Q3 2024 Simon Property Group Inc Earnings Call
Greetings and welcome to the Simon property groups third quarter 2024 earnings Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my.
Speaker Change: Pleasure to introduce your host Tom Ward Senior Vice President of Investor Relations. Thank you Tom you may begin.
Tom Ward: Thank you Paul Good morning, and thank you for joining us today presenting on today's call are David Simon Chairman, Chief Executive Officer, President and Brian Mcdade, Chief Financial Officer.
Tom Ward: A quick reminder, that statements made during this call maybe deemed forward looking statements within the meaning of the safe Harbor of the private Securities Litigation Reform Act of 1995.
Tom Ward: 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.
Tom Ward: 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.
Tom Ward: Well, it's a press release and the supplemental information are available on our IR website at investors Simon Dotcom.
Tom Ward: Our conference call. This morning will be limited to one hour for those who would like to participate in the question and answer session. We ask that you. Please respect our request to limit yourself to one question.
Speaker Change: I am pleased to introduce David Simon.
David Simon: Good morning, everybody and I'm pleased.
David Simon: With our financial and operational performance.
David Simon: In the third quarter, we saw increased leasing volumes occupancy gains.
David Simon: And a total reset retail sales volumes.
David Simon: Demand for space from a broad spectrum of tenants here.
There's strong and steady.
David Simon: And we continue to strengthen our.
<unk> unique reach.
David Simon: Retail.
David Simon: Our real estate platform through our growing development and redevelopment pipeline.
David Simon: Pipeline.
David Simon: This combined with our a rated balance sheet really sets us apart and allows us to focus on the future.
David Simon: We raised our dividend again to $2.10, where now that our historical high.
David Simon: Coming the Hum.
David Simon: Arbitrary capricious closing of our real estate during Covid.
Speaker Change: You have a low payout ratio.
Speaker Change: I'll now turn it over to Brian who will cover our third quarter results and full year guidance in more detail Brian.
Brian Mcdade: Thank you David and good morning.
Brian Mcdade: Real estate after so with $3.05 per share in the third quarter compared to $2.91 in the prior year, a four 8% growth rate domestic and international operations had a very good quarter and contributed 15 cents of growth driven by a 3% increase.
Brian Mcdade: Lease income.
Brian Mcdade: Third quarter funds from operation or $1.07 billion or $2.84 per share as compared to $1 $2 billion or $3.20 per share last year.
Brian Mcdade: Third quarter results include 13 cents per share of non cash net loss as fair value adjustments from the mark to market on the claim senior exchangeable bonds. We issued in November of 'twenty, three which mature in November of 2026.
Brian Mcdade: Noncash loss on derivative is due to the outperformance of clay if your stock price, which increased 18% during the third quarter as a result of the stock appreciation the market value of our clay peer investment increased by approximately $400 million during the third quarter.
Brian Mcdade: OPI was an H cent loss in the quarter due to reduced discretionary spending by the lower income consumer at to spark brands and also from the loss of income from E. D. G. In the prior year due to the sale of our interest earlier this year.
Brian Mcdade: As a reminder, the prior year results include 32 cents per share and non cash gains from the partial sale of our ownership in spark in the third quarter of 'twenty three.
Brian Mcdade: Domestic NOI increased five 4% year over year for the quarter.
Brian Mcdade: You do continued leasing momentum resilient consumer spending and operational excellence delivered the results exceeding our plan for the quarter.
Brian Mcdade: Portfolio NOI, which includes our international properties at constant currency grew 5% for the quarter.
Brian Mcdade: Malls and outlets occupancy at the end of the third quarter was 96, 2% an increase of 1% compared to the prior year. The mills occupancy was 98, 6% at the end of the quarter.
Average base minimum rent for the malls and outlets increased two 3% year over year.
Brian Mcdade: And the mills increased four 5% year over year.
Brian Mcdade: Leasing momentum continued across the portfolio.
Brian Mcdade: We signed approximately 200 leases for 4 million square feet in the quarter.
Brian Mcdade: Through the first nine months of 2024, we have signed more than 3900 leases for 15 million square feet, which is expected to generate more than 1 billion of revenue.
Brian Mcdade: An additional 1800 deals in our pipeline, including renewals for more than 600 million of revenue.
We continue to see strong broad based demand from the retail community, including continued strength for many categories.
Brian Mcdade: Reported retailer sales per square foot with $737 for the mall and premium outlets combined and was up approximately 1% year over year, excluding two retailers importantly, total sales volumes. Excluding those same two retailers were up approximately one and a half.
Brian Mcdade: Year over year.
Brian Mcdade: We ended the quarter, our occupancy cost was 12, 8%.
Brian Mcdade: Turning to new development and redevelopment.
Brian Mcdade: We opened Tulsa premium outlets on August 15th at 100% leased and we've also we also opened a significant expansion at Tucson premium outlets in South Korea in September.
Brian Mcdade: At the end of the quarter, New development and redevelopment projects were under way across all platforms in the U S and internationally.
Our share of net cost of $1 $3 billion at a blended yield of 8%.
Brian Mcdade: Turning to other platform investments are OPI results for the third quarter at spark underperformed as the lower income consumer continues to be more cautious in their spending.
Brian Mcdade: We first highlighted the inflationary impact in the second half of 2022 relative to this consumer performance was below expectations at forever 21 and Reebok.
Brian Mcdade: Sparks N J C. Penney did however record sequential improvement in comp sales during the third quarter, which sets these brands up well the important upcoming holiday season.
Brian Mcdade: We are not sitting still and we expect to have some positive announcements by year end with respect to these businesses.
Brian Mcdade: Turning to our balance sheet during the quarter, we amended and extended our three and a half billion dollar supplemental revolving credit facility for three years on existing terms.
Brian Mcdade: We also issued 1 billion in senior notes with a term of 10 years and a 4.75% interest rate. This was clearly good timing on our part.
Brian Mcdade: During the first nine months of the year, we completed refinancing with a 14 property mortgages for a total of approximately $1 $3 billion at an average rate of $6 one 3%.
Brian Mcdade: We ended the quarter with approximately $11 $1 billion of liquidity and at the end of the quarter on October subsequent to the end of the quarter on October 1st we repaid our last remaining unsecured maturity for 2024 of $900 million.
Speaker Change: We can we constantly innovate and both our physical and digital worlds to create world class convenience for our shoppers and drive incremental sales for our brand partners.
Speaker Change: Continuing this effort and building upon the success of shop premium outlets, we rebranded our digital marketplace shop, Simon to take advantage of all of our assets, including shopper email list totaling over 25 million customers.
Speaker Change: Expanded and rebranded digital marketplace ads.
Speaker Change: On sale and discounted merchandise, while continuing to offer outlet products from leading brands. This is the next phase in our journey to create the ultimate Omnichannel experience.
Speaker Change: We also launched a new nationwide marketing campaign meet me at the mall. The campaign celebrates the shopping malls continued cachet is the go to destination for all generations.
Speaker Change: Two our dividend today, we announced our dividend of $2.10 per share for the fourth quarter a year over year increase of 10, 5%. The dividend is payable on December 30th.
Speaker Change: This is the fourth consecutive quarter, we have increased our dividend and the dividend is now back to our pre pandemic record high.
Speaker Change: Finally, turning to guidance, we are affirming our guidance range of $12.80 to $12 90 per share, which excludes 14 cents per share year to date impact of the noncash loss on fair value adjustments from the Mark to market on the claims are exchangeable bonds, which <unk>.
Speaker Change: Prior to the third quarter. It was only a one cent net noncash loss, but is now 14 cents and needed to be highlighted.
Speaker Change: With that thank you for your time today, David and I are now available for your questions operator.
Speaker Change: Thank you well 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 your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment may be necessary to pick up your handset before pressing the star keys, one moment. Please while we can.
Speaker Change: Call for questions.
Speaker Change: Thank you. Our first question is from Steve Stockholm with Evercore ISI. Please proceed with your question.
Steve Stockholm: Yeah. Thanks, Good morning, David and Brian you know it sounds like you've got great momentum on the leasing front, but the portfolio north of 96% I'm. Just curious how you guys are attacking the lease expiration schedule over the next couple of years and whether you feel like pricing power is moving materially in Europe.
Speaker Change: Favre.
Speaker Change: Just given the interplay with sales being a little bit flat, but obviously, they're being strong demand for high quality retail space.
Speaker Change: Yes, Steve I'll I'll answer that sent.
Speaker Change: Simplistically I guess.
Speaker Change: I would say that's our job.
Is to continue to improve the <unk>.
Speaker Change: Merchandise mix at our at our real estate and.
Speaker Change: So it's it's more than it's it's it's a lot more than just what rent you can charge it.
Speaker Change: It's really you know what is the right.
Speaker Change: Retail retailer tenant.
Speaker Change: You know et cetera, what's the right mix for that property and we take more of a.
Speaker Change:
Speaker Change: Holistic approach to to how we remerchandised centers, where we're still undergoing.
Speaker Change: Significant re merchandising across the portfolio.
Speaker Change: We're seeing better.
Speaker Change: Retailers, when I say retailers, it could be restaurants, et cetera, and I'm using that as a.
Speaker Change: Generic term, we're seeing a lot more interesting in better retailers that are interested in our portfolio. So.
Speaker Change: We need to take advantage of that and.
Speaker Change: And that's the focus so you know obviously supply and demand I mean, you know construction costs are.
Speaker Change: You know up 60% from pre pandemic numbers, I mean pretty staggering number and we're basically one of the few that can build and overcome that.
Speaker Change: So there is no real new supply.
Speaker Change: And that does put us in a.
Speaker Change: And are in a positive light, but our job is to make the properties better.
Speaker Change: And not just focus on you know what.
Speaker Change: The highest rent per square foot, we can get so with that.
Speaker Change: We have a balanced approach obviously, we think we still have growth as.
Speaker Change: Leases expire or we bring in new tenants.
Speaker Change: But I don't I really I really don't like the term pricing power I really don't like to focus on that.
Speaker Change: Just how do you continue to make the portfolio better.
Speaker Change: It was really that the that.
Number one focus.
Speaker Change: For our team we just literally.
Speaker Change: I had three day marathon session.
Speaker Change: When are we go property by property with our leasing folks.
You know we did the malls this week.
Speaker Change: We'll do the outlets and mills next week.
Speaker Change: And if you participated in it I think I offered.
Somebody one time down the road to watch it Alex probably yeah. Alex is the only guy that would want to sit through it.
Speaker Change: But yes, if you sat through it.
Speaker Change: You know the primary focus is how do we make the property better we still have work to do there.
Speaker Change: But I think at the end of the day when you do that you'll get the.
Speaker Change: You'll get the property growth that where we're all looking for so I would characterize it that way Steve the good news as supply and demands in our favor we have the capital to invest in our portfolio to make it better.
Speaker Change: Overcome the unbelievable rise in construction cost when you think about it and.
Speaker Change: That's the focus.
Speaker Change: Alright, well I'm free next week, if you want me to sit down with the mood at.
Are you you're more than welcome.
Speaker Change: You get to choose outlets and mills right now okay.
Speaker Change: Alright, thank you.
Thanks, Dave.
Speaker Change: Our next question is from Caitlin Burrows with Goldman Sachs. Please proceed with your question.
Caitlin Burrows: Hi, Good morning, everyone. David you mentioned, a growing development and redevelopment pipeline I was wondering if you can go through like how deep. This opportunity is for Simon's portfolio now considering all that you've already done and to what extent is there still potential for anchor replacement or other retail Redevelopments and then also that larger mixed use projects.
David Simon: Yeah, I think that continues Caitlin to be you know a huge focus for us. So I would our pipeline is probably around four.
1 billion right now that doesn't mean, we're going to do all of it.
David Simon: But you know we have massive mixed use.
David Simon: Opportunities ahead of us.
David Simon: And we still don't.
David Simon: You know, we still don't have all the anchors.
David Simon: We still don't have all the anchors.
David Simon:
David Simon: Redeveloped the way we want to so you know.
David Simon: We we have opportunities that you know like at Barton Creek or.
David Simon: Now.
Yeah.
David Simon: Down the line if you if you looked at kind of some of the serious fashion Valley is a great opportunity, where we're going to get the J C. Penney space back.
David Simon: And probably do about $500 million redevelopment between retail and mixed use our residential pipeline.
David Simon: As an example of that.
David Simon: Is over $1 billion today, and without including Canada.
David Simon: Fashion valleys or the Barton Creek show the World that we think could do residential we continue to see.
David Simon: You know an interesting relationship between.
Residential development.
Adjacent or a part of or.
David Simon: <unk> retail format. They they they actually go hand in glove with very well.
David Simon: Encouraging to see I think if.
David Simon: Listen as Don Wood he'll tell you the same thing. So so that is exciting we're going full steam ahead.
David Simon: As you know that supply, it's probably you know.
David Simon: In certain markets been oversupplied, but the reality is nobody building now.
David Simon: You think how we're looking at it it's going to take two to three to four years and as we bring these on there'll be no new supply and I think that'll put us in a.
David Simon: And then there have been patients advantageous situation so.
Long story short say 4 billion yeah.
David Simon: And you know roughly a third of that is probably rising.
Well, that's a one off.
So all in all.
David Simon: But some of it looks like for instance, where we just approved the deal and I don't think it sooner.
David Simon: Our 8-K, but we just approved and he'll get clearer for it which is in Fort worth.
You know.
David Simon: Kind of a newer center.
David Simon: Yeah, we just approved the deal with our partner to build an office and retail and ground for the office is gonna be.
David Simon: Right right.
David Simon: Basically.
David Simon: We don't have it's not big it's a 50000 square feet and wells is going to take the majority of it and so most healthy smattering of those kind of.
David Simon: Projects.
David Simon: As soon as we are.
David Simon: As we go forward, but you know bill he's a big spec office.
Speaker Change: I was more Oh God of war.
Speaker Change: Pipeline.
Speaker Change: Got it and just to come from I know you were talking about retail office Ah well not so much office and multifamily you mentioned at one point in there overbuilding that was on the residential side correct.
Speaker Change: That's correct right right.
Right.
Speaker Change: Got it thank you.
Speaker Change: Thank you.
Speaker Change: Our next question is from Jeffrey Spector with Bank of America. Please proceed with your question.
Jeffrey Spector: Great. Thank you maybe just you know following up on the first question topic, David your comments on merchandising mix.
Something else that is sometimes overlooked I know you guys talked about your the omni channel experience and what you're doing there meet me at the mall can you expand a little bit on some of the key initiatives that.
Jeffrey Spector: The company is doing to get engage customers bring them to the centers.
Jeffrey Spector: And how this may evolve over that over the next few years I know of course this holiday season, you'll have some some great programs.
Speaker Change: Thank you.
Speaker Change: Sure sure so.
Speaker Change: I would say Jeff.
Speaker Change:
Speaker Change: The mall continues to be a unique gathering place and.
Speaker Change: We get I think we all get too focused on whether it's.
Speaker Change: You know enclosed has a roof on it I mean, it really to me it really doesn't matter, it's kind of what is the best.
Speaker Change: Retail project in that trading area.
And we believe.
Speaker Change: That and if you talk to you know really.
Speaker Change: New and exciting companies like Sheehan.
Speaker Change: Hmm or other.
<unk> or you know kind of the new wave of.
Speaker Change: Retailers slashed marketplaces, they all believe in.
Speaker Change: No in our product and so and we're seeing a.
Speaker Change: Rejuvenation of the younger consumers wanting to hang out at the mall.
Speaker Change: Well I think it's our obligation.
Speaker Change: Both for us.
Speaker Change: You know and art.
Speaker Change: Investors et cetera, and also for the retailers to really highlight that now you know we don't have unlimited budgets.
Speaker Change: Like are the tech companies right, but we try to do the best we can to reinforce that.
Hey. This is you know this is cool now at the same time, you know digital is important right. So 14, 15%.
Speaker Change: Uh huh.
Speaker Change: Commerce is digital and we think we can play a role in that we think the best way to do that is through shop. Simon We made sure we had proof of concept before.
Speaker Change: We put kind of our our brand on it if you remember it started shop premium outlets.
Speaker Change: Are we.
Speaker Change: Clouded around until we partnered with.
Speaker Change: Michael Rubin and our G. G. We've created we hired some.
Speaker Change: No.
Speaker Change: Top notch talent there we're building our marketplace, we had proof of concept.
Speaker Change: And then we decided to rebrand it under shop Simon So.
We do think and then ultimately that small.
Well add well hang on loyalty product on that which will be important.
Speaker Change: And then ultimately we have Simon search, which will hang on that.
And you know we'll end up with.
Speaker Change: The ship from store pick up pick up at the mall et cetera. So it's the flywheel.
Speaker Change: Starting to fill itself out.
Speaker Change: But in the meantime, we wanted to reaffirm the positive nature that our product.
Speaker Change: It means to the community.
Speaker Change: Means to our retailers.
Speaker Change: So as we as we do.
Speaker Change: As we grow on and we can't ignore digital because let's face. It is around that 14th 15th is that it's not growing the way it used to but.
Speaker Change: You know we have to assume it right. So we have to play in there and.
Speaker Change: And I think we're shop side and we've got the right product.
Speaker Change: Retailer relationships.
Speaker Change: They have in us.
Speaker Change: It gives me confidence we have the right team.
Speaker Change: The right partner.
Speaker Change: And our T G I.
Speaker Change: I think it gives us confidence that we'll.
Speaker Change: We will continue to.
Speaker Change: Great real value out of it.
Speaker Change: But it's not overnight.
Speaker Change: It takes investment.
Speaker Change: And that's and that's what we're doing.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question is from Craig Mailman with Citi. Please proceed with your question.
Hey, good morning, maybe just to follow up on the shop Simon concept. David you know as you guys are looking to re merchandize malls and you know there could be some more anchor fallout over time I mean is the idea here to hopefully get this up and running to where you guys can convert part of.
Speaker Change: The mall to last mile distribution and be able to bring in that logistics angle to your business to help your retailers and also be able to monetize it or or am I reading, a little bit too much into it.
Well yeah.
Speaker Change: You know I do think there is absolutely a role we can play in.
Speaker Change: Search and your local store that happens to be in our center.
Speaker Change: And then and then maybe there's a distribution angle.
Speaker Change: Pick up in store is an angle that we can help facilitate with our retailers.
Speaker Change: Whether it will be a build a mini distribution.
Speaker Change: Centre or not I mean, we look at those things and there is possibilities.
Speaker Change: A certain retailers.
Speaker Change: There are certain centers that.
Speaker Change: You know you know we might be able to do a micro or you know many distribution facility.
We're also looking at last mile.
Speaker Change: In the power area, because obviously, that's you know.
Speaker Change: Going going Crazy in that you know there is well there are real estate is unbelievably well located in.
Speaker Change: It it does.
Speaker Change: You know it is not.
Speaker Change: No we're not out in the.
Speaker Change: Hinterlands and last mile is very important and we're usually have real estate. That's you know a one eight so you know there there's possibilities, it's not gonna be dominant or whatever it'll be selective but there are potential possibilities.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question is from Greg Mcginniss with Scotiabank. Please proceed with your question.
Speaker Change: Hey, good morning.
Speaker Change: Hey, guys. Congrats on the strong leasing quarter crossing 96% occupancy ahead of us.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yes, Sir.
Speaker Change: Or you're functionally full.
Speaker Change: Well you know look I think we can still.
Speaker Change: Increase our occupancy but also.
Speaker Change: Beyond the occupancy and I said earlier is where it's really.
Speaker Change: We're really focused on merchandise so.
Speaker Change: Hum.
Speaker Change: And but we still have room to grow our occupancy.
Speaker Change: But but more important is that bringing in the right tenants.
Speaker Change: Isn't the right center.
Speaker Change: And the right location that that's a huge focus for us.
But we still think we have plenty of opportunity to grow our occupancy.
Speaker Change: Okay. Thanks, and just one quick one on <unk> per share guidance was kind of bad.
Speaker Change: That's all your contribution from real estate as opposed to some of the norm.
Speaker Change: The other platform investments are you still anticipating around euro cents from OTI or is that lower now and maybe offset by better real estate performance.
Brian Mcdade: Craig It's Brian I think we now think that the OPI contribution is gonna be a minus five to minus 10 for the year, but it's being offset by significant improvement in the in the real estate a S. S. All exploration.
Speaker Change: Okay. So so overall.
Speaker Change: We expect it to improve in the fourth quarter.
Speaker Change: Sure.
Speaker Change: Right, but I got here I think my mic.
Speaker Change: The real estate business guidance would be.
Speaker Change: Or.
If it were standalone.
Speaker Change: Yeah. If we if you know OPI is you're breaking up I don't know, if it's our phone or yours, but.
OPI has been a drag.
Speaker Change: This year from an <unk> point of view now remember when.
Speaker Change: So we essentially have four assets in OPI okay.
Speaker Change: We have our investment in our G. G. We have our investment in Jamestown.
Speaker Change: We have our interest in spark and.
Speaker Change: And J C. Penney when you put it all together we have positive EBITDA in those businesses you know of.
Speaker Change: A meaningful amount, but again when you.
Speaker Change: Own an interest in a retailer you've got lots of depreciation lots of expenses that ended up hurting that I felt but not necessarily.
Speaker Change: The EBITDA line, so I just want everybody to put in that perspective.
Speaker Change: And again I would also mention to you.
That you know our investment in both Penni and spark is de Minimis. At this point you know we have a little bit more investment in our G G and Jamestown, but the size of our company.
Speaker Change:
Speaker Change: As you know.
Speaker Change: You know, it's the right thing to do so.
Speaker Change: With that said and Brian said in our call.
Speaker Change: Well, we are still not standing still on our retail side, which is pending in spark and I do think we'll have some positive announcements.
Speaker Change: With respect to those businesses.
Speaker Change: You know near year end or early early 'twenty five.
Speaker Change: We're working hard on that.
Speaker Change: But the bottom line as it has been a drag.
Speaker Change: This year.
Speaker Change: Part of that drag was because we sold a b G.
Speaker Change: So we lost that income that we saw.
Speaker Change: That we when we gave you our budget, we werent anticipating we're extremely happy with that sale.
Speaker Change: So that was the right thing to do at the right time.
Speaker Change:
Speaker Change: And but so we've tackled one opportunity we're tackling the next.
Speaker Change: We view our G G and Jamestown is long term.
Speaker Change: Estimates at this point, obviously that can change.
Speaker Change: But we view those as long term investments.
Speaker Change: And.
Speaker Change: Again, so you know and if you go back in history, which I think is important.
You know when we got into the retail business.
Speaker Change: It was the right thing to do at that particular time.
Speaker Change: You know we are.
Or less.
You know given today's time, it's probably not the right thing to do and that's why we haven't done a retail investment in.
Speaker Change: A few years four years, so we're smart we get it.
Speaker Change: But we're focused and you know we we we have an investment that's where something with no capital in it. So our job is to just to make it better and that's what we're focused on.
Speaker Change: Well I really divert a diversion from what you wanted but I figured I'd give you that I'd give you the full story okay. All the colors appreciate it thank you.
Speaker Change: No worries.
Speaker Change: Our next question is from Ron Camden with Morgan Stanley.
Speaker Change: Yes.
Speaker Change: All right.
Speaker Change: Looks like we lost run.
Speaker Change: Our next question is from Alexander Goldfarb with Piper Sandler. Please proceed with your question.
Hey, good morning, good morning out there, David and Yeah, I'll happy to coordinate with Tom and Steve I'm not sitting in one of those leasing sessions with you.
Speaker Change: Well, well well do it you might you might you you'll either be fully impressed or you'll.
All of the detailed might overwhelm yet so we'll see [laughter] I I look forward to being overwhelmed. So question, David just getting back to the commentary on the 96% plus leased performance of the portfolio and the comments that you've made about you know the opportunity in the malls.
As you look at the bottom tier for a long time, you talked about the bottom, 20% driving cash flow to reinvest in the top malls, but given how competitive the retail environment has become lack of new supply are you seeing new opportunities in your bottom 20% of malls that previously you would've just harvested for cash flow, but because of the change.
Speaker Change: Landscape you now see opportunities that didn't exist a few years ago.
Speaker Change: Yeah, no that's a good.
Speaker Change: It's a really interesting question and a good point I think based on the Pea.
Speaker Change: Everybody on the.
On.
Speaker Change: The last three days of the mall portfolio.
Speaker Change: We absolutely not.
Speaker Change: Re asset in the bottom here and again I don't I don't like that phrase, but you know what I'm going to use it anyway.
Speaker Change: I would tell you if you talk to our team.
Speaker Change: Our leaders in that area.
Speaker Change: John Murphy and Eric Saudi.
Speaker Change: Rick God Love them still loves to go through it.
Speaker Change:
Speaker Change: Yeah, and John Rulli, et cetera, I would say to you.
Speaker Change: One of the real opportunities for this company is too.
Speaker Change: Improve the bottom 20.
Speaker Change:
Speaker Change: And because you're right, there's no new supply in those markets.
Speaker Change: Well just like you know human nature, we always want to work on the sexy stuff right.
Speaker Change: So I do think.
Speaker Change: There's a real potential to improve that.
Speaker Change: Because in many cases, we're the only game in town.
And.
Speaker Change: And given the lack of supply and our ability to reinvest I do think we can make.
Speaker Change: Real strides in that in the in the bottom tier you know again, not every asset but the.
Speaker Change: The majority plus of them. So that's a big focus.
Speaker Change: Going into 'twenty five.
Speaker Change: Without question.
Speaker Change: Thank you.
Speaker Change: Sure.
Speaker Change: Yeah.
Our next question is from Floris Van <unk> with Compass point. Please proceed with your question.
Hey, good morning, guys. Thanks.
Question on the on the on the leasing Oh by the way I I thought the the response to Alex's question was what's fascinating by the way because we believe that you know the the B malls are the lower quality malls financing might finally be coming back to that market now too but.
Maybe if you can talk about your pipeline last quarter. You mentioned it was 250 basis points. How has that moved I saw that permits just open up at store in and Phipps and what percentage of that S. N O pipeline is luxury in in your view is it is a meaningful one and and and you know are there other.
Speaker Change: Hips type luxury projects planned in the portfolio going forward.
Speaker Change: Yeah, Let me let me yeah, it's interesting.
Question again, and I would say I have it right in front of me.
Speaker Change: I used to it.
Speaker Change: Okay. So we have.
Speaker Change:
We've executed.
Speaker Change: 75.
Speaker Change: New luxury deals covering 208000 square feet.
Speaker Change: And we have another 47 odd for signature so that's kind of it Paul.
Out there at this point, but again, we're we're increasing that you know every day as we speak so yeah, we even though.
Speaker Change: The sales for certain branches slowed in that area.
Speaker Change: They are continuing to commit and.
Speaker Change: Fourth as you know I mean, the build out.
Speaker Change: And then in the part time for.
Speaker Change: For.
Speaker Change: For those retailers to open is probably.
Speaker Change: Compared to a kind of a traditional retailer is longer but we've got it we've got a very impressive.
Speaker Change:
We've got a very impressive pipe on that with a lot of square footage that will open over the next few years and growing to this day.
Speaker Change: In Florida, the signed but not open our number is about 300 basis points and importantly here, though as you've heard David talk about multiple times. This is about merchandising mix. So this isn't all incremental we're swapping out underperforming retailers with better retailers and we do have retailers, making commitments well into the future in that number.
Speaker Change: As well.
Speaker Change: Thanks, guys for Fairfax.
Our next question is from Vince Vince to bone with Green Street.
Hi, Good morning could you provide some color on the cadence of stabilization for the development and redevelopment pipeline, specifically, if you could share how much incremental NOI are expecting and twenty-five from the pipeline on a net basis you know all the opening this year next offset by any you know disrupt or die.
One time with with new projects.
Speaker Change: That'd be super helpful for forecasting.
Yeah, Vince we we think we're ultimately going to deliver about 30% of the portfolio.
Investment in twenty-five so.
Speaker Change: Against the 8% Unlevered yield.
Speaker Change: Ill get back into the estimated income contribution from that.
Speaker Change: Data points.
Speaker Change: And is that like an average then things out at like 30% on average will stabilize because like stuff that you know delivered third quarter. For example, this year is obviously going to be accretive to 'twenty. Five just wanted to clarify that point, yeah. I think that's a decent run rate for expectation relative to our development business about a third probably stabilize.
Speaker Change: Yes.
Speaker Change: Great that's helpful and if I can squeeze in one more follow up could you just provide a quick description of any mall redevelopment started in the quarter I saw the spend increase some but no no description and the release of the of the project.
Either way.
Speaker Change: So we started a a rescue project at Briarwood and we started in a redevelopment at to call my husband, the two big ones in the quarter that really that we added to the pipeline.
Speaker Change: Great. Thank you.
Speaker Change: Turkey.
Speaker Change: Our next question is from Juan Sanabria with BMO capital markets.
Juan Sanabria: Good morning, just given where we are with the election next week just curious on your thoughts on potential positives or negatives that could come out depending on.
Speaker Change: Which side wins.
I guess, specifically also what would be your view on tariffs is that positive or negative for Simon's business as a whole. Thank you.
Speaker Change: Well look I I I am to have the view that.
Speaker Change: You know we.
Speaker Change: We we should we.
Speaker Change: Look I'm of the view that.
She owes whether their founders.
Speaker Change: You know kind of like the way I feel or.
Speaker Change: You know up through the ranks auto stay out of politics okay.
Speaker Change: That's not to say that they shouldn't lobby.
Speaker Change: Because you know there there are there are a lot of things that go on in Washington that may affect the company and that's their job. So I'm go and and I'm not here to with doors.
Speaker Change: Take the Washington post skew that.
Speaker Change: Know that we have to be ready for.
Speaker Change: Or all sorts of outcomes I do think because of.
Speaker Change: You know that the.
Speaker Change: Oh, the vitriol that's occurring.
Speaker Change: You know and that's why we're cautious you know what.
Speaker Change: With respect to kind of our guidance for the fourth quarter is that it's an uncertain time right. So not only here domestically.
Speaker Change: And here globally, but.
Speaker Change: Beyond that I really am not going to get into that I think.
Speaker Change:
Speaker Change: I think the decision ought to be left to the two individuals people.
Speaker Change: Me should stay out of trying to influence.
Speaker Change: No no the people the people are what matter.
Speaker Change: And you know, we'll see what happens.
Speaker Change: We will be prepared.
Speaker Change: There's basically.
Speaker Change: Six potential outcomes right, if I had to do it right.
Speaker Change: Now you can do you have a democratic sweep you could have a Republican sweep and then you can.
Speaker Change: It used to be able to do that you know but.
Speaker Change: Now three times I think it's six right. So so you can have six possible outcomes.
Speaker Change: We gotta be ready for all six and I'm not going to tell you what outcome I want I don't think it's my job.
Speaker Change: I do think it's my job to lobby once we understand.
Speaker Change: You know what's happening like you know maybe on the de Minimis rule or etcetera that hurts, our retailers or hurts our.
Speaker Change: Consumer.
Speaker Change: Hum.
But.
Speaker Change: And that.
Speaker Change: Yeah, you know, what if I could if I could be so.
Speaker Change: You know I don't know I Wonder I don't know if I should say this it sounds.
Speaker Change: Guys like me, who who knows what guys like me means, but we ought to like just let the people decide without this overbearing influence from.
From outside people that that's my personal kind of view and I'm worried.
Speaker Change: We just need to be ready for six possible outcomes.
Speaker Change: Fair enough understood. Thanks, David Thank you.
Speaker Change: Our next question is when Michael Goldsmith with UBS.
Speaker Change: Yeah.
Good morning, Thanks, a lot for taking my question, maybe just tying some of the themes that we've heard from the call together.
Michael Goldsmith: Occupancy across the 96% and feel like there is more room to grow your focus on merchandising and being selective and then also it looks like you're it's firing rates for 26 maturities are below 25 by six 7%.
Michael Goldsmith: So that together does that give you confidence or visibility to sustainable mid single digit NOI growth over the next couple of years.
Brian Mcdade: Hey, Michael its Brian Yes, we do believe that we will have the momentum and it ran a why it won't continue.
Speaker Change: All of the things you've highlighted are certainly part of it plus the investment of capital back into the business as you've heard David say, we will be opening up projects in 'twenty five 'twenty six 'twenty seven, but there's gonna be no new supply and so that is certainly going to support our growth as well.
Speaker Change: Thank you very much.
Speaker Change: Thank you.
Speaker Change: Our next question is from Linda Tsai with Jefferies.
Linda Tsai: Thanks for taking my question can.
Linda Tsai: Can you provide some color on the quarter over quarter improvement in domestic and portfolio NOI and then how do you think about NOI growth in 'twenty five as an initial guidepost.
Speaker Change: Well, Linda I think you know the quarter, we continue to see rent growth occupancy growth conversion of temp to Perm I think you you see the quarter, reflecting us executing on our business plan to a high degree and as I. Just said I think we carry that momentum into next year as we continue to execute.
Linda Tsai: Any color on twenty-five though in terms of the same level continuing.
Linda Tsai: But Linda we gave our guidance in February So we'll update you at that point in time, but I do believe that we have momentum.
Linda Tsai: Thank you.
Linda Tsai: Thank you.
Speaker Change: Our next question is from Mike Mueller with JP Morgan.
Mike Mueller: Yeah, Hi, two questions first do you think youll see more acquisition opportunities over the next few years compared to what you've seen over the past five or 10 and then the second question on development redevelopment.
Mike Mueller: What do you see as the average spend level for the next three years.
Speaker Change: Yeah, I was Oh answer I'll, let Brian take number two but I'll answer what I I don't listen I think.
Speaker Change: A company like ours has been always structured built sundance to buy.
Speaker Change: High quality retail real estate.
Speaker Change: You know this.
Speaker Change: <unk>, obviously been our primary focus so it's hard to know whether it'll be similar to what we've done that.
Speaker Change: In the last five or 10 years.
But yeah, there there will be opportunities for us to grow really haven't done much.
Speaker Change: Much of any acquisitions since T. R G deal, which was.
Speaker Change: No.
I can still remember that when I was in the height of well it was a week two weeks before COVID-19.
Speaker Change: And then Bob you forgot to tell me cause he should've known cause.
Speaker Change: Now he has those assets of China, but he forgot to tell me about COVID-19.
But.
Speaker Change: They've worked out for everybody involved but so it's really been a while that doesn't mean that we're not.
Speaker Change: Now looking paying attention to it but we're being.
Speaker Change: And are very thoughtful about well, what we'd like to buy and at what price.
And I would tell you that's not going to change, but I do think there'll be opportunities as we go forward.
Speaker Change:
Speaker Change: It's again, it's hard to compare it to you know five or 10 years ago, but I do think over time will grow.
Speaker Change: Through our through acquisition.
Speaker Change: Go ahead on the pipe and Michael I think as you think about the development redevelopment pipeline you heard David talk today about four there's about a $4 billion Shadow pipeline. We've got a billion two committed I think youre going to continue to see us committed for a billion and a half a year that could ebb and flow by a couple of hundred million dollars on either side, just given the size of the projects in there.
Speaker Change: Delivery of the projects. So we do see that level of investment available to us over in the future.
Speaker Change: Great appreciate it thank you.
Speaker Change: Michael.
Speaker Change: Our next question is from key bin Tim with true Securities.
Speaker Change: Thank you good morning.
Speaker Change: I too shop, Simon Dot Com can you just provide some high level parameters on the progress you're making and the traction we're gaining and also curious about the backend logistics side of it if you're.
Speaker Change: Or given the multiple brands, we have are the shipments being consolidated or is it still you know each individual retailer sending shipments.
Yeah, just I'll answer that first I mean look we're we're early days and you know and using shops I'm in for.
Speaker Change: Delivery you don't remember, it's mostly a marketplace, but we think over time.
Speaker Change: That'll be a service that will be able to offer through the shop Simon.
Speaker Change: App or website.
Speaker Change: And I would say we've had remarkable growth in our G. M D.
Speaker Change: We just rebranded it so.
Speaker Change:
Speaker Change: Well I I am always hesitant, because we do have a partner in that and I'm not sure.
Speaker Change: I should disclose that to you.
Speaker Change: But we've got.
Speaker Change: A meaningful growth in our G M D. There.
Speaker Change: And now that we're going to use.
Speaker Change: Our brand and are as Brian mentioned in his remarks, you know our 25 million email list and add loyalty we think the.
Speaker Change: It'll be more retailers on which led to G M D, which will add to the.
Speaker Change: The overall volume of the of the sides. So I'm just gonna be cautious Camden, because you know we have a partner there. So the good news is we're making a lot of progress.
Speaker Change: And we've got real traction we've got a number of retailers I don't remember exactly but Brian or Tom can tell you after the call.
Speaker Change: But I'll hold off on the G M B right now.
Speaker Change: Maybe at some point, we'll be able to disclose that.
Speaker Change: Okay. Thank you.
Speaker Change: <unk>.
Speaker Change: Okay.
Speaker Change: Our next question is from Ron Camden with Morgan Stanley.
Ron Camden: Hey, just a quick one for me I'm, just looking at the sort of the domestic NOI growth almost 5% which is a.
Ron Camden: Pretty strong in the past you've sort of made some comments about next year sort of hitting that 3% number just curious to get some updated comments on what you're seeing on the ground in any sort of differentiation between the traditional mall and outlet business as well would be helpful. Thanks.
Speaker Change: Yeah, Hi.
Speaker Change: Listen I think.
Speaker Change: Overall, they're all kind of moving in that direction. So.
Speaker Change: I appreciate you trying to get us to disclose our.
Speaker Change: Twenty-five comp NOI growth.
We will do so in February where.
Speaker Change:
Speaker Change: Just going through the phase of that now which is as I mentioned to you. We did the malls this week.
Speaker Change: We do the outlets and the mills next week.
Speaker Change: There will absolutely.
Speaker Change:
Speaker Change: I'm sure that with you with our year end earnings in early fab and.
Speaker Change: But again I think the momentum that we're seeing.
Speaker Change: Over the last couple of years continues that that's the important point.
Speaker Change: Thanks, so much.
Ron Camden: Thanks, Ron.
Speaker Change: Thank you there are no further questions at this time I'd like to hand, the floor back over to David Simon for any closing comments.
David Simon: Okay. Thank you I appreciate all the questions and interest in.
David Simon: Well, we'll talk soon if we don't talk all day.
David Simon: You know a good holiday season.
David Simon: Thank you.
Speaker Change: This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.