Q2 2023 Simon Property Group Inc Earnings Call
Greetings and welcome to the Simon property Group second quarter 2023 earnings Conference call.
At this time all participants are in a listen only mode a.
A brief 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.
It is now my pleasure to introduce your host Mr. Tom Ward Senior Vice President of Investor Relations. Thank you. Mr. Ward you may begin.
Camilla 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 It Brian Mcdade, Chief Financial Officer, and Adam Wright, 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 or.
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 are available on our IR website at investors that Simon Dot Com Our conference call today will be limited to one.
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 Good afternoon, I'm pleased to report our second quarter results.
Second quarter funds from operation were $1.08 billion or $2.88 per share.
I'll walk through some variances for this quarter compared to Q2 of 2022.
Mystic and international operations had a very good quarter.
And contributed eight sensor growth, primarily driven by higher rental income high.
Higher interest income and other income of four cents.
The higher interest expense cost us eight cents in the quarter over quarter comparison.
A five cent lower contribution.
From our other platform and our investments in publicly held serve securities compared to Q2 2022.
So from a real estate business was $2.81 per share in the second quarter compared to $2.78 per share in the prior year period.
And year to date that comparison is $5.65 per share and 23 compared to $5.58 and 22, our real estate business is performing ahead of our plan.
And overcoming the headwinds from higher interest expense.
And we're also pleased with our OPI results in the quarter and continue to expect the business to meet our original 2023 guidance, we provided at the beginning of the year.
We believe the market value of our O P. I platform is approximately $3.5 billion or roughly $10 per share, we generated $1.2 billion and free cash flow in the quarter.
And $2.1 billion year to date domestic property NOI increased three 3% quarter over quarter and three 6% for the first half of the year portfolio NOI, which includes our international properties at constant.
Currency grew 3.7% for the quarter and three 8% for the first half of the year, our mall and outlet occupancy at the end of the second quarter was 94, 7% an increase of 80 basis points compared to the prior year.
The mills occupancy was 97, 3%.
And T. R. G was 93, 7% average base minimum rent for the malls and outlets was $56.27 per foot an increase of three 1% year over year.
This is an all time high for BMR and the Mills ran increased 4.33% to an all time high of $36.02 per foot.
Leasing momentum continued across our portfolio, we signed more than 1300 leases for more than 5 million square feet.
For the quarter and we're up to 11 million square feet year to date, we have a 1100 deals in our pipeline, including renewals for approximately $470 million and occupancy cost more than 30% of our total lease out activity in the first half of the.
Year was new deal volume, we continue to see strong broad based demand from the retail community across many categories reported retail sales per square foot in the second quarter was $747 per.
Foot for our malls and outlets the mills at six.
$677 per foot. We also hosted our second annual National outlet shopping day in June was very successful for shoppers and participating retailers, we generated more than 3 million shopper visits over.
That weekend feedback has been great. We're also excited to continue to build on this annual event and we expect it to continue to get bigger and bigger each year turning to the balance sheet. We completed the refinancing of nine property mortgages during the first half of the year.
<unk> for a total of $820 million at an average rate at 6% our balance sheet is strong we have $8.8 billion of liquidity.
Today, we're proud to announce our dividend of $1.90 per share for the third quarter. That's a year over year increase of eight 6% the dividend will be payable on September 29.
We have now paid over $40 billion in dividends since we've been public we're increasing our full year guidance of 2023 from $11.80.
Per share to $11.95 per share to 11 85.
And respectively at 11 95.
Per share. This is an increase of five cents at the bottom end of the range and two cents at the midpoint.
Now, let me give you food for thought.
If I may we have built a world class ports.
Portfolio over a long period of time since we've been public.
Following our debartolo transaction in 1996.
Our portfolio consisted of 119 malls and 65 strip centers, primarily in the Midwest. Since then we have acquired 220 properties.
Well up more than 50 and dispose of approximately 250 properties of the original 184 properties in 1996.
37 remain in our core portfolio today.
So our high.
Proto productive portfolio as a result of constant asset rotation.
Finally, let me conclude by saying our business is performing well and as head of our internal plan tenant demand is excellent occupancy is increasing.
Base minimum rents are at record levels property, NOI is growing and again, beating our internal expectations.
We said at the beginning of the year and we are now operator, we're ready for your questions.
I will be conducting a question and answer session.
I'd like to ask a question. Please press star one.
<unk> on your telephone keypad.
Your line is in the question queue.
You May press Star two.
A question from the queue.
For participants using speaker equipment.
Sorry to pick up your handset before pressing the psyche.
For questions.
Okay.
Thank you.
And our first question comes from the line of Mr. Steve.
With Evercore ISI. Please proceed with your question.
Hi, Thanks, Good afternoon David.
Steve.
Good I just wanted to follow up on your leasing comments in the pipeline everything sounds really good and maybe even getting better as the year unfolds. So you know where do you ultimately think that occupancy in kind of the the mall portfolio can ultimately settle out and are you seeing an accelerating trend in <unk>.
Pricing power across the portfolio.
Steve first of all I think we will be north of 95% by year end.
And you know I wanted to see I I don't like the word pricing power so much.
You know I think.
Our asset rotation that I mentioned earlier.
<unk> has allowed us to create kind of a.
You know a portfolio, that's really unrivaled in our industry.
And given our strong tenant relationships were.
In a good spot to find kind of a win win that that.
It has to happen when you least as much space as we do.
Hum.
Physical environment.
Terms of bricks and mortar.
Sales is as important as ever.
That's been reinforced by.
Essentially every retailer and anyone that's in the E Commerce business all.
Look to that I think there was obviously a long period of time, where.
Many felt many of the pendants felt that bricks and mortar just don't matter. That's a you know they are.
The furthest thing from the truth, so weak we continue to think our.
Yeah, no rollover by and large is going to be positive and we have the ability now with new tenant demand to replace retailers that.
You know aren't producing sales and which will allow us to generate higher rents. So I do think we're pushing up.
Rents I think we're doing it hopefully thoughtfully.
By and large and we expect that trend to continue.
Thank you.
Thank you and our next question comes from the line of MS. Caitlin Burrows with Goldman Sachs. Please proceed with your question.
Hi, everyone. David you gave those details on the asset rotations since 1996, So I guess, that's making me wondering I'm guessing everybody else should that be a suggestion to us that you're looking to get more active in asset recycling kind of near term medium term acquisitions dispositions or was that just more a comment on.
Simon historical strategy.
Well I would say.
We've been very active right. So I think.
I think yes.
Because of our size it does get lost in translation that you know we're always.
You know recycling and always looking to improve the quality of the portfolio. So I would think our trend.
Would continue.
<unk>.
In that sense, and well always recycle assets.
We find to the extent that we can do that.
And generate more liquidity, we find are not just it's it's every asset that we have to the extent that we think theres a good trade to do whether it's a.
You know to sell or to buy we're going to we're going to pursue that.
And I think it's it's been an important component of our success over time.
Same time, we've done it.
Uh huh.
As we all know we've done it in a way.
Where others have done it in a way too.
Generate the quickest short term returns through a lot of leverage.
You know we've done it is as.
As anyway so.
That's been that's been another key component of our ability to to grow yet recycles. So.
I don't think I'm signaling that signaling.
But maybe you know you have these epiphany so maybe.
You know, maybe maybe it's possible right.
That you know.
There'll be some will be more active on.
Reallocating capital to.
Ah different assets that we have today.
Yes.
Thanks.
Thank you and our next question comes from Alexander Goldfarb with Piper Sandler. Please proceed with your question.
Hey, good afternoon down there David and also thank you for for moving your cost to avoid an overlap I appreciate it.
So question there was a recent press article and and not that article not.
Which I'll, let you opine if you want but just talking about luxury sales and my question is this we all look at luxury is sort of like the ultimate driver of retail and yeah. If you will but my question is really you know given how customer preferences have changed lifestyle people.
Changing how they live.
Sort of curious when you look at that.
Tenant landscape are there any sectors that you would say are now you know I guess going back to Caitlin.
Early nineties.
Example are there any sectors now where you're like Hey, 2030 years ago. In this sector was nowhere and now it's 20% of retail or it's the absolute must have and I'm just sort of curious if luxury is still sort of that dominant place in retail or if it's more niche and it works in certain malls, but for the bulk of what really.
Drives your cash flow to the bottom line, maybe it's other sectors I'm just trying to understand how the face of retail has changed using your analogy of over the past 30 years, what the company looks like that in the Midwest versus now.
Look I would say unquestionably the.
Some of the best retailers in the World.
Like carrying or an L. B M age group.
Had the best brands and they.
Do the most volume they build the best stores.
They think longer term.
You know over.
Longer term over any retailer that we've ever experienced their true to their business.
So.
We admire what they do we admire how they build their brand we admire all day they maintained their brand they have loyal customers. So there is no better companies to do business with.
That believe.
And we we aspire to be more like them, then than anything and I think.
How you know how they maintain their stores and how they treat their customers and.
And how they're treated themselves so the luxury business.
Yogurt is growing is really important.
It's.
It's worldwide.
A great consumer that loves physical retail.
That wants to go shop, and do other things at the at our centers. So we wanted to do as much business as we can with them.
There are.
You know they are still very focused obviously sales have flattened a little bit compared to Q2 of 'twenty two.
And and and but but if you look at where they are in and Tom.
Brian I don't know off the top of my head, Alex but they can wear 2030, 40% above where we were in 19, but I don't remember the exact.
<unk> number but they can they can give to give it to you later so.
You know one of the interesting things is LTM age group and.
I really you know if you look at our 8-K there.
They're now our top and our top 10 tenants, we couldnt be more.
Our proud of that relationship and the brands that they're that they have so.
This is not a niche business. This is a growing business it's for exactly.
The affluent shopper the established.
Shopper, but also the affluent shopper.
And the fact that we're you know we do so much business with them is something that we're extremely proud of and we will.
We will.
I don't like the word lean in but.
We will do as much as we can do.
You know to continue to foster those relationships.
And that is a huge differentiating point that.
That we have with Simon property group so.
Where where they're headed because.
You know, we think there's great business to do together.
[noise] I hear Ya I b.
Oh, sorry, I talked with another question.
No I think Tom said and federal is right. After you guys. So I thought my Mic was already cut so I didn't know you're not gonna get we're getting we're only kidding.
We'll talk to you later thanks Alex.
Thanks.
Thank you.
Next question comes from the lineup.
With Green Street.
With your question.
Hi, Good afternoon could you discuss the current red between least in physical occupancy and then kind of keyed in and what visibility.
Four openings, releasing them and executed but are not yet open.
The visits Brian we're still hovering right around 200 basis points of of unopened that ebbs and flows as you might imagine every month given you know the velocity of our business. We do think we're gonna carry that through year and and certainly we do expect that we're going to continue to see openings throughout the balance of the year you know as <unk>.
Taylor's open late later this month and into September and October .
And and I would tell her that.
I would say just follow up on that Vince is that you know a lot of the business that we.
You know have signed leases on and or about to be signed is.
Still and I don't I mean, we can give you the exact number I'll have it again at the top of my.
At the top of my tongue, but Ah the tip of my tongue, but.
There is a lot of the business that we've signed or about to be signed.
24, and even twenty-five business.
And especially.
You know when we're in that we're talking to the restaurant business.
Oh, you're talking nine months filled out you're talking permits that.
That are required to get you know, it's a little more complicated getting restaurant permits liquor license et cetera, we've got some great restaurants going into form Crystal Stanford vulgar.
But you know you're literally talking about a year.
To get permitted get opened.
To some extent some of this was delayed also with just equipment because of the.
You know COVID-19 and the and the.
You know all of the all of the supply chain issues associated with it so.
And again, you know when you're talking about are full price business build outs or longer.
Then you know then the outlet or the mills business. So the.
Pipe on that sense is pretty good not and and not too which is not in the.
These numbers, but we also on that front have boxes.
That you know.
That are you know schedule to open in 2425 that is you know obviously serious long time.
Well, you know a year plus build up.
And a lot of business with our Dicks Prime arc.
Lifetime fitness et cetera that.
You know, even Barnes is doing new deals.
We were building a new store with cold you know <unk>.
Stuff that just takes time found mauer shields.
Shields et cetera, even though they just recently opened in Wichita to a to a great opening which is one of our 37 by the way just Ah just for fun fact.
So you know the build out it's frustrating in that it does take time.
But you know, but it's but it so we still expect some some.
Really interesting things to happen in 24 25 as.
These.
These tenants open and remember.
And a lot of cases.
The more interesting the retailer or the longer the build out there is a correlation there.
Yeah that makes sense. That's all really helpful call I. Appreciate that my next question I was I was hoping you could discuss how demand today by retail format retail format and geography I'd be curious to hear any in between.
Malden outlet and also between gateway market them in suburban centers.
Simply I thought you know as I go back in time I think the.
You know and I'm trying to go through Covid.
I think the demand in the outlet business has.
Picked up more.
[noise] slower to pick up.
Then the mall business and I think it's finally picked up to kind of where the mall business has been.
So I think demand from a product type is kind of even the hell.
And that's not to say malls has slowed.
Down it's just that the outlet took a little bit.
Longer to pick back up.
Mills was somewhat unabated and that and as you know, it's it's a combination of any at all.
Ah regionally.
By and large.
The.
Superregional suburban sites are.
Have a high level of interest across the board, we don't have a lot of.
City Center stuff. So it's we're not the we're not the right guy to ask but I am happy that our portfolio is positioned in the.
You know the you know the the high catchment areas and that you know in the suburbs.
And then finally regionally.
As you might imagine.
Where you're seeing population growth.
Texas, Tennessee, Florida.
Those kind of places you know, we're seeing a little bit more of the size.
And.
But again in real estate.
You know.
You could still have the best location in you know kind of a micro environment that does unbelievably well because.
It still is the center of attention. So you gotta be careful in these geographic.
Trends, one way or another it really is as we all know real estate is <unk>.
Very location oriented, but I would say those are just kind of generic trends.
Hasn't changed all that much.
But the suburbs continue to be.
You know as we said a few years ago Ah well ahead of most.
We still felt like that was the that was the place to be and we're happy to see that.
Not that we make a lot of predictions, but we're happy to see that prediction at least one of them came true.
Great. Thank you. Thank you.
Thank you.
Ronald.
Morgan Stanley . Please proceed with your question.
Great just one one quick one just thinking about the growth function of the business you talk about getting a 95% occupancy by the end of the year, obviously that that annualizes in 2024.
Think about the occupancy boost the rent bombs, releasing spreads it doesn't seem like a stretch to get two or 3% plus number next year.
And grow so I'm trying to understand what are some of the moving pieces. We should be thinking about is we're building out the growth function of the business and 24.
Well I I think it's all you know, it's all of the likely suspects its lease up it's.
Renewal spreads its new business, obviously, it's overage.
Or percent sales and sales activity so.
There's nothing new there I mean, it's all the stuff that has allowed us to go to.
To grow our.
You know our comp NOI over a long period of time through a lot of volatility COVID-19.
Research real estate Recession's E Commerce proliferation of this that and the other.
So it's all of those likely suspects I mean, I think we feel.
Generally positive about our economy grow comp NOI.
But it's all the likely suspects and it's all the same.
No metrics that we have to we have to produce to generate that.
And we still have the ability even as we get up to 95%.
Thereabouts, we still have the ability to.
Which we can't lose sight of we have the ability to replace.
Retailers with with with better ones that will.
You know just common sense will be able to pay higher rent cause there'll be more productive.
It's really that simple so.
But.
Ron It's all the same stuff and you know.
And we're focused on hitting all of those cylinders.
Certainly to finish this year, but also in 2425 and.
The added benefit that we have in 2425 is that we've.
Got a lot in the pipeline that will finally <unk>.
Finally open.
Helpful. Thank you sure.
Thank you and our next question comes from the line in Florida.
Right.
Please proceed with your question.
Alright, Thanks, Hey, good afternoon guys.
I had a <unk> and unfortunately I have to limit it to one so I won't focus on the not less important opi's stuff, but but maybe if you can talk a little bit more about the 200 basis points of signed not open presumably that's higher in your mall portfolio than your outlets and.
Maybe if you could also quantify in terms of dollar amount or NOI impact I I know that a lot of those leases and that S. I know, there's a lot of luxury tenants, which typically pay significantly higher rent. So presumably it has a greater impact on your on your your N.
<unk> then then you're you're you know then the percentage just in terms of occupancy.
Look we don't want to get into that level of detail. We certainly will for 20 fours week outline what our company why growth is but you're you're 100% right that the the you know it is much easier and quicker to open an outlet store.
The build out.
Can be anywhere between 30 and 90 days in the mall generally can be six months plus.
And then when you get too complicated.
Tenants or.
Where the build out as expensive you are talking nine months plus restaurants in that area. So.
But we do you know when it goes back to I think Flores you were you were one of the original.
Analysts that was very focused on when we're gonna get back to 19 <unk>.
Levels.
And you know I'm happy to say that we will be back we better be back okay, but we will be back in.
They're in and.
24, and a lot of that really at the end of this year, we annualize it.
So.
It really is a function of getting those retailers open.
But the specific numbers I mean, all if if the guys Wanna talk offline and go through it I'm certainly happy to do that but that's it I think it's better answered.
As we go through 24.
Comp NOI plan with you you know early next year.
Thanks, David sure.
Thank you.
Question comes on the line.
<unk>.
Okay. Please proceed with your question.
Great good afternoon.
Follow up question, David on your comment on <unk> potentially allocating.
Money or investments into other assets I mean, you've been doing that really since world financial crisis investing in the best properties, you've been densifying assets with apartments et cetera.
Is there anything else that you were thinking of changing that you've noticed a change let's say between the <unk>.
The difference in the asset you own or what you're seeing out in the retail landscape or you're really sticking with those programs as well.
I think I think Jeff, we're gonna more or less stick to our programs but.
What we've done historically I think it's it's.
You know it's been the right strategy.
Will knickknack I mean, we're we've we've had we've.
We've had good experience.
By and large not perfect, but good experience.
Experimenting here and there, but our core business is <unk>.
High quality retail real estate, we're not moving away from that by any stretch of the imagination, we have lots of levers in that category too.
To pull in terms of how we went to allocate capital the wound up put up more here versus there you know do we want to sell this and reinvest at.
So I think.
Dead.
I had the ability to express it we think about that all of the time that we never really talk about it but as we.
The sole purpose of.
Going through that asset rotation was to tell you that we do think about.
This stuff all the time and and beyond just think about it we actually do stuff about it so and you know sometimes communicating that.
To investors.
Investors and an analyst is important to know there were you know.
We're going to reallocate capital, where we think the growth is.
And we're not afraid to you know to sell or buy or hold or whatever you know whatever we think is the right thing to do.
So that that's really it I wouldn't make you know this is not like.
We're not trying to like here, we go something something as big around the corner. It just you know we do we have done this and you know we just wanted a pointed out.
Alright, thank you.
Thank you.
Crushing comes from the line of my.
J P Morgan.
To your question [noise].
You know the spreadsheet, how when you look at Mills ER.
Ah outlet malls, it's all pretty pretty decent we.
We still see our occupancy costs now is around 12% right.
So.
You know, we're we're feeling.
Better about our ability to to generate.
Positive rent spreads.
It's not.
You're always going to happen on every space and and every mall or outlet.
But we are seeing it pretty much across the board.
And as again I would say to you from.
You know what might shift is.
Where where where where I thought are.
Outlet business was a little slower coming out of Covid, where.
We're seeing a much better pick up over the last year or so there so.
You know, we're optimistic that that's going to continue as well.
Okay. Thank you.
Thank you.
Our next question comes from the line of Michael called Smoke.
Yeah. Please proceed with your question.
Good afternoon. Thanks, so much for taking my question in your opening remarks, you talked about the deals in the pipeline and that 30% of police activity in the first half was new deal volume, how does that compare to the past and and what does this indicated this indicate that there is greater interest for for new concepts to two.
Interested in leasing or or what or is there. Some other meaning behind this data point that you provided thank you.
I just think it it it most importantly, it reinforces the.
The the the.
The the.
The importance of our product and it reinforces her.
How are retailers.
Feel about our our.
<unk> and the outlet business. So it's a great sign I mean, it's a great sign that we have new.
Concepts and I would say generally that 30 per cent is really developed over the last.
Three months.
And whether it's direct to consumer whether it's the.
The luxury whether it's a restaurant business, whether it's entertainment, we're seeing entertainment pick up.
Like we did pre COVID-19.
So I I think it's a testament to the product that new.
Retailer's that want to open new stores in our existing product is a great sign in a great Testament and that.
That level is certainly.
Much higher than I've seen since.
You know I mean, it goes I'm gonna say almost seven eight years because.
You know.
The 20th 2020, I'm, sorry 2019.
We <unk>, we probably didn't have that level of percentage of new tenants. So it's clearly higher than it was in the 1918 <unk>.
17 level and it kind of goes back to where we were in the 14 15 16 level.
So it's a it's a good sign.
For sure.
[noise] [noise]. Thank you.
Thank you.
Next question is from.
BMO capital markets.
Please proceed with your question.
Hi, Good afternoon, two part question one it looks like there's at 10 or 11 cents.
In the piano will just curious if you could talk a little bit about what that is and that was at <unk> guide as the prior guidance.
Secondly, if you have any comments on the prior quarter's comments on domestic property NOI of at least three per cent. Thank you.
Let me Ah again, no no no I know that but the two but what did you say, 2%, 3% refrigerate percent Oh, let let let me start there so.
The yeah, we're feeling very comfortable.
Comfortable.
That will will will be above the 3%.
The game the after tax gain is associated with.
The AVG raising.
Of of capital primary capital.
Which we get diluted down so it's Ah.
We have a dilution gain after tax it was seven yep.
There's three cents a tax and the tax line Michael for that transaction.
Okay and that wasn't in the prior got it so I'm assuming correct.
Well, we didn't we you know we I don't we give a pretty big range and.
You know it really wasn't in our guidance so much to speak because you know.
That's really out of our control.
Thank you.
Thank you.
Our next question is from grabbed my goodness.
Please proceed with your question.
Good afternoon.
So quick to partner on Talman for me in a while I was down 3% from last quarter. What she was up 40 basis points. Just curious of drivers weren't that decline when in line with your comments on asset recycling can you remind us the process by which you would recapture the remaining 20 per cent of that investment in weather.
Planning to do so or maybe that's one of the.
The assets that you might be looking to recycle.
Well I'm not gonna I'm not gonna.
Comment on that so there there are.
Puts and calls associated with health and over.
Basically a five year period.
They have the right to kind of slowly.
20 per cent of their interest to US and then we eventually have a call associated with it. So so that's that and Brian why don't you go through the.
Two of last year, but but you can do you have any other comment on it yeah. Gregg that's exactly what it was you can see you know any other day basis. We're still ahead, but they did have a higher percentage contribution in Q2 of last year than they did this year.
The other thing on Talman if you.
On T. R. G. So R F F O contribution this quarter versus last quarter.
Is lower and it's primarily three things number one as.
We got DNO insurance reimbursement and Q2 of 22.
That's number one number two is.
We also had a land sale.
And then obviously number three is the higher interest expense, so they're a little more exposure floating right that there.
And I think the spread difference between our F. F O contribution from T. R. G. Two.
Two Q2 of 22 over twenty-three was how many cents seven something like this editor seven cents, okay see I still remember numbers so.
So.
So if you go through so R. F F O contribution from Taubman TR.
T R G, where Rio 80% was seven cents lower this quarter.
Q2 of last quarter of 22.
So that might be helpful to you those are the order of magnitude if there was any details on that.
Called Tom O'brien.
But that general yet so we had a lower contribution.
Right number Adam Yeah. Okay. Thank you that's the right number so there's really not much to ask.
[noise] okay. Thanks.
Thank you.
Next question.
Sorry.
Huh.
With your question.
Hey, good evening out there.
We're not talk about the beat technical we're really not out there were actually in New York City today. So.
Indiana is considered out there, which you know I.
I will not comment on but we're actually right here I don't know where you are but we're right here in New York City.
That's not too far from you [laughter] cool.
Can you talk about the outlook for retail sales in the back half of your give them that the macro and the expiration of the student loan payments and what you think that'll that'll do it pop that'll have on the business and maybe some commentary also when you're the bad habits trying to get an early thoughts on potential improvement on that might not have been in 2024.
Yeah, I I would say, we're actually optimistic on the back half of this year, because you know cops or.
Sales I should say in the second half of 22 really started to.
Decelerate you know because of the Ah you know.
Obviously, the the <unk>.
Increase in interest rates gas prices inflation.
So I think across the board are cops get easier for our retailers in the second half.
So we're actually optimistic and I think generally the economy as we all know is.
You know seems to you know relatively stable, obviously, it's a very uncertain world. So.
Anything can happen but.
But we're actually optimistic on sales for the second half who expected to you.
To comp up on with respect to bad that we're not see it continues to be lean and mean and.
And.
You know, it's a little more.
Then maybe last year, but it's like it's still comparatively historical lows yeah.
Okay. Thank you. Thank you.
Thank you.
Question.
Linda.
Caffeine. Please proceed with your question.
Hi, Thanks for taking my question in terms of three per cent NOI <unk> is that the level you think you could sustain next year.
I would hope so yes.
Mmm.
[laughter] I'm not one of my qualities, but there is that was the most <unk>. So thank the anthrax all day [laughter].
Did you have another question Linda.
Sure I guess uhm on page 19, you'll also broke out mixed you some franchise operations in <unk> and also the same line item for expense, maybe just a little more <unk>.
Yeah I think.
Brian and Tom felt because we're doing and these are only consolidated assets. So we have a we we have a big franchise operation was Starbucks in terms of our.
You know, where we franchise some Starbucks location plus obviously, we're building hotels.
And the.
And it was all lumped into the other income other expense and we thought instead.
Instead of having all the questions on you know why is this number growing in this number growing we kind of.
We just felt like it would be better to separate it.
For your believe it or not for your benefit.
And then how would we model that going forward.
Look I think the hotel business.
Is pretty straightforward and that we're building it we have certain returns and I think.
We pretty much outline our returns on our 8-K, so I think that's pretty.
Obviously, it takes time for apartments are hotels or any of mixed used to.
You know to to stabilize but I think that that will be pretty easily and the end of the day. The Starbucks business is not over it's not even material. So.
An amenity that we can make some margin on.
And it's grown a little bit bigger than what it was historically b because we took over some of the operations during COVID-19.
And so that's not an overly <unk>.
Material number and I you know, we can kind of give you an order of magnitude of revenue and expense the only problem. This year.
It really some of these just came on board so.
You know I'd I'd say to you in 24 well.
Be the kind of the first full year and that will probably be we can certainly outline what it is but the net profit is not overly important yeah.
Does that help.
Yeah. Thanks.
Okay.
Thank you.
[noise].
Craig Mailman with city. Please proceed with your question.
Good afternoon, David just a quick clarification on Monday earlier questions about the seven cent necking you guys rooms guidance here by five cents at the mid point could you just run through if there are any other puts and takes that moved around with guidance this quarter, where maybe this wasn't the sole driver but maybe.
Something operational on you know.
This could have all set something else was trying to get a sense that was Mr. Reason guidance went up and had this not happened you guys would have ended up kind of lowering the range here on the margin.
No I mean, I think we're always pretty conservative.
So.
We'll see how the.
You know, we're always trying to beat and improve our numbers I think we have as good a history of anybody.
To do that.
And again, we always I know.
It might frustrate folks, but there's always puts and takes in a company our size I mean, we have $80 billion of assets were not a small strip Center company that's Scott.
You know there there's gonna be some volatility we've got a three and a half billion dollar asset portfolio that so far this year thrown off zero earnings.
F F O essentially.
It's mostly back have a backpack and waited again, we have three and a half billion.
Of value.
Market doesn't value, it's not in our earnings I think the number to look at is are the number. We gave you which is our kind of F. F O real estate earnings.
That was at 281, if I remember that was hurt by eight cents of rising interest rates that's 289.
No I think we.
We give you a cop NOI, you're going to have some volatility because of OPI I think opie is really simple three and a half billion dollars.
Make 50 60 cents.
And it's on our books for a lot less and.
S.
And again.
You know in terms of investments and monetization and everything else associated with that we're always going to do the right thing so.
That's really it I think you know.
<unk> overage rent has stabilized so it's a little more conservative.
We want to make sure we're conservative as we look at the year if sales do.
Grow.
On the back and waited.
That we think will be at our overage number, which mean will beat our guidance.
No we don't have a crystal ball, but we've been.
We're we're we've raised our guidance from the beginning of the year.
That's the important thing we've had headwinds.
With that rising rates went up higher than we thought.
This is probably the biggest the biggest headwind and then second.
You know the L. P is a side has been.
More back and waited than we originally anticipated.
And that's simple as that and.
The other thing to remember is.
So AVG just raise money.
You know basically at 20 billion dollar enterprise value.
Because of their growth, we got Z wheel, 12% of the company, we get zero funds from operation contribution from them because of all of their one time charges, we had the same situation and penny.
And that's why we're giving you this real estate F. F O number put them off the ball on it it's too low your whatever multiple youth.
You think it is I would add a couple of hundred basis points, it's too low.
Then at $10 a share and that's R. N. A V. And then you know enjoy the rest of the summer that's how I would think about it.
Okay.
Are you still there [laughter].
Okay on Thanksgiving.
Yeah, but you buy that argument.
Oh yeah.
Talk about all right [laughter]. Thank you for listening.
Okay. So I think we're out of questions and I owe it to dawn what now I'm Gonna tell you a story okay.
So we.
Dawn initially stole our five o'clock time period.
So we were not very happy and we said, we'll do it together and then I said you know what.
<unk> [noise].
We loved on we want to be friendly so not only did we move our time, but we gave dawn.
The option of whether he wanted to do 430 or 530 and he chose 530. So if you don't like our time or you don't like here's time blamed on a.
But I'll hand, it over to dawn I'm I I feel like Ed Mcmahon.
And Don is Johnny Carson.
Thank you.
[noise] teleconference.
Oh, Thank you for your participation.
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