank you. Thank you. Thank you. Thank you. The next question comes from Greg McGinnis from Scotia Bank. Peace be with you, Christian Greg.
Speaker 9: Hey, good evening, David. I just want to make sure that I understand that 570 million gross rental income number that you mentioned. Is that new and renewal leases? Is it on a pro-rata basis inclusive of international and DRG? How much of that I guess is incremental to in-place rants?
Speaker 4: all of it, and then what's the time frame that you're contributing? All terrific questions. And, you know, we highlighted that just to give you a sense of the
Speaker 4: The scope of the business that's going on here. So that's a huge number that that's just one lease You know one level of activity and the year and it's bigger than some companies that you know that exists today So let me try to unpack it. It does include renewals. It's just FGG. It's just somatic
Speaker 4: And if you look at the renewals and the new business, there's a really good uptick from kind of the inflation income on that. And that will come in not really this year, but over 24 or 25. Those stores get open. And...
Speaker 4: I think it just adds a sense of our future growth that we see in front of us from our existing portfolio. But I'm not in a position to break it out between renewals and new incremental business, but you'll see that flow through the NOI in the upcoming quarters.
Speaker 10: Okay, so it is both though, because you mentioned $100 million of new income last quarter, of 2 Queensland Brokersges.
Speaker 4: Correct. Okay. It includes both. Correct. Thank you. Thank you.
Speaker 2: Thank you. The next question comes from Derek Johnson from Deutsche Bank. Please go ahead with your question, Derek.
Speaker 11: Hi everyone, good afternoon. Occupancy is now at 94.4% and that's just 70 bps below pre-pandemic levels.
Speaker 11: given the leasing demand we've discussed, how is the team weighing occupancy versus rates now that the gap is so narrow?
Speaker 4: The good news is that when we're, you know, and again, every lease is different, every relationship is different, you know, rollovers, you know, some rollovers go down, but I would say generally speaking, you're like…
Speaker 4: We are finally seeing renewals that are
Speaker 4: overall above the expiring rents. So that...
Speaker 4: And part of that is just supply demand is in our favor. And we are getting, you know, because one is...
Speaker 4: I think from the retailer's point of view there's a real appreciation for bricks and mortar. One, two is they know where a...
Speaker 4: landlord that they can rely on and that we're going to do the right thing to maintain and reinvest in these properties and we have the capability of doing so. And generally there's more demand that we're seeing and the retailers are in...
Speaker 4: having survived COVID or in better shape and want to grow their business.
Speaker 4: I can't guarantee it, but I am hopeful that we will beat that number, you know, certainly in the next 12 months.
Speaker 4: assuming we can continue to maintain reasonably decent economic conditions.
Speaker 4: we can continue to maintain reasonably decent economic conditions. All right, thank you. Thank you.
Speaker 2: The next question comes from Flores Fundicum from Compass Point. Please proceed with your question, Flores.
Speaker 12: Thanks. Good evening, guys. David, so maybe if you can give us a little bit more of an update. I know in the past you've talked about your sign-not-open pipeline being around 200 basis points. Your leased occupancy just increased by 110 basis points. Is that S&O pipeline relatively similar? At this point, everyone would be satisfied if you guys got over a million errors.
Speaker 12: And then maybe, I mean, if I look at the base rent going up by 3.1% approximately, and if you get about 10% of your space back, I mean, it assumes, you know, pretty healthy releasing spreads if my math is correct. I mean, how should we be thinking because politically…
Speaker 12: it appears that leasing spreads are accelerating in your core business.
Speaker 4: I think that's a fair statement and I would say that the pipeline is similar to what it's been.
Speaker 4: We're still hanging around 200 basis points at this point in the year.
Speaker 4: So I do think it's...
Speaker 4: You know, as we've been saying over the last few couple quarters, I mean, we have finally turned a corner on
Speaker 4: lease spreads, demand, better properties, more commitments.
Speaker 4: from lease spreads, demand, better properties, more commitments from retailers.
Speaker 4: and more retailers wanting to open stores, all driving pretty good demand, which allows us to get the spreads that we were accustomed to. But we were flatlining pre-COVID. Obviously, we got...
Speaker 4: We got hurt during COVID and we bounced back nicely. And so from that standpoint, it's good to see. And if I can maybe follow up, David, on Jamestown. And you mentioned external capital.
Speaker 12: How are you thinking about how's the Jamestown acquisition betting in and is that potentially a source of external capital that you can bring into some of that the apartment or hotel investments and or how are the synergies between those two businesses working out and particularly thinking like Atlanta with the street retail right near your
Speaker 4: You know, several reasons, but a couple of highlights here. One is they're really good asset managers.
Speaker 4: Two is they have a development capability that's very interesting to us and they have excellent institutional relationships.
Speaker 4: And we think with our partnership we can grow that business. We did not other than there is a big...
Speaker 4: future development, master plan development that they're working on in Charleston, where we did partner with them directly.
Speaker 4: We did not buy any of their existing real estate that is owned by the various funds, whether it is the German funds or the Premier fund. Jamestown is in the process of raising their 32nd German fund.
Speaker 4: They have a lot of separate account and interests.
Speaker 4: It's really good for us because we get to learn those institutional investors better and more. And I just think we're early days there, but I think the thesis that we had going in continues to leave us data from past generations until day one and it's been certainly a very solid
Speaker 4: to be very, very valid. This is a long-term relationship that I think will grow.
Speaker 4: You know, eventually I see us partnering with institutional money that will be managed by James Down that will partner with us to build XYZ or by XYZ or you know, build a...
Speaker 4: You know, a big community in Charleston, you know, more Charleston. So yeah, I think all of that...
Speaker 4: elements of potential growth with Jamestown are out there. We do like the asset management business as a platform. We gift our toe into it.
Speaker 4: elements of potential growth with Jamestown are out there. We do like the asset management business as a platform. We dipped our toe into it, but I think
Speaker 4: Again, just as we look at the landscape for real estate owners and managers, we think when we look at a Blackstone, when we look at a Brookfield, obviously they own, they can do everything that they manage.
as we look at the landscape for real estate owners and managers, we think when we look at a Blackstone, when we look at a Brookfield, obviously they own, they asset manage. For us to have some
scale or some role in that business I think ultimately will be a nerd to the benefit of Simon Property Group and that's what we're after.
Thanks, David. Thank you. The next question comes from Craig Schmidt from Bank of America. Please proceed with your question, Craig. Thank you. Given the seasonality of the OPI business, how do you see the future of the OPI business?
Which quarter do you expect that number to turn positive? I think it will be, Craig, you know about retailers. So just to reinforce, the retail part of the OPI, remember the vast majority of the OPI.
Just important to put it in context.
So the retail part the pure retailer part penny and spark is seasonal
Last quarter Q1 of 22 was just stimulus, whatever, was a really tough comparison.
for the retail, retailer part of OPI.
With that said, we expect it to be profitable in Q2 and Q3.
it will, we expect it to be profitable in Q2 and Q3 and
You know, but the vast majority of it will be Q4 like all the other retailers.
So when you see retailers, you know, report this quarter that are public, I think generally you'll probably all have tough comps against Q1 of last year.
yet the cops get a lot easier. This is a lot more information for a business that's, we have no cash investment remember, and it does create a little volatility of our earnings for better or worse. In this case this quarter it's worse, fourth quarter it will be much better. It does create a little volatility, but...
You know that it'll you'll see it map out part of that OPI map out Just like other retailers where the loss will be in Q1
profitability in Q2 and 3 and then you know 70% 55% and Q4.
Thank you. Thank you. The next question comes from Juan Sanabria from BMO Capital Markets. Please proceed with your question, Juan. Hi, good afternoon. I'm just hoping to get a little color on the month-to-month leases.
They've picked up from about 4.5 to 7.5 percent sequentially in the first quarter while you did a fantastic job chopping wood and reducing the rest of the 22 expirations. But just curious on why the increase in the month to month, what's going on behind that. Yeah, one of the comments I made was we expect to be
basically 75% by the end of Q2. It's just a process. It's just, you know, we're negotiating, the retailers are negotiating.
You know, the stores are open and operating, but you know, it's just a typical drawn out process that is the so to speak, the art of the negotiation, but a lot of that's already handshake committed to that we're just going through and processing now.
If you look at it, it's normal seasonality of that line item at this point in time of the year.
Great, that was my follow-up. Thank you. Thank you. The next question comes from Mike Muller from JP Morgan. Please proceed with your question, Mike.
Thanks. I was wondering, has there been any notable change in lease duration for what you're signing so far in 2023 compared to last year?
Not really. Not at all. Okay. That was it. Thank you. Thank you.
Thank you. The next question comes from Tandal Jussef from Nizal. Please proceed with your question.
Hey, good evening.
Dave, I think earlier you mentioned that new leases were 25% of the volume in the first quarter. I guess I'm curious if that's why CapEx picked up 8% in the quarter, and if this is also a new versus renewal leasing you should expect in your term. Thanks.
We have a tough connection. Did you guys hear that? Can you repeat your question please? You kind of broke up a bit. David I think you mentioned earlier in the call that new leases were 25% of the deal volume in the first quarter. So I'm curious if that's why CapEx was up, I think 8% in the first quarter. And also if this level of new leases, 25% or so.
Would be kind of the right way to think about new versus renewal leasing going forward. Thanks Yeah, I think I guess on the on the TA line there is some we are doing more deals So there is probably more TA associated with it. So
be kind of the right way to think about new versus renewal leasing going forward. Thanks. Yeah, I think I guess on the TA line there is some, we are doing more deals so there is probably more TA associated with it so I'm not sure, you know, the capex
I still had a hard time on the last part. Did anybody hear it? No, we didn't hear it. Unfortunately, we didn't hear it, but if you want to call back, we're happy to answer that. Thank you. Moving on to the next.
you know, pre COVID and if it should return to that normal level, what does that mean for Simon Simon's NLI or earnings, however you want to look at it?
Well, I would say generally speaking, you know, we, you know, just to give you a sense, our sales for our tourist properties that we identified was up 8% quarter over quarter, right? Generally. Yep.
So the bottom line is it is really going to result in overage rent that we've probably flatlined more or less on those properties. So you know that and that will manifest itself once we reach the break point so later in the year. But you know we're seeing, we're starting to see.
You know, I mean like Vegas, you know, where are tourist properties? Florida, which has been pretty strong, but we're seeing more and more international tourism there.
Woodbury here in the New York area. I say here, I'm in Indianapolis, but in the New York area is really starting to see a lot more international tourism. California has been kind of the weak link, but we're starting to see more and more...
sales there and then Vegas is just going crazy. Vegas, you know, we have really important exposure in Vegas between Forum, Crystal, our two outlet centers. Vegas is as good as it gets.
the casinos, what's going on with the city, the movement from California to Nevada.
All of the football, baseball, sporting activity, Formula One, it's a great place to have.
You know a lot of retail real estate. We're seeing real benefits of that. So this will manifest itself in the fourth quarter as we're seeing that but you know as we reach the break points but we're finally seeing the international tourist come back to the states.
A little weaker dollar helps and obviously all of it. I think finally you don't have a vaccine card or whatever is required to come here. All of that is kind of yesterday's news as of today or yesterday. So
I think we're finally starting to see that come back, like it was pre-pandemic. Okay, and a quick question for Brian . You guys have a pretty healthy cash balance of over a billion dollars, yet you still carry a balance and a revolver.
I'm sure there's a pretty logical, simple answer to this, but it's true. Yes, that's exactly right. The outstandings on our wall were denominated in Euros and they serve as a net investment hedge against our asset base in Europe . We do have a heavy, sizable cash balance as we did our offering earlier in this year and pre-funded the balance of our unsecured maturities for this year.
Michael.
Good afternoon. Thanks a lot for taking my question. David, your base minimum rent growth is accelerating. If a nice SNO pipeline, you're talking about blowing past your 2% and a wide growth guidance for the year. All sounds great. I guess the question is, how sustainable is this algorithm? How long can it continue? And what are the factors that are ultimately going to work?
but, you know, supply and demand is in our favor.
You know, I think our spot in our industry is
well established, we have the confidence with our retail partners, we know what we want to do with our properties, we're not, you know we don't bat a thousand, we make mistakes all the time, but we know where we want to position them.
So I hate using kind of this, but itís really going to be the external environment that could slow this down, meaning what happens, do we do a recession or that. And I honestly think some of these markets are, when people ask me that, I actually think if we do go into a recession itíll be quote this kind of regional recession.
So if there is one.
You know, we've always heard, well, it's going to be a regional one. This one might be one, but who I just, I really don't know, but I think that's...
What slows us down? Obviously we do have some headwinds with higher interest rates. We do have debt maturity at low rates that are all over. We'll cost us some growth. But we just have to kind of go through that and deal with. Thank you very much.
slows us down. Obviously we do have some headwinds with higher interest rates. We do have debt maturity at low rates that will roll over, will cost us some growth. But we just have to kind of go through that and deal with it. Thank you very much. Thank you.
The next question comes from Linda Tsai from Jefferies. Please proceed with your question, Linda. Hi. How do you think about the longer-term growth profile of the OPI business versus growth in overall portfolio NOI?
You know, do you think the OPI business requires more consistent investment before it generates more stable returns?
Well, I think you have to look at it, the individual investments and
Like for instance, Authentic Brands Group is a growth machine. They're buying brands left and right. They're buying Billabong. They're buying Vince. They've got a huge pipeline. So I really see that company growing, growing, growing.
Spark and Penny are, you know, Spark is opening new stores, getting better at e-commerce, getting better operating. I'm sure over, you know, they added Reebok to its portfolio last year. That still hasn't been fully integrated. So.
You know, I expect you put that growth to accelerate in 20 the latter half of 23 and 24 You know RGG which includes rule a lot of guilt and importantly Shop premium outlets remember we contributed that to that joint venture
Shop premium outlet is on fire. We're growing our GMV By leaps and bounds. I really think you know this was an idea we had
years ago we kind of got it off the ground, maybe not quite as good as Wilbur Wright, but we got it off the ground. We merged it into RGG and it's really rocking and rolling. We're signing up good retailers all the time. That's got a great story to it. When you get the hall.
And we have some smaller investments in that. So I think I see a real growth pattern in all of those. Penny is reinvesting. I think Penny has found its mojo. It's getting better brands in the store. We're making the stores look better. It's got growth and beauty that's investing.
You know, the retailer side of OPI has a little more exposure to the economy because, you know, retail just does. But I think they all in their own right have their own growth story.
But you know what, we're economic animals to the extent that we think we get fair value. We've got lots of opportunities to invest in our company or other transactions that will add value. So we look at these very clinically.
And I just remember we've created a lot of value here.
with very little capital. And what's amazing is that our earnings now.
which is a good sign because it means it's earning money. And given the small investment, it's been – if you just want to look at return on earnings, return on investment, it's been outstanding. So very proud of it.
And you know, which is a good sign because it means it's earning money. And given the small investment, it's been, if you just want to look at return on, you know, return on earnings or return on investment, it's been outstanding. So very proud of it, very profitable.
Not our core focus yet. I used the executive team here to leverage our capabilities, intellectual firepower.
to make those companies better and I think we've done a pretty darn good job and we've had good partners.
across the board so we've done it in a very prudent way and it's been it's been very it's been very
beneficial for us and I expect growth to continue. You know, I'll have more ups and downs, won't be a straight line, but I have, I expect more growth from that category. But at the same time, you know, I think we're going to have a lot of growth.
10 years from now or five years from now we don't have to own any of these companies. Thanks for that and then just a follow-up. Do you have a sense of how much mixed-use development could become as a percentage of portfolio NOI? Could you give us a sense of what that might represent today? It's not very big today. What is it like 3-4%?
should.
I should try to strive to get up there if we can do it accretively in the 7-8% range. But that would be roughly $500 million.
So it's not, it's going to take time.
So it's not, you know, it's not, it's not, it's going to take time. Yeah. Thank you. Thank you. Sure. Thank you.
Thank you. The next question, the final question comes from Handel Jister from Mizzou. Please proceed with your question. Hey there. Thanks for letting me back in. I wanted to get to the second part of my question, and then I have one more. So the second part of my earlier question was, if you are expecting new lease volume to be about 25% of the overall leasing volume as they were in the first place.
I'm curious if you're seeing similar trends at your properties, and if you think that's a reflection of the consumer, and if that's coming up in lease negotiations in the current environment. Thanks.
Well, yeah, I'm glad you asked that because we keep track of that ourselves. And just to give you March over March 23 over March of 22,
We are 105.5% for malls, 105.6% for mills.
at 120.2% for outlets for 108% above last year this time. And January and February were actually much higher month over month. So for our portfolio we're above traffic is above.
where it was this time last year. Year to date, month to month. Okay, thank you. Thank you. Thank you.
Thank you very much. There are no further questions at this time. I would like to turn the floor back over to David Simon for closing remarks. Thank you, sir. Okay, thank you, and I appreciate the questions and we'll talk soon. Thank you. Thank you very much, sir.
This does conclude today's teleconference. You may disconnect your lines at this time and thank you very much for your participation.
And and that.
bona-