Q3 2023 Simon Property Group Inc Earnings Call

Greetings welcome to Simon property groups third quarter 2023 earnings conference call. At this time, all participants are in a listen only mode.

<unk> 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 Tom Ward Senior Vice President of Investor Relations. Thank you you may begin thank you Sherry.

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. 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.

Referring back to 1995 and actual results may differ materially due to a variety of risks uncertainties and other factors. We refer you to today's press release, and our SEC filings for a detailed discussion of the risk factors relating to those forward looking statements. Please note that this call includes information that maybe accurate only as of today's date.

Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included within the press release and the supplemental information in today's form 8-K filing both the press release and the supplemental information are available on our IR website at investors that Simon Dot Com Our conference call. This evening will be limited to one hour.

For those who would like to participate in the question and answer session. We ask that you. Please respect our request to limit yourself to one question. So I'm pleased to introduce David Simon a good.

Good evening and I'm pleased to report our third quarter results third quarter funds from operations were $1 $2 billion or $3 20 per share.

Let me walk you through some of the highlights for this quarter.

Compared to the same quarter of 2022.

Mastic and international operations had a very good performance this quarter and contributed 17 cents of growth primarily driven by higher rental income.

Noncash after tax gain.

<unk> at 32 cents in the third quarter.

Were related to the partial sale of our ownership interest in spark.

And a b G. As a result of a b G selling primary shares in the quarter higher interest expense.

It was a setback at seven cents year over year, we had a 15 cent lower contribution.

From our other property investment platform compare to Q3, 2022 and a two cent loss on mark to market of publicly traded Securities F. S. Though from our real estate business was $2 91 per share in the third quarter.

Imperative to 83 in the prior period last year, so far our real estate as produced eight.

And 55 cents per share for the first nine months compared to 840.

From last year, we are pleased with the transaction spark completed with Sheehan during the third quarter that demonstrated the value that we've created in that business.

The transaction was significantly above our basis and as a result, we recognized a gain in the corner.

We read and the transaction.

Ultimately reduced our ownership interest in spark.

From 50% to 33% as we had managed sheehan as a partner.

Given our lower ownership interest in the back end weighting.

Profitability in the fourth quarter, we now expect five cent lower F. F O contribution from spark in the fourth quarter of this year during the third quarter. The Taubman family exercised their put right on a portion of their interest in T. R. G.

We exchange 1.725 million partnership interest units for an additional 4% ownership interest we now own 84% of T. R. G domestic property NOI increased four 2% euro.

For a year for the quarter and three 8% for the first nine months.

Portfolio NOI, which includes our international properties at constant currency grew four 3% for the quarter and 4% for the first nine months of the year mall and outlet occupancy at the end of the third quarter was 95, 2% an increase of 70.

Basis points compared to last year, our third quarter occupancy is higher than fourth quarter of last year, which has not occurred historically.

The mills occupancy was 97, 4%.

And I keep and see us above all year end 2019 levels.

For all of our platforms average base minimum rent for malls and outlets increased two 9% year over year and the mills was three 6% year over year leasing momentum continues across our portfolio, we signed more than 900.

70 leases for approximately $4 3 million square feet in the quarter.

Through the first nine months of 2023 we signed more than 3500 leases for 15 million square feet, which is expected to generate over $1 billion of revenue. We have an additional 1100 deals in our pipeline, including renewals for another four.

400 million in revenue.

We are seeing strong broad based demand from retail community, including continued strength for many categories.

Reported retail sales.

<unk> per square foot in the third quarter was $744 for the mills and outlets combined and 676 for mills, we continue to be active in redevelopment new development. During the quarter. We started construction on a significant redevelopment at Brea mall and a new upscale.

<unk> outlet center in Jakarta, our first premium outlet in Indonesia, we completed the refinancing of 11 property mortgages. During the first nine months of the year for a total of $960 million at an average rate of 6% we have our balance sheet is strong.

Long with approximately $8.8 billion of liquidity today, we announced a dividend of $1.90 per share for the fourth quarter, which is a year over year increase of five 6%. The dividend is payable on December 20.

Knight.

And we also purchased approximately one point to seven.

<unk> shares of our common stock for $140 million, we are increasing our full year 2023 guidance from $11.85.

To $11 95 to $12.15 to $12 25 per share. This is an increase of 30 cents at the midpoint.

So to conclude I'm pleased with our third quarter results, our business is performing well and as the head of our plan.

Tenant demand is strong occupancy is increasing base minimum rent levels.

Rent levels are at record levels, and we are very experienced at managing our business through volatile periods of time and as you. All know this is when we do some of our best work. So we're now ready for your questions.

Thank you.

To ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question. Kim You May Press Star two if he would like to remove your question from the queue and for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.

Our first question is from Ryan Camden with Morgan Stanley. Please proceed.

Great. Thanks, so much a just one on some of the guideposts just given in the past is we're flipping the calendar 'twenty 'twenty four you talked about sort of 3% organic growth is achievable just wondering how youre thinking about that and how we should think about potential interest cost headwinds as asked.

That sort of Ralph thanks.

Sure.

Look I think we feel good about that kind of comparable NOI growth.

You know our debt is reasonably a laggard. So yes, we will have some interest expense headwinds.

But we still think we'll end up growing our business next year.

With that said.

Great and if I can.

Thank you I got you I got it wrong.

I was just going to say if I can ask a follow up just on the 30 <unk> guidance range I think you've talked about 32 cent gain and then five cents lower.

The retailers just just wondering is there any other sort of puts and takes on.

That we should be mindful off thanks.

Sure no what we're gonna have five cents lower because of the spark.

Sheehan deal.

We lost a couple of cents from our Mark to market on a couple of our public securities that we own.

Last quarter.

Hum.

And essentially the you know the the.

The real estate business as you know been very.

You know significant door growth.

And you know what kind of see where the fourth quarter ends up but I think it's you know well will you know are 97% of our business is going to outperform what we thought from originally.

Hmm originally what we had budgeted.

Thank you sure.

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

Hi, Good evening, everyone. David I know you gave some numbers on recent leasing activity, which sounds really strong I was wondering if you could give some additional context, maybe to how that leasing activity compares to recent and pre pandemic yours, maybe what that means for pricing and how that could impact permanent occupancy.

Well thank.

Thank you Caitlin so I would say let.

Let me try and address your questions in no particular order I think will be yearend occupancy will be.

You know obviously higher than it is today I don't know that it'll be our highest ever but it'll be.

Within.

Within distance pretty pretty close.

Even with all the volatility in the world and the market.

We still.

Expect are we still seeing demand.

A very strong I mean, you and I were you.

You know frankly, we're cautious we're waiting for shoes to drop, but we havent seen it on.

You know our new deals are whether it's F&B entertainment.

No a high end luxury tenants athleisure.

Just to name some categories were seen and there we're still seeing a lot of demand on that front.

And.

I would say from a.

Pricing element.

You know we feel.

You know I would say we feel.

Comparable to the way we fell in the.

15, 16 and 17.

Error in terms of your ore I guess that was almost seven eight years ago, but what's happened over those seven or eight years, but.

No we still feel like that's kind of.

We're in that good shape wear.

We're driving rents up and you know it's okay for the retailers are making deals and supply and demands in our favor.

You know, obviously, we cycled through a lot of poor performing retailers.

Unknown Executive: compared to the same quarter of 2022. Domestic and international operations had a very good performance this quarter and contributed 17 cents of growth primarily driven by higher rental income. Non-cash after tax gain, gains of 32 cents in the third quarter were related to the partial sale of our ownership interest in Spark and ABG as a result of ABG selling primary shares in the quarter.

Due to Covid and.

The ones that we are doing new deals where they're excited to do.

To do business with us so.

You know pricing is good.

For sure going in the right direction occupancy is going up.

And tenant demand is pretty.

Pretty strong across.

The whole spectrum and even in certain categories.

You know just to take luxury yes. There are some that are being more cautious, but theres plenty that you know that are growing new stores. So.

David Simon: Higher interest expense was a setback of seven cents year over year. We had a 15 cent lower contribution from our other property investment platform compared to Q3 2022 and a two cent loss on market market of publicly traded securities. FFO from our real estate business was $2.91 per share in the third quarter compared to 283 in the prior period last year. So far our real estate has produced $8.55 per share for the first nine months compared to $8.40 from last year.

You know, it's it's really retail specific.

Obviously bricks and mortar you know through the pandemic two today.

He has a proven its value to retailers.

I'm sure you hear that on the on the conference calls from retailers. So you know in that sense, we're making a lot of good stuff happen.

Brian did you have something on the occupancy.

I was just going to say, we continue to see about 30% of our deals being new deals in the quarter. So that's consistent with the prior quarter as well. So there is definitely lots of activity on the new deal basis.

Great sounds encouraging thanks. Thank you.

Our next question is from Samir Khanal with Evercore ISI. Please proceed.

David Simon: We are pleased with the transaction Spark completed with Sheen during the third quarter that demonstrated the value that we have created in that business. The transaction was significantly above our basis and as a result we recognize again in the corner and the transaction ultimately reduced our ownership interest in Spark from 50 percent to 33 percent as we have mentioned Sheen as a partner. Given our lower ownership interest in the back and waiting of profitability in the fourth quarter we now expect 5 cent lower FFO contribution from Spark in the fourth quarter of this year.

Good evening, everyone, David maybe provide color on how your malls are performing versus outlets.

You know maybe from a regional standpoint coastal non coastal sunbelt I'm just trying to see what you know what if there's a if there's any differences from a leasing standpoint. Thanks sure.

I you know it's interesting I would say, we're seeing pretty good.

Tenant sales growth on the tourism properties, whether they're outlets or malls now.

Most of our.

Pure tourist properties are really the outlet centers and we're seeing good growth in that category.

Traffic generally is slightly above last year still slightly.

David Simon: During the third quarter the Talbamy family exercised their put right on a portion of their interest in TRG. We exchanged 1.725 million partnership interest units for an additional 4 percent ownership interest. We now own 84 percent of TRG. The Mepic property NOI increased 4.2 percent year over year for the quarter and 3.8 percent for the first nine months. Portfolio NOI which includes our international properties and constant currency grew 4.3 percent for the quarter and 4 percent for the first nine months of the year.

Below.

19, but obviously conversion is way up because our sales are on a per square foot basis are much higher than 19.

I would say generally whether mall or outlet the sun belt area.

Has produced pretty good results in terms of sales year to date.

We saw actually a decent pick up in California, which was encouraging.

But really good growth in it you don't know Woodbury.

You know common that you now finally, getting the tourism back to where it is.

And.

David Simon: All analysis occupancy at the end of the third quarter was 95.2 percent increase of 70 basis points compared to last year. Our third quarter occupancy is higher than fourth quarter of last year which has not occurred historic. The mills occupancy was 97.4% and occupancy is above all year-end 2019 levels for all of our platforms, average base minimum rent for malls and outlets increased 2.9% year-over-year and the mills was 3.6% year-over-year. We signed more than 970 leases for approximately 4.3 million square feet in the quarter.

Apparel has been strong in the outlet business. There's no question people are looking for.

A little more value or maybe they're looking for a lot more value given the higher inflation.

The consumers had to deal with.

Not a huge bifurcation between you know malls and outlets, it's very property specific.

You know the the different you know as you know we reported flat sales are basically quarter over quarter end.

No there's no real difference between outlets.

And malls in that number.

Luxury probably.

Well it didn't probably it did flatten out in the third quarter of this year for sure but it wasn't across the board it was more.

David Simon: Through the first nine months of 2023, we signed more than 35 hundred leases for 15 million square feet, which is expected to generate over a billion dollars of revenue. We have an additional 1,100 deals in our pipeline, including renewals for another 400 million in revenue. We are seeing strong broad-based demand from retail community, including continued strength from many categories, reported retail sales. The third quarter was $744 for the mills and outlets combined and 676 for mills.

Couple of specific retailers had a tough Q3, others were up so it was really.

Retailer specific.

Jewelry, you know malls may have a little more exposure to jewelry. So that was a that was a category that took a little more on the chin.

Yeah, you know some of our higher end retailers in the jewelry category performed well so it was.

No.

Basically.

Not a real.

Tran I'd say the most important thing that come away with is that.

The sunbelt continues to perform well.

David Simon: We continue to be active in redevelopment and new development. During the quarter, we started construction on a significant redevelopment at Brea Mall and a new upscale outlet center in Jakarta, our first premium outlet in Indonesia. We completed the refinancing of 11 property mortgages during the first nine months of the year for a total of $960 million at an average rate of 6%. We have our balance sheet as strong with approximately $8.8 billion of liquidity.

And we're seeing the tourists centers kind of make a make a nice comeback as they've been lagging.

Little bit more than the others over time in a little bit of flat lining and.

You know when the in the luxury category.

Okay.

Tom Thank you bet, Brian anything you want to add I think you've covered it David Okay.

Thank you.

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

Hey, good evening need me out there David.

So I'll I'll do one question at a hold the follow up.

David Simon: Today, we announced a dividend of $1.90 per share for the fourth quarter, which is a year-over-year increase of 5.6%. The dividend is palable on December 29th, and we also purchased approximately 1.27 million shares of our common stock for $140 million. We are increasing our full-year 2023 guidance from $11.85 to $11.95 to $12.15 to $12.25 per share. This is an increase of $0.30 at the midpoint.

On as you guys gain leverage with the tenants.

Are you seeing tangible ability to you know get more favorable terms one of the issues with retail over time has been you know the tenants, especially the larger tenants or the more anchor ish or more you know fashion.

Fashion like the hot tenants of the day or are you know driving lease terms traditionally curious if youre seeing a change in that which would translate to an ability to accelerate.

Rent growth NOI growth et cetera.

Well I, we don't we don't we don't have let I mean, thank you for the question Alex.

We're not that far away you always see out here, we're really not that far away.

David Simon: To conclude, I'm pleased with our third quarter results. Our business is performing well and is ahead of our plan. Ten at the man is strong. Occupancy is increasing. Based minimum rent levels are at record levels, and we are very experienced at managing our business through volatile periods of time. And as you all know, this is when we do some of our best work.

But but put that aside.

We were it's not a question of leverage over the retailers I think what we have going for us.

He is a great diverse portfolio, it's the best in the industry.

You know for our mills to our outlets to our full price malls.

And.

Unknown Executive: So, we're now ready for your questions. Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tome will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue, and for participants using speaker equipment, and maybe necessary to pick up your handset before pressing the star key. Please.

You know that's unique its size its scale its quality.

We built up over many many years.

And as you remember I don't think it was last quarter, maybe it was Tom but the week went through.

The transformation of the portfolio as of last quarter. So you know we.

We've done a lot to try to improve the quality of the portfolio.

Ron Camden: Our first question is from Ron Camden with Morgan Stanley, please proceed. Great, thanks so much. Just one on some of the guideposts you've given in the past, as we're flipping the calendar to 2024, you talked about sort of 3% organic growth as achievable, just wondering how you're thinking about that and how we should think about potential interest costs had wins as that sort of rolls. Thanks. Sure, look, I think we feel good about that kind of comparable NOI growth. You know, our debt is reasonably laddered, so yes, we'll have some interest expense had wins, but we still think we'll end up growing our business next year with that set. Great, and in fact, thank you.

And I would say that obviously, there's no not a lot of new retail being being built there's not a lot of retailers closing stores.

And oh or or going bankrupt and I think most retailers today, you know kind of the good malls and the good properties versus the not so good.

And when you add that up supply and demand is in our favor.

And you know, we're we're generating you know market rats.

It's neither here, nor there, but importantly.

Importantly, and I think.

I'd like to address this with you is that and again I'm sure retailers at a different point of view, but I think they.

The most interesting.

Fact that are the most interesting thing that we have going for us. In addition to the quality diversity et cetera that I mentioned.

They know we're going to be around.

David Simon: I was just going to say if I can ask a follow up just on the 30 cent guidance raise it, I think you talked about 32 cent gain and then 5 cents lower from the retailers, just just wondering, is there any other sort of puts and takes that we should be mindful of. Thanks. Sure, no, we're going to have 5 cents lower because of the spark, she and deal, we lost a couple of cents from our market on a couple of our public securities that we own last quarter.

So.

And there and they know that.

You know that you know, we'll we'll stick to a deal we'll make it happen when we say we're going to redevelop something we do it.

And I think that you know when there are open to buys.

We tend to get our fair share of those or more than because of some of the.

Factors that I mentioned quality scale, but also the fact that you know they know we're going to get the job done and obviously.

David Simon: And essentially the real estate business has been very significant to our growth and we'll kind of see where the fourth quarter ends up. But I think it's, you know, we'll, you know, our 97% of our business is going to outperform what we thought from originally, originally what we had budgeted. Thank you. Sure.

There's been a lot of changes and.

Mall ownership over the years.

You know balance sheet and quality.

Of operations.

Is it two way street, it's both.

As we look at retailers reassess that they certainly assess us Ed.

And.

And I think that gives us an advantage that we worked very hard as you know.

To achieve and you know.

No.

I mean I.

How do I say this I mean, we've really outpaced our peer group.

Caitlin Burrows: Our next question is from Caitlin Burrows with Goldman Sachs, please proceed. Hi, good evening, everyone. David, I know you gave some numbers on recent leasing activity, which sounds really strong.

Dramatically.

Dramatically and any measure you want growth earnings dividend.

Quality of operations scale balance sheet.

David Simon: I was wondering if you could give some additional context, maybe to how that leasing activity compares to recent and pre pandemic years, maybe what that means for pricing and how that could impact permanent occupancy. Well, thank you, Caitlin. So I would say, let me try and dress your questions in no particular order. I think we'll be year-end occupancy will be, you know, obviously higher than it is today. I don't know that it'll be our highest ever, but it'll be, you know, within distance pretty, pretty close.

You know that the.

You know I know, we all focus quarter to quarter and this and that but you know if you take a step back and you go Wow.

What do you got going for yet.

And again, we don't this sounds a little break doses I don't want it to but.

But I mean, we've really outpaced.

If you look over the last 10, 510, 15 2025 years.

You know, we've we've dramatically outpaced our peer group.

Thank you. Thank you.

I'll follow up I I stopped yes, I love it.

David Simon: Even with all the volatility in the world and the market, we still expect, you know, we still seeing demand. Very strong. Frankly, we're cautious. We're waiting for shoes to drop, but we haven't seen it on our new deals. Whether it's F&B Entertainment, you know, high end luxury tenants, athletes, you know, just to name some categories. We're seeing, you know, we're still seeing a lot of demand on that front. And I would say from a pricing element, you know, we feel, you know, I would say we feel comparable the way we felt in, you know, 15, 16, 17 error in terms of error.

Our next question is from Jeff Spector with Bank of America. Please proceed.

Great. Thank you good afternoon.

David just wanted to tie in some of the leasing comments the momentum youre seeing the deals in the pipeline.

Our high occupancy levels.

To the redevelopment pipeline and just I guess, how are you thinking about that pipeline.

And the ability to increase that like how are you going to satisfy some of the needs out there.

We continue to capture that market share maybe even more.

Thank you, Jeff So look I think.

We have the ability now to.

To develop and redevelop.

Because we're not.

Essentially what I said earlier, we're not listen we gotta be stewards of capital, we got to be very focused but.

You know we're not capital.

Constrained the way.

Some others might be and.

David Simon: I guess that was almost, you know, 78 years ago, but lots happened over those seven or eight years. But, you know, we still feel like that kind of, you know, we're in that good shape where, you know, we're driving rents up. And, you know, it's okay for the retailers. They're making deals and supplying demands in our favor. You know, obviously we cycle through a lot of poor performing retailers due to COVID.

Our ability to invest in our portfolio.

Is unmatched so we intend to do that now at the same time, Jeff you know rates are up we returns for us have to be up.

And.

Oh, So you know.

You haven't seen it really.

Big change at our 8-K redevelopment, but that takes time because a lot of the stuff was put in place, but you know when we built something new or we redevelop we're gonna have to you know.

David Simon: And the ones that we are doing new deals with are excited to do, you know, to do business with us. So, you know, pricing's good for sure going in the right direction occupancy is going up intended demand is pretty strong across the whole spectrum. And even in certain categories, you know, just to take luxury. Yes, there's some that are being more cautious, but there's plenty that, you know, that are growing new stores.

Do a better job of leasing and returns in.

And.

To warrant that capital because just about everything we do.

You know I mean, we still want to maintain our leadership position, but just about every.

The amount of capital we spend I have to measure it.

In my own mind against buying our stock back.

And you know I mean, our stock because you saw we bought stock back. So our stock is pretty compelling. So you know we want to redevelop we want a new development, but you know.

David Simon: So, you know, it's, it's really retail specific. Obviously, bricks and mortar, you know, through the pandemic to today has proven its value to retailers. I'm sure you hear that on the conference calls from retailers. So, you know, in that sense, we're making a lot of good stuff happen. Brian, did you have something on the occupancy? I was just going to say we continue to see about 30% of our deals being new deals in the quarter. So, that's consistent with the prior quarter as well. So, there is definitely lots of activity on a new deal basis. Great sounds encouraging. Thanks. Thank you.

We got a high hurdle that we got a jump over so.

Like we've done historically I expect us to find the right balance.

Between continuing and to maintain our leadership position investing in our properties for the benefit of.

Shareholders communities retailers alike.

But at the same time, we gotta be economic animals.

And you know that's that's what.

I know everybody here understands that process and that's what we're trying to achieve.

Samir Khanal: Our next question is from Samir Canal with Evercore ISI. Please proceed. Good evening, everyone.

Our next question is from Michael Goldsmith with UBS. Please proceed.

David Simon: David, maybe provide color on how your malls are performing versus outlets. You know, maybe from a regional standpoint, coastal, noncoastal, sunbelt. Just trying to see what, you know, if there's any differences from releasing standpoint. Thanks. Sure. You know, it's interesting. I would say we're seeing pretty good. Can it sales growth on the tourism properties, whether they're outlet or malls? Now, the most of our and pure tourist properties are really the outlet centers, and we're seeing good growth in that category.

Good evening. Thanks, a lot for taking my question, David you, specifically mentioned the performance of the real estate business on this call several times, which has been strong.

In time this quarter you sold off some of the spark so.

How can you continue to refine some of the ancillary parts of the business. So that the strength that we're seeing and that youre talking about on the core business can continue to shine.

Well listen.

It's a very good question and it's less and less of our business as you know it's under 5% of our earnings you also have to understand that.

David Simon: Traffic generally is slightly above last year, still slightly below 19, but obviously conversions way up because our sales are on a per square foot basis are much higher than 19. I would say generally whether mall or outlet, the Sun Belt area has produced pretty good results in terms of sales year to date. We saw actually a decent pickup in California, which was encouraging, but really good growth in a woodberry common that finally getting the tourism back to where it is.

You know when we.

Add to the you know when we added to our F. L. Its net income which in many of these cases.

You know you don't add while all of these cases, you don't add back depreciation so EBITDA and our F. L contribution are much different.

Importantly.

You know.

These have all been profitable endeavors, but we understand that even the small amount of.

Earnings that we get in comparison to our total.

David Simon: And you know, peril has been strong in the outlet business. There's no question people are looking for a little more value or maybe they're looking for a lot more value given the higher inflation that the consumers had to deal with. Not a huge bifurcation between malls and outlets, it's very property specific. The different, as you know, we reported flat sales basically quarter over quarter and there's no real difference between outlets and malls in that number.

Our earnings power.

It's volatile people don't like the volatility.

Well like we did with spark earlier, we're going to continue to harvest our investments over time.

And as we do that.

We're going to we're going to we're going to you know if you asked me today, we'll monetize things over time.

And we're going to buy our stock back because.

No no it's wildly accretive because let's look at it I you know what I trade at as a multiple of F O.

And you know I have investment value in these investments, but they give us very little earnings because of gap and if you do the math you can see the accretion we would get on a buyback.

David Simon: There were luxury, probably, it didn't probably, it did flatten out in the third quarter of this year for sure, but it wasn't across the board. It was more a couple of specific retailers had a tough Q3 others were up. So it was really retailers specific jewelry, you know, malls may have a little more exposure to jewelry. So that was, you know, that was a category that took a little more on the chin yet, you know, some of our higher end retailers in the jewelry category perform well.

So they're basically.

I get no earnings from them, but I've got value and it's our job to get the value into cash.

Take the cash buy our stock back or invest in properties.

And and have it or you know a bygone era.

<unk> of our of the time, but with an abstract that said you know at a boy you made a lot of money.

So that's the strategy.

I hope that answers your question.

Our next question is from Floris van data.

David Simon: So it was, you know, basically not a real traffic say the most important thing to come away with is that, you know, the sunbelt continues to perform well. And we're seeing the tourist centers kind of make a make a nice comeback. They've been lagging a little bit more than the others over time and a little bit of flat lining in, you know, in the in the luxury category. Tom, I think you covered it. Okay. Thank you.

With Compass point. Please proceed.

Hey, David Thanks for taking my question.

So I was curious on on T. R G.

So I noticed the occupancy dipped a little bit.

You essentially you wind up increasing your ownership by 4% by issuing some O P use what price where with the stock issued at and what yields are you buying what's the implied cap rate on the <unk> business and how should we think about that also as it relates to.

Other potential opportunities in the market and how much flexibility was there and then maybe I guess in terms of the timing of the next sort of puts or or hurdles that you have for increasing your interest in that business going forward. You are right I mean, I'll just talk about the exchange a little.

Alexander Goldfarb: Our next question is from Alexander Goldfarb with paper, Sandler, please proceed.

David Simon: Hey, good evening, need me after David. So I'll do one question and I'll hold the follow up on as you guys gain leverage with the penance. Are you seeing tangible ability to, you know, get more favorable terms? One of the issues with retail over time has been, you know, the tenants, especially the larger tenants or the more anchorish or more, you know, you know, you know, fashion like the hot tenants of the day are, you know, driving least terms traditionally curious if you're seeing a change in that, which would translate to an ability to accelerate rent growth and a wide growth, etc. ?

And then Brian can give you an idea on the occupancy it's no big deal, but I'll, let Brian go through that so.

Taubman has the right to put their interest.

There are 4% interest for the next five years.

And it's basically essentially appraised value.

You know, it's either in negotiation or we get appraisal firms.

No.

We decided to negotiate in good faith, we made a deal.

David Simon: Well, we don't, we don't, we don't have let, I mean, thank you for the question, Alex, we're not that far away, you always say out here, we're really not that far away, but, but put that aside, we, it's not a question of leverage over the retailers. I think what we have going for us is a great, diverse portfolio. It's the best in the industry, you know, far away. From mills to our outlets to our full price malls, and, you know, that's unique, it's size, it's scale, it's quality, you know, that we built up over many, many years.

And and and then we issued the stock and you know I mean, the reality is.

We're we're we're trading.

Yeah, Simon property group.

Quickly is trading below appraised values. So one of the reasons, we bought our stock back was.

I'm not a big fan of issuing stock at this.

At this moment in time, so you know, we'll use our capital base.

Basically get rid of the dilution that we did.

Issues now taubman had that right. They exercises it appropriately we had a good faith negotiation made a deal and it was more or less at the appraised value and to put it in perspective.

David Simon: And as you remember, I don't think it was last quarter, maybe it was Tom, but that we went through the, you know, transformation of the portfolio was the last quarter. So, you know, we've done a lot to try to improve the quality of the portfolio. And I would say that, obviously, there's no, not a lot of new retail being, being built. There's not a lot of retailers closing stores, and, or, or going bankrupt.

For us at today's value, it's probably pretty close to <unk>.

Ware.

We knew you know negotiated our deal with Taubman.

Pre Covid and then obviously, we got to Covid adjustment.

But it was in that range kind of where the deal was announced publicly.

And so we're gonna quarter rise that dilution.

David Simon: And I think most retailers today know kind of the good malls and the good properties versus that not so good. And when you add that up, supply and demand is in our favor. And, you know, we're, we're generating, you know, market rights, you know, it's neither here nor there.

By buying our stock back we started that once we made the deal and I think the families pretty smart they said.

Simon property group Stock's undervalued and.

I like I like the dividend.

And.

Why not so I think you know.

David Simon: But importantly, importantly, and I think I'd like to address this with you is that, and again, I'm sure retailers have different point of view. But I think they, the most interesting fact that, or the most interesting thing that we have going for us in addition to the quality, diversity, et cetera that I mentioned, they know we're going to be around. You know, so, and they know that, you know, that, you know, we'll, we'll stick to a deal, we'll make it happen. When we say we're going to redevelop something, we do it.

I don't know what will happen next year could be the same thing, but at this point the F. 16% left in T. R. G.

We're at we're happy to own 100% of P. R. G.

I think they're happy.

Now.

To do what they're doing in and you know, we'll we'll deal with it.

You know as as as time goes on but nothing can happen the rest of this year and it sometime next year that this all a recycles so with that said I hope that answers that but I'll, Brian if you want to add anything to that please nothing on that but Florida on your question about their occupancy it is back 100 and <unk>.

David Simon: And I think that, you know, when there are open to buys. We tend to get our fair share of those or more than because of some of the, you know, the factors that I mentioned quality scale, but also the fact that, you know, they know, you know, we're going to get the job done.

10 basis points, there were really two major spaces that they had to take out of commission that they come back online in the fourth quarter. So you will see that come back on and then some in the fourth quarter. It is just simply timing.

Yeah.

And if I may if you don't mind the.

David Simon: And, and obviously, you know, there's been a lot of changes in mall ownership over the years. [inaudible][inaudible] amount of capital we spend, I have to measure it in my own mind against buying our stock back. And, you know, I mean, our stock, as you saw, we bought stock back so our stock is pretty compelling.

I, if I recall correctly I think you can look at my notes, but the cap rate at the time that you did the deal was it had a six handle on it is that is that the right way to think about you know the appraised value for DRG.

Well again this was a negotiated deal.

You know there their view of appraised value started much higher than that for that.

With all due respect forest, which you might imagine.

But we settled on a deal that today.

If you go back in time to.

Two.

Oh Taubman pre Covid would have attributed taubman.

You know.

Per share number and the $51 range, so somewhere in that range. We ended up if you remember doing COVID-19 at $43 a share I will tell you that their NOI today is higher than it was at 19.

Our portfolio has changed here and there so it's really hard to do an apple to Apple, but at the end of the day that gives you that you know the the.

Are things, but.

You're not that far off I think that's a reasonable estimate but that kind of puts all the metrics out there.

And again, it's not a huge deal.

In the scheme of things you know you know under a couple of hundred million today. So.

But it gives you a perspective of kind of that.

I think they would argue to appraise values much higher than what they do.

Exchange, yet, but you know.

But we.

We we are we ultimately did not go through the appraisal process.

Thanks, David Thank you.

Our next question is from Vince T bone with Green Street. Please proceed.

Hi, good afternoon minimum base rents were about 3% year over year, which is about the same level as contractual bumps. So I'm just trying to get a sense of you know leasing spread economics here like does that mean leasing spreads were also in the low single digit range or are there other factors influencing this metric.

One way or another well I mean, I'll see if Brian will add to and just you know I.

Remember this is the total portfolio so to move this thing up it.

It takes a lot right and spreads are just.

For a moment you know our leases that come in and go out. So so you can't really look at it that way so for us to move the entire portfolio gives.

It gives you a sense of leasing spreads now if you look at whatever what pages on the 8-K.

The the.

You know the new the new.

Well, we added some new information there on the.

29, 21 21.

That.

You'll see some of that.

Right.

Some of these that are going in there now are driving the rent.

The rent you know those numbers now include our new leases that are driving that base minimum rent up yes, I mean, we typically only touch about 10% of our leases a year event. So you got to factor that in as well. So renewals are about 10%, but the balances are new leases, which as David said are really driving the higher.

Or contributing to the higher average base minimum rent.

David Simon: So, you know, we want to redevelop, we want a new develop, but, you know, we got a high hurdle that we got to jump over. So, like we've done historically, I expect to find the right balance between continuing and to maintain our leadership position, investing in our properties for the benefit of shareholders, communities, retailers alike, but at the same time, we got to be economic animals. And, you know, that's, that's what, you know, everybody here understands that process and that's what we're trying to achieve.

But it is my with my statement fair, though that contractual bumps for base rent are still around 3% or are they lower than that the overall portfolio no theyre right in that range Vince.

And then just is there any color you can share about renewal spreads and I know, it's hard to move the overall portfolio with 10%, but just kind of conversation means they're not too far away from the average.

Taxable bumps because they were plus 30% take an extreme example, like we could see that in the metrics.

I'm just trying to ultimately get to the gallery on.

I mean, I guess again Vince.

In order to have the average base minimum rent go up for 20000 leases.

Hey.

Of 3%.

Michael Goldsmith: Our next question is from Michael Goldsmith with UBS, please proceed. Good evening. Thanks a lot for taking my question. David, you specifically mentioned the performance of the real estate business on this call several times, which has been strong. At the same time, this quarter, you sold off some of the spark. So, how can you continue to refine some of the ancillary parts of the business so that the strength that we're seeing and that you're talking about on the core business can continue to show.

Versus you know, 10% to 15% that calculate spread you're going to be mathematically.

Going to have.

Rent spreads that are higher than the 3%.

And we'll walk you through that later, but that just from a math point of view, there's just no way that.

That can drive that number up but you know we'll walk you through that so.

When you say that we would say to you that's not.

That you know that that's not.

Michael Goldsmith: Well, listen, it's a very good question, and it's less and less of our business as you know, it's under 5% of our earnings. You also have to understand that, you know, when we add to the, you know, when we added to our FFO, it's net income, which in many of these cases, you know, you don't have to. Well, all of these cases, you don't add back depreciation. So, EBITDA and our FFO contribution are much different.

They're not reality because in order to drive up average base minimum rent 20000 leases or thereabouts, you're going to have to outperform much more than the 3% on just what's rolling off no question.

So what we can take it offline I appreciate the time thank you.

Our next question is from Greg Mcginniss with Scotiabank. Please proceed.

Hey, good evening, David and Brian I'll keep this to one and a half questions for you. So last quarter, you spoke about potentially being more active with asset recycling or reallocating real estate capital.

Michael Goldsmith: Importantly, you know, these have all been profitable endeavors. But we understand that even this small amount of earnings that we get in comparison to our total earnings power is volatile. People don't like the volatility. Well, like we did with Spark earlier, we're going to continue to harvest our investments over time. And as we do that, you know, we're going to, we're going to, you know, if you ask me today, we'll monetize things over time.

The challenges faced in the financing market change those expectations at all or how are you thinking about that today and how our higher interest rates impacting your customers and tenants.

Well, it's not much.

I'll take the.

The last first so I would say higher interest rates.

Slash Inflations clearly is affecting them.

No.

A good portion of the consumer out there so.

No there are affordability.

For and what we're seeing is most on.

The consumer on what what I'd call the kind of the.

You know the more.

Michael Goldsmith: And we're going to buy our stock back because, you know, it's wildly accreted because let's look at it. You know what I trade at as a multiple of FFO. And you know, I have investment value in these investments, but they give us very little earnings because of gas. And if you do the math, you can see the accretion we would get on a buyback. So they're basically, you know, I get no earnings from them, but I've got value, and it's our job to get the value into cash, take the cash, buy our stock back or invest in properties and have it, you know, a buy gone error of the time. But with an asterisk that said, you know, at a boy, you made a lot of money. So that's the strategy.

The brands that are focused on.

You know the more moderate income consumer so there's no question that that's having some impact.

But the good news is you got unemployment and you've got wage growth that is counter balancing that but there are definitely being more cautious.

So that you know that's not necessarily affecting you know that.

Income consumer to the extent that you might otherwise think.

But it's clearly affecting the lower or more moderate income consumer.

That you know that they're being.

There.

We're being more cautious and from our standpoint.

From a retail point of view.

You know demand like I said earlier, we haven't seen it.

Affecting retailers too much in terms of their growth plans.

David Simon: I hope that answers your question.

Floris Dijkum: Our next question is from Floris Van Dijkum, with compass point, please proceed. Hey David, thanks for taking my question. So I was curious on on TRG. So I noticed the occupancy gets a little bit. You essentially, you want to, you know, increase in your ownership by 4% by issuing some opus. What price was the stock issued at? And what yield are you buying? What's the implied cap rate on the TRG business?

But you know.

What we obviously monitor that every day so from our standpoint.

You know our cost of capital is up so.

Any investment we make.

As I mentioned earlier is in the us.

Yeah that was measured against.

Return, we would get from buying our stock back the return that we would get from.

Redevelopment or development and given that that's why we haven't been.

Active on the acquisition front.

Floris Dijkum: And how should we think about that also as it relates to, you know, other potential opportunities in the market? And how much flexibility was there? And then maybe I guess in terms of the timing of the next sort of puts or hurdles that you have for increasing your interest in that business going forward. Let me just talk about the exchange a little bit, and Brian can give you an idea. The occupancy is no big deal, but I'll add Brian, go through that.

And.

And I and I don't expect that to really change.

In addition, you know.

We're always looking at monetizing our assets.

Other it's real estate or otherwise.

And to the extent that we can make the math work.

We create liquidity through asset sales.

You know the math is very compelling for us to do that to buy our stock back.

Floris Dijkum: So Calvin has the right to put their interest. They're 4% interest for the next five years. And it's basically at essentially appraised value. So, you know, it's either a negotiation or we get appraised firms. And, you know, we decided to negotiate in good faith. We made a deal. And then we issued the stock. And, you know, I mean, the reality is, you know, we're trading, you know, Simon property group, unequivocally trading below appraised values.

And so you'll see more of that trend to continue.

Great. Thank you. Thank you.

Our next question is from Mike Mueller with Jpmorgan. Please proceed.

Yeah, Hi, just a quick one here and I know this is a bit of a hypothetical but do you think you would've bought stock back if you didn't issue. The this year is to taubman.

I think we would buy I'm sorry.

I think we're looking.

It's a it's a it's a good question a fair question and let me say this.

The way I'm thinking about it so to the extent that we have.

Additional liquidity events.

Floris Dijkum: So, one of the reasons we bought our stock back was, you know, I'm not a big fan of issuing stock at this, at this moment in time. So, you know, we'll use our capital to, you know, basically get rid of the delusion that we did issues. Now, Calvin had that right. They exercised appropriately. We had a good faith negotiation made a deal. And it was more or less at their praise value and to put it in perspective for today's value.

Or you know in the case of Taubman.

Dealing with the dilution of issuing stock at this price.

There's no question, we're going to buy our stock back.

To the extent that we don't I don't have an answer for you yet on.

No.

You know, whether we would have done it apps it.

The T R G issuance.

Or is it or a and.

Floris Dijkum: It's probably pretty close to where we, you know, negotiated our deal with Calvin, pre-COVID. And then obviously, you know, we got the COVID adjustment. But, you know, it was in that range kind of where the deal was announced publicly. And so, we're going to quarterize that delusion, by Byron R. Stockback. We started that once we made the deal. And I think the family's pretty smart. They said, you know, Simon Property Group stocks undervalued, and I like the dividend, and, you know, why not?

Enhanced liquidity from asset sales.

But like I said, you know our development pipeline redevelopment pipeline is very much.

Very much measured up against the.

You know the stock buyback and every asset I've got.

I don't have to own anything.

At this point I'm happy to sell assets at the right price.

To buy our stock back and I think you'll see more of that from us.

You know over time.

And that could be real estate and or other stuff.

Got it Okay and real quick just in case I missed this was there any change to the OPI guidance that's embedded in your current ethical outlook.

Floris Dijkum: So I think, you know, I don't know what will happen next year could be the same thing, but at this point they have 16% left in TRG. We're happy to own 100% of TRG. I think they're happy, you know, you know, to do what they're doing, and, you know, we'll deal with it, you know, as time goes on, but nothing can happen the rest of this year, and it's sometime next year that this all recycles.

Yes, we've lowered it we've lowered it other than that you understand the five because we own less of spark.

We have lowered it for the fourth quarter.

Bye.

Absolutely guys.

For the fourth quarter would be about 20, <unk> yeah, yeah, Yeah, roughly 20 cents in the fourth quarter lower contribution you know lower contract. If you look in total for the year and.

Our share of that as roughly if you take out the five we've lowered it about 15 cents.

Floris Dijkum: So with that said, I hope that answers that, but I'll Brian, if you want to add anything to that, please. Nothing on that, but Floris, on your question about their occupancy, it is back 110 basis points. There were really two major spaces that they had to take out a commission that they come back online in the fourth quarter. So you will see that come back on and then some in the fourth quarter.

Got it okay. Thank you. Thank you.

Our next question is from Craig Mailman with Citigroup. Please proceed.

Thanks, It's actually Nick Joseph here with Craig.

David you've talked a lot on the share buybacks. It sounds like in your answer to the last question. We are open to asset sales and other monetization.

Floris Dijkum: It's just simply timing. And if I may, if you don't mind the, if I recall correctly, I have to look at my notes, but the cap rate at the time that you did the deal was, you know, had a six handle on it, is that, is that the right way to think about, you know, the appraised value for TRG? Well, again, this was a negotiated deal. You know, their view of appraised value started much higher than that for, you know, with all due respect for us, which you might imagine.

<unk> opportunities.

What are you seeing in the transaction market today in terms of those asset sales, you know where where are cap rates, what's the buyer pool like Andy how are you seeing an opportunity to try to crystallize some of that disconnect between the stock price and where you would hope to sell an asset.

Well.

Look I think.

Domestic retail is.

Yeah, not a lot of transactions, but we have assets throughout the world.

Floris Dijkum: But we settled on a deal that today, you know, if you go back in time to, you know, Talbin pre-COVID would have attributed Talbin's, you know, per share number in the $51 range. So somewhere in that range, we ended up, if you remember, doing COVID at $43 a share, I will tell you that the NOI today is higher than it was in 19. I mean, Portfolio has changed here and there since it's really hard to do an apple and apple, but the end of the day that gives you the, you know, the, the sense of things, but you're not that far off.

That's one two is obviously, we've got investments in our OPI category.

But frankly domestic assets other than you know maybe some of our residential stuff hotel stuff, there's just not a lot happening.

And you know.

We might see some stuff, but I think that won't be really driving kind of the activity that we would we would.

We anticipate.

Thanks. Thank.

Thank you.

Our next question is from Linda Tsai with Jefferies. Please proceed.

Hi, Thanks for taking my question about 6% of ABR is on month to month leasing and then 12% expiring for 24 how.

Floris Dijkum: I think that's a reasonable estimate, but that kind of puts all the metrics out there. You know, and again, it's not a huge deal in the scheme of things, you know, you know, under a couple hundred million today. So, but it gives your perspective of kind of that. I think they would argue the praise values much higher than what they exchange yet, but, you know, but we ultimately did not go through the appraisal process.

How much of the month to month is getting converted to permanent or should that number grow and then in terms of the 12% expiring in 'twenty four.

What's been addressed from a retail standpoint from where you stand today.

Yeah, I I know that.

There's a there's.

A number of leases in 'twenty three that are basically agreed to we're just finalizing the documentation.

So that's the first and I would think that generally.

Floris Dijkum: Thank you, thank you.

Vince Tibone: Our next question is from Vince Tibone with Green Street. Please proceed. Hi, good afternoon. So minimum base rents were about 3% year-rear, which is, you know, about the same level as contractual bumps. So I'm just trying to get a sense of, you know, leasing spread economics here. Like, does that mean leasing spreads are also in the low single-digit range, are there, you mean, see if Brian will add to it? Just, you know, remember, this is the total portfolio.

We're.

More than halfway through 'twenty fours right now on a kind of a.

Negotiated not papered basis, so Brian I don't know if you want to add anything to it but that that would be.

You know that that's kind of kind of where we are generically.

Linda you can see the material change Q2 over Q3, we've cleared about $2 2 million square feet out of that category. It's just a matter of processing.

We talked about it on our last call Theres, just a lag effect in the processing of those leases. So we do expect that to continue.

Vince Tibone: So to move this thing up takes a lot, right? And spreads are just, you know, a moment, you know, leases that come in and go out. So, so you can't really look at it that way. So for us to move the entire portfolio gives you a sense of leasing spreads. Now, if you look at whatever what pages on the 8K, the, you know, the new, we added some new information there on the 29, 21, that, you know, you'll see some of that, you know, some of these that are going in there now are driving the rent, you know, the rent, you know, those numbers now include our new leases that are driving that base minimum rent up.

Thank you.

Sure.

Okay.

Our next question is from handling C tests at Mizuho. Please proceed.

Yeah.

Hey, good evening out there.

Dave I just had a quick follow up on the consumer retail sales Atlantic question from earlier.

I think you noted your portfolio sales were flattish during the quarter, we've heard from other sector in storage apartments. It seemed like the consumer had a bit of a wall during the third quarter in September I'm curious if you saw anything.

Within the quarter, maybe in September of that sort and then perhaps what's your expectations in the near term outlook for retail sales for your portfolio and the consumer as we head into the holiday season of next year. Thanks.

Sure.

Well generally as we said earlier in the year, we expect to be more or less flat. So.

That's kind of what our expectations continue to be.

In terms of retail reported retailer sales.

Vince Tibone: Yes. I mean, we, we typically only touch about 10% of our leases a year, then. So you got to factor that in as well. So renewals are about 10%, but the balances are new leases, which as David said, are really driving the higher, or contributing to the higher average base minimum rents. But it is my statement fair, though, that contractual bumps for, for base rent are still around 3% or are they lower than that the overall portfolio?

Again, we feel pretty good about the higher income higher income consumer.

Vince Tibone: No, they're right in that range. And then just those very color you can share about renewals spreads. And I know it's hard to move the overall portfolio with 10%, but just kind of conversation means they're not too far away from the average contractual bumps, because they were plus 30% thick and extreme example, like we could see that in the metrics. So I'm just trying to get some more color here on. I mean, I guess, I again, Vince, in order to have the average base minimum rent go up for 20,000 leases of 3% versus, you know, 10 to 15% that calculates spread.

We've also got a balancing act in terms of you know some of our value oriented centers centers will you.

You know maybe play a more important role for a consumer today that.

They might not have otherwise played a last couple of years.

But you know it's it's.

It's unknown I mean, I know, we're being extra cautious.

Because of the.

The.

Inflation is still a little bit they're still taking a bite out of the consumer and obviously.

You know you've got rates that are beginning to talk to you through.

You know the economic system, so cautious flat.

Flat, we're not anticipating a downturn.

But.

Not a row robust sales growth for the fourth quarter relatively flat.

Got it appreciate that.

Vince Tibone: You're going to be mathematically going to have rent spreads that are higher than the 3%. And we'll walk you through that later, but that's just from a math point of view. There's just no way that that can drive that number up, but, you know, we'll walk you through that.

Squeeze in a follow up I think you were mentioned earlier as well that you started I think it was 960 might have new redevelopments at 6% yield and you talked about a higher hurdle rate, maybe some color on perhaps what that hurdle rate today is and where the next fastest redevelopment yields or projects would need to be.

You can see that migrate soon thank you.

David Simon: So when you say that, we would say to you that's not that, you know, that's not the not reality, because in order to drive up average base minimum rent to 20,000 leases are thereabouts, you're going to have to outperform much more than the 3% on just what's rolling Thank you.

Sure.

Yeah, I think the.

You know, it's a little bit dependent upon the real estate so.

You know and what we're trying to accomplish and what the benefits of that real estate.

Are and where the market is for that so for instance, you know.

When we build a new residential.

Greg Mcginniss: Our next question is from Greg McGinniss, the scoosh of Aing, please proceed. Hey, good evening, David and Brian. I'll keep this to one and a half questions for you. So last quarter you spoke about potentially being more active with asset recycling or reallocating real estate capital. Have a challenge of financing market, change those expectations at all. How are you thinking about that today and how are higher interest rates impacting your customers' intents?

Apartment house we.

Look at kind of where the value and the cap rates for that are they may be obviously lower than our debt.

But our own but to the extent that we feel like we might sell it.

And make the arbitrage will do that.

Again, if we're you know got an asset that's a six cap rate we're building to an eight that's creating value.

On the other hand, if we have an a asset that we're building to a six it ain't going to happen. So you know there's no there's there's.

Greg Mcginniss: Well, I'll take the last first. I would say higher interest rates, slash inflation clearly is affecting a good portion of the consumer out there. So, you know, there affordability for and we're seeing this most on the consumer on what I'd call the kind of the, you know, the more the brands that are focused on, you know, the more moderate income consumer. So there's no question that that's having some impact. But the good news is you got employment and you got wage growth that is counter balancing that but they're definitely being more cautious.

Greg Mcginniss: So that, you know, that's not necessarily affecting, you know, that a higher income consumer to the extent that you might otherwise think, but it's clearly affecting the lower or more moderate income consumer. That, you know, that they're being, they're being more cautious. And from our standpoint, from a retail point of view, you know, demand, like I said earlier, we haven't seen it, you know, affecting retailers too much in terms of their growth plans.

You know we have themes we have.

Points of view, but just like anything else every.

Transaction, we do every redevelopment we do really is grounded by what we are trying to accomplish with that real estate, so but overall.

Again like I said earlier, we've got to push it higher.

Cause you know our cost of capital regardless is up across the board.

So we don't have the luxury to you know to build you know.

Dilutive deals and you know as you know we've never really bought dilutive.

We've never really built dilutive and.

And we certainly don't anticipating doing that today.

We've always had a spread to our financing.

And to the quality of what we built.

We expect that to continue but that obviously those thresholds have been raised.

Thank you.

You.

Our final question is from Juan Sanabria with BMO capital markets. Please proceed.

They are in the best for last I love It thanks for the time.

Just curious if you could comment on kind of the watch list you've commented about the consumer but.

Greg Mcginniss: But, you know, what we obviously monitor that every day. So, from our standpoint, you know, our cost of capital is up. So, you know, any investment we make, as I mentioned earlier, is in the, is, you know, was measured against return. But return we would get from buying our stock back to return that we would get from redevelopment or development. And given that, that's why we haven't been active on the acquisition front.

Maybe what the bad debt has been year to date with the historical levels as in your perspective as you think about 'twenty four.

Oh, the watch list on retailers.

Yes, Sir yeah.

No.

It's it's relatively low there are there are a couple that were.

You know they are today that probably weren't there last year, obviously I'm not going to name those.

So.

It certainly hasn't grown all that much but there are you know one or two retailers that we're paying close attention to.

Greg Mcginniss: And I don't expect that to really change. In addition, you know, you know, we're always looking at monetizing our assets, whether it's real estate or otherwise. And to the extent that we can make the math work, and we create liquidity through asset sales, you know, the math is very compelling for us to do that, the buyer's stock back, and so you'll see more of that trend continue.

And I, probably wouldn't have said that.

Last year.

So.

David Simon: Great, thank you, thank you.

I think that I mean, it's not a very good answer, but it's probably the best way to.

To explain it.

You know without naming names, but there you know there are a couple on that list today that didn't exist yesterday, but you know what.

They're not 10 names there are a couple.

Brian you want to add anything no I think thats right, David we've certainly expanded but by only two or three names and it's at a relatively low point relative to history.

Mike Mueller: Our next question is from Mike Mueller with JP Morgan, please proceed. Yeah, hi, just a quick one here, and I know this is a bit of a hypothetical, but do you think you would have bought stock back if you didn't issue the shares to Talbot? I think we would buy, I'm sorry, I think we're looking, it's a good question, a fair question, and let me say this, the way I'm thinking about it, so to the extent that we have additional liquidity events, or in the case of Talbot and dealing with the delusion of issuing stock at this price, there's no question we're going to buy our stock back.

And I wanted to just confirm with everyone that that is.

You know as you look at our what pages are our top tenant list on Sun 'twenty to 'twenty two.

You know it's.

You know, it's it's certainly none of the category.

It is in our top 10 or top 20.

So.

And as you know are the department stores don't pay.

You know really don't pay all that much well you have the rent there in terms of what they pay.

Yes.

Thank you. Thank you.

Yes.

We have reached the end of our question and answer session I would like to turn the conference back over to Mr. Simon for closing comments.

Mike Mueller: To the extent that we don't, I don't have an answer for you yet on, you know, whether we would have done it, absent the TRG issuance or an enhanced liquidity from asset sales. But like I said, you know, our development pipeline redevelopment pipeline is very much, very much measured up against the stock buyback and every asset I've got, I don't have to own anything at this point, I'm happy to sell assets at the right price to buy our stock back.

Well, thank you and we finished a little bit earlier, so I think.

Enjoy the rest of the evening.

Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.

Yeah.

Yeah.

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Mike Mueller: And I think you'll see more of that from us, you know, over time, and that could be real estate and or other stuff. Got it. Okay, and real quick, in just in case I missed this, was there any change to the OPI guidance that's embedded in your current FFL outlook? Yes, we've lowered it. We've lowered it. Other than that, you understand the five cents because we own less a spark. We have lowered it for the fourth quarter by roughly guys for the fourth quarter to be about 20 cents.

Hum.

Hum.

Hum.

Hum.

[music].

Hum.

Mhm.

Okay.

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Mike Mueller: Yeah, yeah, roughly 20 cents in the fourth quarter, you know, lower content. If you look in total for the year and you know, our share that is roughly, if you take out the five cents, we've lowered it about 15 cents. Got it. Okay. Thank you.

Okay.

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Nick Joseph: Our next question is from Craig Melman with City Group, please proceed. Thanks. Actually, Nick Joseph here with Craig.

David Simon: Very, very talk a lot on the share by back. Sometimes like in your answer to the last question, we're open to asset sales and other monetization opportunities. What do you see in the transaction marketing in terms of those asset sales? Where are cap rates? What's the buyer pool like? Are you seeing an opportunity to try to crystallize some of that disconnect between the stock price and where you'd hope to sell now?

Okay.

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David Simon: Well, look, I think domestic retail is not a lot of transactions, but we have assets throughout the world. That's one, two is obviously we've got investments in our OPI category, but frankly domestic assets other than maybe some of our residential stuff, hotel stuff, there's just not a lot happening. And we might see some stuff, but I think that won't be really driving kind of the activity that we would anticipate. Thanks.

David Simon: Thank you.

Linda Tsai: Our next question is from Linda Tsai with Jeffries, please proceed. Hi, thanks for taking my question. About 6% of ABRs on month to month leasing and then 12% expiring for 24. How much of the month to month is getting converted to permanent or should that number grow? And then in terms of the 12% expiring in 24, what's been addressed from a real standpoint from where you stand today? Yeah, I know that there's a number of leases in 23 that are basically agreed to, we're just finalizing the documentation.

Linda Tsai: So that's the first and I would think that generally we're more than halfway through 24s right now on a kind of a negotiated not-papered basis. So Brian, I don't know if you want to add anything to it, but that would be, you know, that's kind of where we are generically. In Linda, you can see that the material changed Q2 over to Q3. We've cleared about 2.2 million square feet out of that category. It's just a matter of processing. We talked about it on our last call. There's just a lag effect on the processing of those leases. So we do expect that to continue.

Brian Mcdade: Thank you. Sure.

Haendel Juste: Our next question is from Handell Seed. Just to let me see if you'll please proceed.

David Simon: Hey, good evening out there. They've just had to follow up on the consumer, retail sales, Atlantic question from earlier. I think you know that your portfolio sales were flatish in the quarter. We've heard from other sectors, storage, apartments, which seemed like the consumer hit a bit of a wall during the third quarter and September. I'm curious if you saw anything within the quarter, maybe in September of that sort and then perhaps what your expectations in the near-term outlook for retail sales for your portfolio and the consumer as we head into the holiday season the next year. Thanks.

David Simon: Sure. Well, generally as we said earlier in the year, we expect to be more or less flat. So that's kind of what our expectations continue to be in terms of retail, reported retail sales. Again, we feel pretty good about the higher income consumer. We've also got a balancing act in terms of, you know, some of our value-oriented centers will... You know, maybe play a more important role for our consumer today that they might not have otherwise played last couple of years.

David Simon: But, you know, it's it's unknown. I mean, I, you know, we're being extra cautious, because of, you know, the, you know, inflation is still a little bit there, still taking a bite out of the consumer. And obviously, you know, you've got rates that are beginning to tell to through, you know, the economic system. So cautious, flat. We're not anticipating a downturn. But, you know, not a row, robust sales growth for the fourth quarter, relatively flat. I appreciate that.

David Simon: If I squeeze in a follow up, I think we were mentioned earlier as well, that you started, I think it was 960 litre of new redevelopment that fixed percent yields. And you talked about a higher hurdle rate. Maybe some color on perhaps what that totally today is and where the next batch of redevelopment yields or projects would need to be. And where we could see the migrates. Thank you.

David Simon: Sure. Yeah, I think the, you know, it's a little bit dependent upon the real estate. So, you know, and what we're trying to accomplish and what the benefits of that real estate are and where the market is for that. So, for instance, you know, when we build a new residential apartment. The apartment house, we look at kind of where the value and the cap rates for that are. They may be obviously lower than our, that our own.

David Simon: But, you know, to the extent that we feel like we might sell it. And make the arbitrage will do that. Again, if we're, you know, got an asset that's a sixth cap rate, we're building to an eight that's creating value. On the other hand, if we have an eight asset that's we're building to a six, it ain't going to happen. So, you know, there's no, there's, there's, you know, we have things, we have points of view, but just like anything else, every transaction we do, every redevelopment we do really is grounded by what we're trying to accomplish with that real estate.

David Simon: So, but overall, you know, again, like I said earlier, we've got to push it higher because, you know, our cost to capital regardless is up across the board. So, we don't have the luxury to, you know, to build, you know, diluted deals. And, you know, as you know, we've never really bought diluted, we've never really built diluted, and we certainly don't anticipating doing that today. We've always had a spread through our financing and to the quality of what we've built. We expect that to continue, but that obviously those thresholds have been raised.

David Simon: Thanks. Thank you.

Juan Sanabria: Our final question is from Juan Sanabria with the MO Capital Markets, please proceed. Given the best for last, I love it. Thanks for the time. Just curious if you could comment on kind of the watch list you've commented about the consumer but maybe what the bad debt has been here to date with the historical levels is and your perspective as you think it about 24. The watch list on retailers? Yes, sir.

Juan Sanabria: Yeah, you know, it's relatively low. There are a couple that were, you know, they are today that probably weren't there last year. Obviously, I'm not going to name those. So it certainly hasn't grown all that much, but there are, you know, one or two retailers that were paying close attention to. And I probably wouldn't have said that last year. So I think that, I mean, it's not a very good answer, but it's probably the best way to explain it, you know, without naming names, but there, you know, there are a couple on that list today that didn't exist yesterday, but you know, they're not ten names, there are a couple.

Juan Sanabria: Ryan, you want to add anything? No, I think that's right, David. We've certainly expanded, but by only two or three names, and it's at a relatively low point relative history. Yeah, and I want to, you know, just confirm with everyone that that is, you know, as you look at our what pages are, our top tenet list on 22. 22. You know, it's, you know, it's certainly none of the category that is in our top ten or top 20. So, and as you know, our department stores don't pay, you know, really don't pay all that much. Well, you have the rent there in terms of what they pay. Thank you.

David Simon: We have reached the end of our question and answer session. I would like to turn the conference back over to Mr. Simon for closing comments. Well, thank you, and we finished a little bit earlier. So I think, you know, enjoy the rest of the evening. Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation. Thank you.