Q1 2024 Simon Property Group Inc Earnings Call
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Greetings and welcome to the Simon property Group first quarter 2024 earnings Conference call.
At this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Tom Ward Senior Vice President of Investor Relations. Thank you. Mr. Ward you may begin.
Thank you Camilla and thank you all for joining US. This evening presenting on today's call are David Simon Chairman, Chief Executive Officer, and President, Brian Mcdade, Chief Financial Officer, and Adam Lilly 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 secured.
<unk> 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 FCC 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 dotcom.
Our conference call. This evening will be limited to one hour for those who'd like to participate in the question answer session. We ask you. Please respect our request to limit yourself to one question I'm pleased to introduce David Simon well. Good evening, we're off to a good start with results that exceeded our plan.
First quarter funds from operation.
We're $1.33 billion or $3.56 per share compared to <unk>.
1.03 billion or $2.74 per share last year.
Let me walk you through some highlights.
For this quarter compared to Q1 of 'twenty three domestic operations had a very good quarter and contributed nine sensor growth.
And by higher rental income.
Gains from investment activity in the first quarter were approximately 75 cents higher year over year old P. I had a two cents after tax lower contribution compared to last year.
Funds from operation from our real estate business was $2.91 per share in the first quarter compared to $2.82 in the prior year period, 3.2% growth rate domestic property NOI increased 3.7% year over year.
We have continued leasing momentum in Brazilian.
Consumer spending and operational excellence delivered these results that were above our plan for the first quarter portfolio NOI, which includes our international properties at constant currency grew three 9% for the quarter.
NOI from O P. I in the first quarter includes a $33 million charge and one time restructuring charges at spark and J C. Penney.
Excluding these one time charges.
And a bargain purchase gain from Reebok transaction last year NOI from OPI improved $5 million year over year and was on plan for the quarter. Remember these retailers are on a fiscal year ended January 31st and the charges were.
Part of the your year end closing process. They were not budget mall in occupancy at the end of the first quarter was 95, 5%.
An increase of 110 basis points compared to the prior year Mills was 97.7 average base minimum rent for our malls and outlets increased 3% year over year and at the mills three 8% increase leasing momentum continued as I mentioned.
We signed more more than 1300 leases for approximately $6 3 million square feet, approximately 25% of our leasing activity in the first quarter was new deal volume, we are approximately 65% complete with our 24, our lease explorations and.
We continue to see strong broad based demand from the retail community retail sales volume across the portfolio increased two 3% for the first quarter compared to last year, our tourist oriented properties outperformed the portfolio average in the quarter with.
The 6% increase in sales.
Ported retail sales per square foot in the first quarter was $745 a foot.
For our outlets a malls.
Combined which was flat year over year, excluding two retailers retail sales per square foot.
From our premium outlet platform reached an all time high this quarter occupancy costs at the end of the first quarter was 12, 6%.
Now, let me talk about other platform investments affectionately known as OPI, we sold our remaining interest in authentic brands group during the first quarter for gross proceeds of close to $1.2 billion and recorded a pretax and after tax.
Gain of $415 million and $311 million respectively.
The sale in the first quarter combined with the sale in the fourth quarter yielded gross proceeds of 1.4.
$5 billion, we drew we generated substantial value from the a D G investment.
And a seven X multiple on our net invested capital during our short ownership period.
As a result of the sale of de B G and the restructuring charges that I mentioned earlier.
One time in nature at spark and Penny in the first quarter. We now expect F. F. L. I F F O contribution from OPI to be around breakeven this year compared to the initial guidance of 10 to 15 cents for your reference we bought you did.
The at O P. I the S. F O from a b G around eight cents per share so roughly half of that was associated with a b G.
Now moving on to new development and redevelopment, we opened an AC hotel at St. John Center, we are opening Tulsa premium outlets. This summer leasing is going great and we have a significant expansion at USADA premium outlets in South Korea. This fall at the end of the quarter, New development and redevelopment projects.
Your way across our platforms in the U S and international.
And nationally as well with our share of net cost of $930 million at a blended yield of 8%. We expect to start a construction on additional projects in the next few months, including just shortly our residential project at North dates.
Station in Seattle.
What's interesting for us as we're able to build when others need to rely on construction lending market, which is a as you might imagine very difficult right. Now we expect our starts to be around $500 million of shares now.
On our balance sheet, we retired $600 million of senior notes in the quarter. We ended the quarter with approximately $11.2 billion of liquidity today, we announced our dividend of $2 per share for the second quarter a year over year increase of eight one.
The dividend is payable on June 28.
And given the transactions for this quarter and our results for this quarter. Our current view for the remainder of the year, we're increasing the full range of our full year guidance of 'twenty 'twenty four and the guidance range of $11.85 to 12 two.
I'm, sorry, let me restate that we're increasing our range to $12 75 to $12 90 per share compared to $12 51. Since last year. This is an increase of 90 cents at the bottom end of the range and 85 cents at the midpoint.
Needless to say I'm very pleased with our first quarter results.
And our business and tenant demand continues to.
To remain strong despite a cloudy macro environment occupancy is increasing property NOI is growing.
And we made a significant profit on our a b G investment.
And everything's kind of moving on and all the right directions. Thank you were ready for questions.
Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue and.
Speaker Change: And you May press Star two if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Our first question comes from the line of Caitlin Burrows with Goldman Sachs. Please proceed with your question.
Hi, good evening, everyone. Congrats on a solid quarter operationally and execution on the a b G. So I guess there have been news reports that you could get involved can express so whether it's related to express to debt finance strategy going forward and.
Can you give some insight to your current thinking on having ownership in brands what type of terms are attractive to you and how you balance that with the potential earnings volatility.
Well you know no one likes earnings volatility unless it's volatile or you're in the right direction. Okay. So.
Kayla and thank you for the comments to start but that's that's no I don't.
Like volatility either let's.
Listen on express.
We were approached by them.
The IP owner.
I think it's not.
Not overly complicated in the sense that they saw.
What we had done historically, both with a b G and spark.
And are offered us to participate with no capital.
But also add our expertise.
And our knowledge and.
You know what we've been what we've done in the past with spark.
And because we have always valued express as a retailer and as a client.
You know we jumped at the at the opportunity. So we don't expect it.
And we expect to be it's Gotta go through bankruptcy process and that's Oh, that's out of our control, but if if W. H P does end up getting that we'd be.
Pleased to participate in the turnaround of express and again, we don't expect any capital yeah as part of that participation. So you know when we get opportunities like that we evaluate it we look at the brand and the value of the brand in this case.
We're.
You know comfortable that that express.
It's a good company and it's a great brand is and we can add value to it and given the fact that you know we.
We were able to hopefully turn around the retailer saved jobs.
And create value from our investment.
It's a way we see it as a win win situation with with you know with no capital from our standpoint.
Great. Thanks for that thank you.
Our next question comes from the line of Jeff Spector with Bank of America. Please proceed with your question.
Hi, This is levy Deutsche <unk> on for Josh.
I was curious if you could talk a little bit more about it.
Retailer sales as we started the year.
And it it seems like there's been some good outperformance from driven by especially your your tourism driven.
Driven centers, so I'm just wondering.
And how much that has been a factor into the first quarter of this year and how much upside there is remaining from from tourism.
Sure.
We we feel very bullish on the on our.
You know portfolio in general and then obviously.
Our tourist centers, especially in California and in.
The northeast are starting to finally see the.
Improvement.
We have been seen for quite some time in Florida.
And.
You know, Florida continues to be.
Unbelievably strong market as well so we're we're finally seeing California, North east pick up obviously the strong.
Dollar visa b.
For certain currency does have a.
In effect, a kind of a.
Inhibitor effect, but even with that said our domestic tourism.
<unk> continues.
You know to.
Continues to excel and I think people at the end of the day a day that was part of it when they go on a holiday they love they love shopping as part of that experience dining shopping being.
Being with their families and.
As I said earlier I mean, we feel like the malls made a big comeback.
You know physical stores or where it's happening and we're seeing a resurgence.
And reinvigoration.
Of of that whole product. So we're pleased is kind of where we're where we're seeing things. So.
Certainly the lower income consumer has been under pressure now for quite some time.
You know, we're very focused on that.
Obviously inflation has taken its toll and even though inflation is moderating.
The prices.
That.
The lower <unk>.
Cam consumers don't really.
Dealing with are quite.
Daunting. So we'll continue to see volatility in that area, we anticipate.
You know, we're hoping that.
No their cost of living.
Moderates and to some extent.
You know their wages go up or you know there are cost of living goes down. So we can see more discretionary income there.
The higher income consumer continues to you.
And I have to spend and.
And and visits are properties in and.
And its good and you know is a good example of that is our traffic.
The first quarter.
Quarter.
Zinc was up around 2% for the year right yes.
So you know that's a that's also a very good sign.
Okay.
Okay and our next question comes from the line of Samir Khanal with Evercore. Please proceed with your question.
Good afternoon, everyone I'm, David O'brien, you provided the same store guide of at least 3%.
Last quarter I guess, how do you feel about that guy today Youre doing three seven in the first quarter.
Clearly leasing has been strong.
But we also seen some announcements from express route 21, I guess, how do you feel about that guidance great. Thanks.
Yeah look.
We don't we don't update that.
As you probably know I think you'd know we we don't you know that's our goal for the year, we don't update it every quarter as some others might but we still.
I feel like that even though we've got.
Some unanticipated to some extent I mean, we do create.
You know bogeys on our rental income stream on retailers that we do feel.
Might come under pressure in the air So we do have.
Kind of adjustments.
Adjustments in our budgeting process dealing with those we still feel like you know.
Our initial guidance on that is very achievable. So we don't update it every quarter, but you know if we didn't feel.
Like we could achieve it.
And you know I think we would.
Oh, we would highlight that but we don't see that even with some of the.
You know I mean, we might not overachieve you know.
As we always want to.
But I think we can still deliver the initial guidance.
Thank you David Thank you.
And our next question comes from the line of Ronald Camden with Morgan Stanley. Please proceed with your question.
Yeah.
Great just a quick one on the 500 million not the valve and starts if you could just talk about sort of the opportunity there and.
Do you sort of still see.
Opportunities to go on offense on sort of the mall space given that fundamentals are coming back and we know that there is gonna be peers looking to sell assets are there opportunities in appetite to go on offense on sort of buying more assets. Thanks.
Speaker Change: Sure.
I think.
We've seen rates.
More or less stabilized now.
Volatility prior to that were.
It was a hard to predict now you know, we're not anticipating a reduction in rates, but at least we feel like.
We're in a more or less a stable rate environment that makes it easier to make investment decisions. So I would I.
I would break it up into two buckets, the first bucket B R.
Redevelopment effort and most of that frankly is mixed use.
In our properties and we feel very well.
Bullish on that remember, you're you're talking about bringing on if it's a two to three year process, we're talking about bringing on product in two to three years not can be any supply we do a very good job of understanding supply and demand the new new better product always wins.
So.
We are unabated.
In our mix mixed use and we'll be doing some multifamily.
Development.
Boston, Bray, and Orange County, and we as I mentioned, we just signed our GMP at North station.
To build about 300 units as part of that whole redevelopment. So that really goes down debate is that when you get to the external.
You know external a new deal environment I would say.
Hum.
We have a lot of opportunities ahead of us and I think our job is just to.
Prioritize make sure were.
Valuing the opportunities right.
And and we don't take our eye off the ball.
You know with what we're doing with our existing portfolio. So long story short I probably would.
Venture to say that there could be more external opportunities for us, but again, it's got to be great quality.
At a fair price and have assets, where we think our expertise can add cash flow growth to them.
Thank you. Thank you.
Okay.
And our next question comes from the line of Michael Goldsmith with UBS. Please proceed with your question.
Good evening. Thanks, a lot for taking my question David you highlighted.
The health of the consumer it seems like doing alright are managing through the environment.
Given your positioning.
Occupancy gains and the pricing power that you have if there was some sort of macro slowdown do you think how do you think you'd be able to navigate it or maybe said another way do you think the business has become a little bit less macro sensitive as you are.
There's been consolidation and and you kind of become the place where you where you reach consumers that luxury.
Thanks.
Sure.
Where we are make no mistake about it we are not immune to the macro the.
The macro environment so.
We we would.
Without.
Have to deal with it both from.
Speaker Change: If it ultimately.
But the less consumer spending in more retail.
Client stress, we're not immune to it however, and this is a big.
No the big underlying from my standpoint, I have always felt like we've done our best work.
You know when others are.
Speaker Change: Dealing with the macro environment so.
You know and as I mentioned to you we have $11 billion of that liquidity.
And that's in that.
R. R e-commerce.
Comments earlier.
So.
I think.
When and if and frankly I mean, it's it's.
No realistic to assume we may go through a reasonable slowdown here coming up.
I think that's when we do our best work, that's why others get tired and throwing the towel.
That's where we get read.
<unk> hopefully we're rejuvenated now, but this is when we really.
Get motivated and.
And I, you know as I think back.
Had the luxury of being in the spot for 30 years I think we do our <unk>.
Very vast work.
You know when you know.
When the times get tough so not wishing that on us or anyone.
But it is a realistic probability we won't be immune for but that I think will further separate.
This company from our peers so.
That I know that I have a 100% confidence in that.
If that does happen.
We'll have further further separation.
Thank you very much thank you.
Our next question comes from the line of Alexander Goldfarb with Piper Sandler. Please proceed with your question.
Hey, good.
Alexander David Goldfarb: Good afternoon out there.
David just wanted to go back to Caitland question.
In response to the retailers you said that it brings a lot of volatility obviously, we all like volatility in the right way, but you can't deny that you guys have made a ton Oh, sorry could you say a French word to describe that.
But you guys have made a ton.
Money billions from these retailer investments.
Yes, they are volatile, but they've been lucrative space. So just wanted to get a better sense is the express model sort of a future where you guys will participate.
Alexander David Goldfarb: If you put in no capital or just trying to understand how you weigh the money that you've made versus the.
Alexander David Goldfarb: This short term or the quarterly earnings volatility because clearly it's been a source of our success for you.
Speaker Change: Yeah, that's it.
It's interesting Alex it's a very good question and I think.
Honestly, we really focus on.
You know to the extent, we do put in fresh.
Fresh capital.
We.
In addition to understanding what it means for our overall business.
And.
The totality of our company.
It's also <unk>.
Absolutely driven by you know return on investment just like you know building a new shopping center so.
And again, yes, we have volatility, but in the scheme of things again.
And the fact that we've made money I hope most.
Folks are.
Understanding that the volatility is really on the margin.
And I'll just give you a good a good example of you know and and again, we take F.
<unk> as you know as net income plus depreciation well you know the.
Attributes when we get from our retailers is net income which was fully burdened by depreciation. So there's no add back but to give you a simple <unk>.
Alice is on you know just a b G. As an example, so we we cleared a billion for 50 of cash.
And that.
<unk> about eight eight cents of earnings because you know.
We just picked up our share of net income.
We only got we only as a shareholder there only we only we'd get tax distribution is.
No.
Some chatter as essentially.
So we would only get our tax distributions, which amounted to.
$2 million a quarter, so that's $8 million and if you take the $1 billion for 50 and investing in the bank at five 5% that's $70 million.
So we went from $8 million of cash flow to $70 million just selling that so when we look at every aspect of our pre tax after tax what does it mean to the portfolio.
What as you know we don't want we don't want volatility, but we'll have we'll certainly.
Except it if we think it's gonna be a good investment and it all kind of goes into.
The analysis, we understand the market is.
Not thrilled with it so we try to also do it in a way that really.
Really does not.
Make it.
The.
You know the story it is on the margin and it will always be on the margin but.
But.
But we do think we can add value to the enterprise by some of these investments.
And.
No.
Each investment is so idiosyncratic its hard to say.
You know again if I'm.
If express happens it's hard to say that that's the new model because I don't I don't know that I can say that I think every one of these things is somewhat idiosyncratic but.
And are we.
We do have the opportunity to do more than you know.
Lease space in a you know and Alabama, someplace or you know.
That's what this company is all about we do more than that we.
You know, we're in South Korea, where in.
You know, we're in Jakarta, where we're building in Tulsa, where.
We're building apartments in Seattle.
Speaker Change: So I mean, I'm waxing, a little bit here, but I I I.
We think of ourselves broader then.
I think the market thinks of us.
That's a comment upon us and I think our disclosures have gotten better over time, I hope you'd reality on OPI, so you'd see it not detract from real estate, but same time.
We're somewhat or somewhat different than <unk>.
Your line, it's up to you know others that do.
Some of what we do.
Speaker Change: And that was the point that you guys have this special thing yeah, it's sort of like Kimco has there Hugh retailer unique thing and it would be ashamed to do away with it if it was just volatility clearly it's made you.
A lot of cash so thank you for the answer thank you Alex.
Our next question comes from the line of Craig Mailman with Citi. Please proceed with your question.
Thanks, its a mixture of secured with Craig David I, just wanted to ask on <unk>.
E opportunity and to roll out additional luxury either VIP suites or retailers. We saw what you did at Woodbury and I'm just curious on the opportunity for the remainder of the portfolio and what kind of demand do you think that will try it from some of these higher income client tell that you're seeking.
Listen I think we've got a great portfolio.
Of you know.
Our real estate that is focused on.
The very high.
Income consumer and I think.
You know.
We need to step up our game in.
And all of the services that need to be provided to that consumer.
And I think Woodbury Sawgrass are just the beginning of an effort to really.
You know I can't think of the right word but really.
Entertain that consumer to make it really special and it's all it's all of the services that are they're accustomed to its the fine dining.
It's the ease of.
Of access it's right, having the right retailer mix.
So we.
We probably have around 20.
The 25 properties that are that have this high you know our centers are really big so they obviously appeal to a.
Our broad range of consumers, which is the way we like it because you know.
That's also.
You diversify.
You know the ebbs and flows.
But that.
But those 2025 centers really need special attention, we got a great team that's dedicated to them.
And.
In many cases, where the.
Preferred or are you know certainly a meaningful landlord to.
To the best retailers in the World and we want to we definitely want to stay in that spot. So.
A big push for us to step up our game.
When it's dealing with the very high end consumer.
On all sorts of all sorts of levels.
And so I think what.
What happens at Sawgrass.
<unk> and.
Speaker Change: Colonnade.
And you know what already happens at Woodbury.
But you know, we're we're just stepping up our game.
Will happen at Houston in King of Prussia.
You saw what we did it sets in Atlanta and.
What's going on at Boca Raton in Florida.
You know just to name a few that jumped out at me.
It's really really a high priority for the company.
Okay.
And our next question comes from the line of Floris Van <unk> with Compass point. Please proceed with your question.
Hey, thanks.
David.
I was going to ask you about luxury but I was pip so.
Yeah.
I'm going to ask you about capital.
Recycling, presumably your guidance I mean, you're just you're clear. It's you know $1 2 billion on the <unk> sale.
Sitting there in cash and obviously you do have some ongoing development.
Development, but those are essentially funded from your your.
Retained cash flow if you will so the guidance assumes is that that cash sits there uninvested essentially for the rest of the year or is there further upside I guess is what I'm getting at if you were to do something else with that cash at.
Speaker Change: Redeploy that into higher yielding investments.
Yes.
Speaker Change: Good very good question.
We.
We cleared in two months 1 billion $4 50, as you know foreign so I just wanted to mention that but yeah right now our guidance is just assume.
Simpson it sits in the bank.
<unk>.
And or pays down debt, but that's basically it so no no really.
You know.
No real.
Redeployment is contemplated in.
And our numbers at this point.
Brian if you want to add anything yeah, no. That's right. We've just assumed that we would hold the cash for the time being and we have debt maturities coming due here in September and October and so we could use the cash on hand to fund that we also were carrying cash from our activities and our capital markets activities last year. So that's a combination of it will address our upcoming maturities.
Thanks.
Q.
Our next question comes from the line of Vince to Bond with Green Street. Please proceed with your question.
Hi, good evening could.
Could you elaborate on the charges taken in the first quarter related to spark and J C. Penney and then possibly related to that kind of what is your near term outlook in terms of J C. Penney store closures, just given foot traffic trends in recent years have not been great. So just curious how long you think the current store count and.
Sleep is.
Annabelle.
Yeah, the charges pretax for $33 million, so not you know not.
Not.
You know most it's kind of funny.
Because you know most charges through the hundreds of millions of dollars.
I think you have to put it in perspective, but with that said.
It really dealt with.
Personnel and inventory.
So that where that that were the two.
Primary.
Factors and more really on the inventory side because we.
We had some clearance inventory.
That.
And spark it was really focused on F 'twenty, one and and Penny.
Just on basically clearing out some inventory so you know penny.
We're pleased with Penney just talk talk.
All we know about the store closings.
No there is they're very interesting they don't.
Penny is able to produce positive EBITDA, even if there's.
No.
You know.
No we're not high sales I think they do you know.
Out of the box so I don't really in fact.
Penny almost can be a beneficiary opening new stores.
As opposed to closing stores I'm sure there'll be a few here and there but.
You know most all of their stores are.
Our.
Positive EBITDA and so they.
Very good way of having positive EBITDA.
Out of.
What I call low volume stores.
And again.
This is what's interesting to us.
No.
Penny is not public so you know what matters to me that's cash flow EBITDA.
And that obviously.
Comp sales are important right, but.
But as long as we're profitable out of the stores you know Theres No wall Street pressure that we've got it.
Narrow that store count.
I don't necessarily believe shrink to grow it very very well.
It's very hard to achieve maybe you can achieve it.
My history, not not overly long but.
Oh long enough.
I don't care what industry, it's very hard to do some have done it by the court.
But to me if it's got positive EBITDA.
Nothing wrong with.
Maintaining that store for the community.
You certainly don't want to lower standards of how you operate it but.
If you can if you can create cash flow.
Necessarily mean you have to.
Reinvest that much in it and you can use that cash flow to reinvest in the other elements of your business. So I don't anticipate long story short.
I really don't anticipate.
No.
Much portfolio real estate activity at the J C P level.
No. That's really helpful color just as a quick follow up on that I'm. Just curious given the ownership structure. I mean are you guys able to pursue recapturing some of these boxes at your best properties to unlock you know mixed use development opportunities or how would that work given your split ownership with Brookfield.
Yeah, well look I think it's part of the deal originally.
First of all our relationship with Brookfield is excellent and our.
Our.
You know we both pay.
Basically.
<unk>.
And an investor in there as well.
Very much see eye to eye on.
J C Penney and how it operates.
Oh, we should operate at and I would say both of us.
Hum.
My my memory is a little bit cloudy, but when we did the restructuring.
We did get both of them, it's got the opportunity to reclaim.
Or.
<unk> reclaimed certain space.
From Jcpenney that we could redevelopment. So it's a good question and the fact is we are about to embark upon one.
That you'll see an announcement in the near future where we are.
We are going to ultimately redevelop a J C. Penney at one of our.
One of our centers so.
Yeah.
I don't remember the exact count I don't remember exactly how much Brookfield, but it's part of the.
Part of the bankruptcy process and negotiation with each other.
We did give each other the right to do that and so what happens there is we get notice.
To the company its already documented then we get that we Uh huh.
And we could in this case.
It's a lease so theres nothing to pay we just cancel the lease now.
Obviously stores, a little bit profitable very profitable for us.
J C. Penney, so we're going to have to finding some new opportunities to make up for it but.
That's all part of it part of the deal. So I think there'll be a handful like that both for Matson Brookfield that we'll be able to do.
But.
And again that was all pre negotiated to the extent that there is one that wasn't part of that negotiation. Yeah. That's pretty you know given our relationship with Brookfield pretty pretty straightforward.
Come up with the value they come up with a value.
You know obviously, the J C. Penney management team, we'd have to be part of that and.
They they would get the appropriate value to redevelop that that project.
Thank you all great color. Thank you.
Yeah.
Okay.
And our next question comes from the line of Juan Sanabria with BMO capital markets. Please proceed with your question.
Hi, good afternoon, just hoping to ask about.
The watch list or bad Guy I believe you said you had assumed 25 basis points last quarter.
That change now at all.
And if so maybe if you could break out the express impacting and in your prepared comments you talked about sales on a per square feet basis being flat.
Speaker Change: Hang out two tenants just curious.
The color of why those two tenants were stripped out if there's any.
Speaker Change: Interesting.
So let me let me answer that I think.
The two tenants.
Even if we Didnt I think it's just color for you to know that generally.
The portfolio was was flat we.
We don't like to name tenants. So we don't.
Focus on it I'd also I think point out to you. The most important thing we look as total volume.
And we were up quarter over quarter or what was the number again two four.
Two 3% that's really the number we look at and again remember these are reported sales.
We can get into this whole diatribe about.
You know some of it is some of the retailers.
Creditors sales with Internet returns so it's it it's.
It's just information Okay do do what you want with it but it's just information, but our our sales. If you include the two retailers.
The last 12 months was down one 8%.
On a rolling 12.
But toll because not all of those are comp total was up two 3%, which is the more important number now.
We'd also just.
And Brian can add in here now that I'm talking about miles will just finish.
We don't we don't.
As part of our discussion we don't we'll never get into a retailer specific response.
But.
Obviously bank.
Bankruptcy for tenants has a lot of.
Speaker Change: Uh huh.
A lot goes on leashes have to be rejected.
Yes.
And depending on where they were on that.
And what happens so.
We in our comp NOI, we have our bad debt expense I think I gave you some color we still feel like.
It's achievable so.
But again I don't think and Brian can add we're not going to really give you a color too much on express, but we do put in.
When we model our business for the year, we do put in.
You know unforeseen circumstances.
And we try to.
We tried it.
Budget appropriately for retailers that are under pressure.
In this case, we kind of knew express was in that.
But but.
But a lot remains to be seen how.
Express comes out of bankruptcy.
And the ultimate financial impact.
Thank you.
Thank you.
Yeah.
And our next question comes from the line of Hendel St. Juste with Mizuho. Please proceed with your question.
Hey, good evening, thanks for taking the question.
A quick two parter here first I wanted to follow up on <unk> question on the uses for the cash and the retail monetization to stocks $35 or so higher than what you lost back so I assume it's fair.
That's fair to assume that buying back stock is less likely here.
And are there any special dividends that need to be paid on that gain and then my second part of the question is we noticed that the TRT property count dropped to 18 properties versus 20 last quarter what happened there. Thanks.
I'll, let Brian you can I hope you can answer all of these I expected I can with respect to <unk>. There were two properties. One was our partner are buying out our interest. So there the property count went down by two in the quarter.
With respect to element to fair out some country club the two assets that are there.
The partner is buying us out or bought us out.
With respect to capital on the balance sheet certainly.
It's a capital allocation decision relative to stock buyback, but you know with the amount of capital that we are generating both free cash flow and what's on our balance sheet. It is still an appropriate use of capital throughout the balance of the year and would expect that we would have interest in buying back our stock at certain levels.
I would just add to that that you know that.
The E G sale.
Happened I don't remember exactly but near quarter end and we were.
We were.
Speaker Change: We were.
Blacked out for that because of our Q1 earnings so I wouldn't read that the fact that it's sitting on the balance sheet too.
Read too much into that.
Got it appreciate that and a special dividend anything on that front. If there is no required special dividend. These or are these this interest we don't in our taxable REIT subsidiary, so there'll be a tax actual payment do not actual a special dividend.
Got it got it thank you.
Our next question comes from the line of Linda Tsai with Jefferies. Please proceed with your question.
Hi, Thanks for taking my question a two parter.
Appreciate the fact that you won't provide capital to express, but could you just give more color on how you would be providing assistance to the brand.
Well I think.
You know obviously there is a couple of elements the first.
The most important one is that.
You know we have the history.
Running a retailer coming out of bankruptcy.
Speaker Change: So I think for.
Speaker Change: For better or worse, I think its better but.
Others may not agree with me.
There's a certain expertise in doing that and we've.
We have and I think.
What are potential partner sees on that is.
As.
Is that that we can bring to the table, so I wouldn't underestimate that.
One number two is as part of any.
Bankruptcy.
We're gonna have a lease negotiation.
Some leases will get.
Restructure some won't some will pay.
What's existing renters and so on so but that's that's that happens regardless of whether or not were involved or not.
So that's just part of the bankruptcy process, we go space by space and find out.
We kind of find out what.
We'd like to do maybe short term leases.
So on and so forth, but but but but we're not alone in that any other landlord will.
We'll have to come to their own conclusion on what they what they wanted to do this.
As part of rent adjustment is necessary to.
Get the brand on solid financial footing.
And do you have any clarity on this store closures at all because one of your much smaller peers expects to close 65% of its stores and <unk>.
You know we are not involved in that process.
It's really.
That's really management.
So I have no point of view, where no opinion on that at all.
That whole process as part of that we really want.
We really won't get involved until.
Until.
Sure.
Approved as the stalking horse bidder, so that all that's going on today with the depth and everything else is all part of it.
It's all of the existing management team we have no.
No involvement in that whatsoever.
Thank you.
Speaker Change: Sure.
And our next question comes from the line of Mike Mueller with Jpmorgan. Please proceed with your question.
Yeah, Hey, guys, it's hung on for Mike.
I guess I was wondering can you give us an idea of where what categories you're seeing most of the demand from in your malls is it I'm just wondering if it's broad based and or how much of it was apparel versus other categories.
Honestly, it's across the board restaurants entertainment.
The athleisure.
Sports related.
It's.
The bigger boxes.
Unit close prime markets of the World.
Zara.
It is.
You know.
It is you know this is where I give a shout out to Rick because he used to used to go through it but.
You know we're seeing it you know Abercrombie, we're doing a lot of new opportunities with mango.
Golden Goose just to name a few.
Yeah.
Net well JD sports Allo allo.
Lulu Lemon is growing with us upsizing a lot of properties.
Speaker Change: Our house is a great company that we're doing.
Business with.
Pinstripes number of restaurants.
Restaurant tours.
It's very very very encouraging.
It's so it's so diverse.
Got it if I could sneak one other question and I guess beyond $745 a square foot.
As that portfolio weighted or NOI weighted ports.
Speaker Change: Portfolio wait I'm, sorry, just portfolio pure if it was NOI weighted.
We used to do that its like 90%.
$950 plus or minus yes.
Okay 950 thereabouts.
Perfect. Thanks sure.
Our next question comes from the line of Greg Mcginniss with Scotiabank. Please proceed with your question.
Hey, David Good afternoon.
I guess I'm looking at the volatility in the retail investments what are the drivers to keep spark and jcpenney on balance sheet as opposed to the APG investment and would you look to sell those in the near future.
Well again, there are equity accounted so they're really not on our balance sheet.
Just to make that clear so their investments.
Listen they are.
We build a company where.
Everything is core nothing this quarter so.
We saw the AVG.
We got an offer we hit the bed.
We view that for any and all assets that we have whether it's J C. Penney spark.
Y Z mall.
Call uncle, David and.
Speaker Change: No.
Most people don't hit my bad, but you know.
The only thing that's core is.
You know the company and its people and its balance sheet, but every other assets for.
For sale at the right price so nothing is.
It's a critical long term and again you know.
Look guys, we're talking about volatility and the reality is.
The volatility has been mostly on the upside and again were.
A company that earns $12 and we're talking about.
10 or cents here or there so.
I just wanted to put everything more or less in perspective, but.
Yes.
There is nothing nothing.
Debt.
Wouldn't sell.
At the right price across the company worldwide.
Period end of story.
And it's very simple you know why because if we got the cash I know we would find.
You know an appropriate investment for that.
<unk>.
That would.
<unk> replaced the earnings.
Lost.
Speaker Change: It's really that simple.
Or we'd give it to the shareholders or we buy our stock back so.
I am.
I am at the point of the highest level of indifference about monetizing an asset as youll see.
Great. Thanks for the color sure.
Thank you.
We have reached the end of our question and answer session and with that I would like to turn the floor back over to Mr. David Simon for any closing comments. Okay. Thank you sorry, we are.
I know, it's the end of earning season, we always we're always late in.
Q1, because we tied to our annual meeting next on Wednesday, but thank you for your interest and your questions very good questions I appreciate it. Thank you.
Speaker Change: Yeah.
This concludes today's teleconference. You may disconnect your lines at this time.
You for your participation.
Yeah.
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Speaker Change: [music].
Yeah.
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