Q4 2024 Simon Property Group Inc Earnings Call
Speaker Change: Greetings and welcome to the Salmon Property Group fourth 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.
Speaker Change: It is now my pleasure to introduce your host, Tom Ward. Thank you. You may begin.
Speaker Change: Thank you Matt 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 Roy, Chief Accounting Officer.
Speaker Change: A quick reminder that statements made during this call may be deemed forward-looking statements within the meaning of the safe harbor of the Private Securities Litigation Reform Act of 1995, and actual results may differ materially due to a variety of risks, uncertainties, and other factors.
Speaker Change: 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.
Speaker Change: Please note that this call includes information that may be accurate only as of today's date.
Speaker Change: 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 8k filing.
Speaker Change: Both the press release and the supplemental information are available on our IR website at investors.simon.com.
Speaker Change: Our conference call this evening will be limited to one hour. For those of you 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'm pleased to introduce David Simon. Good evening, I'm pleased with our financial and operational results in the fourth quarter, concluding an exceptional year for our company.
Speaker Change: We reported record total funds from operation of $4.9 billion, or $12.99 per share.
Speaker Change: We generated $4.6 billion in real estate FFO, or $12.24 per share, which was growth of 3.9% year-over-year.
Speaker Change: We returned a record of more than three billion dollars to shareholders in cash dividends
Speaker Change: and now we have paid approximately $45 billion to shareholders in dividends over our history as a public company.
Speaker Change: We saw record leasing and retail sales volume and occupancy gains for the year.
Speaker Change: We completed last week the acquisition of the mall, two well-known luxury outlet centers in Italy from Caring.
Speaker Change: We look forward to adding these high-quality luxury assets into our global portfolio while continuing to build upon their success.
Speaker Change: We opened a new, fully leased premium outlet in Tulsa, Oklahoma, and we completed 16...
Speaker Change: significant redevelopment projects during the year. Development and redevelopment opportunities are growing within our portfolio. We levered our A-rated balance sheet.
Speaker Change: providing additional capacity and flexibility to fund future growth. Now going to turn it over to Brian who will cover our fourth quarter results in more detail and provide our outlook for 2025.
Brian Mcdade: Thank you, David. Real estate FFO was $3.35 per share in the fourth quarter compared to $3.23 in the prior year. 3.7% growth.
Brian: Domestic and international operations had a very good quarter and contributed 18 cents of growth.
Brian: During the quarter, we sold assets that resulted in a tax benefit, which partially offset a prior tax expense from our ABG sale, and essentially offset a write-off of pre-development costs associated with a joint venture development project in California.
Leasing momentum continued across the portfolio.
Brian: We signed more than 1,500 leases for 6.1 million square feet in the quarter.
Brian: For the year, we signed a record 5,500 leases for more than 21 million square feet. Approximately 25% of our leasing activity for the year were new deals.
Brian: Malls and outlet occupancy at the end of the fourth quarter was 96.5%, an increase of 70 basis points compared to the prior year. Our year-end occupancy is the highest level over the last eight years.
Brian: The mill's occupancy was 98.8%, an increase of 1%, and is at a record level.
Brian: Average base minimum rent for the malls and outlets increased 2.5 percent year over year and the mills increased 4.3 percent. Retailer sales per square foot was $739 for the year.
Brian: Strong revenue growth across our businesses combined with expense discipline resulted in a hundred basis point increase year-over-year in our industry leading operating margin.
Brian: Our occupancy cost at the end of the year was 13 percent.
Brian: Domestic NOI increased 4.4% year-over-year for the quarter and 4.7% for the year.
Brian: Portfolio NOI, which includes our international properties at a constant currency, grew 4.5% for the quarter and 4.6% for the year.
Brian: Fourth quarter funds from operation were $1.39 billion, or $3.68 per share, compared to $1.38 billion, or $3.69 per share last year.
Brian: Fourth quarter results include 20 cents per share of non-cash after-tax gain from the combination of JCPenney and Spark Group. The mark-to-market fair value of Claypeers exchangeable bonds increased year-over-year which offset a lower contribution from OPI operations.
Brian: As a reminder, the prior year results include 33 cents per share in gain from the sale of part of our interest in ABG last year.
Turning to new development and redevelopment.
Brian: This year we will open our first premium outlets in Jakarta, Indonesia in March and expect to begin construction on 4 to 5 mixed-use projects throughout the year.
Brian: We expect to fund these redevelopments and mixed-use projects with our internally generated cash flow of over 1.5 billion dollars after our dividend payments.
Brian: Other platform investments, JCPenney and Spark Group combined to form a portfolio of iconic retailer banners called Catalyst Brands.
Brian: Catalyst brings together Sparks Brands, Aero Costal, Brooks Brothers, Eddie Bauer, Lucky, and Nautica with JCPenney in its exclusive private brands.
Brian: Catalyst sold Reebok in early January and is currently evaluating strategic options for Forever 21. We view the Catalyst transaction as a positive development that will create significant synergies with a solid balance sheet that will enable the company to drive EBITDA growth.
CataList shareholders include Simon,
Brian: Turning to the balance sheet. During 2024, we completed $11 billion in financing activities, including issuing $1 billion in senior notes for the 10-year term and a 4.75% interest rate.
Brian: We recasted our $3.5 billion revolving credit facility with maturity extended to January of 2030 and no change in pricing or terms.
Brian: and completed over $6 billion of secured loan refinancings and extensions.
Brian: Lastly, we delivered our balance sheet by approximately $1.5 billion in the year and ended the year at 5.2 times net debt to EBITDA. Our A-rated balance sheet provides a distinct advantage with more than $10 billion of liquidity at year end.
Brian: Additionally, today, relative to our dividend, we announced a dividend of $2.10 per share for the first quarter, a year-over-year increase of 7.7%. The dividend is payable on March 31st.
Brian: Now, moving on to our 2025 guidance, our real estate FFO guidance range is $12.40 to $12.65 per share.
Brian: Our guidance reflects the following assumptions. Domestic property NOI growth of at least 3%.
Brian: increased net interest expense compared to 2024 of between 25 to 30 cents per share reflecting current market interest rates and projected cash balances compared to 2024.
Brian: Lastly, our diluted share count of approximately 377 million shares and units outstanding.
Brian: Due to the recent Catalyst brand transaction, we will not include Catalyst guidance at this time. We expect there will be significant savings and synergies from the combination that will be coupled with potential restructuring costs.
Brian: We expect Catalysts will generate positive EBITDA in fiscal 2025 and roughly break even FFO as they work through the combination.
Ow!
Brian: With that, thank you, and David and I are now available for your questions.
Speaker Change: Great, thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation call will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key.
One moment please while we hold for questions.
Speaker Change: Our first question is from Jeff Spector from Bank of America. Please go ahead.
Jeff Spector: Great, thank you. Now I know you'll get through some of the numbers through some of the other questions. I wanted to focus on...
Speaker Change: some of the initiatives you have to bring people to the mall.
Speaker Change: I know you have the Tomorrow Stars, the Meet Me at the Mall, when your traffic was up at malls, premium outlets.
Speaker Change: Again, you talked a little bit more about some of the programs, initiatives that you're doing to, again, bring the shopper to the mall, and how did those programs go for the holiday season. Thank you.
Well, listen, I think we're leaders in this area.
You know our national advertising campaign is all about
Speaker Change: talking about, you know, how it's fun to go to the mall and hang out. Just like in the 80s and 90s, we had a very good reception to it. We rebranded
Speaker Change: Simon Premium Outlets to shop Simon. We're in the midst of creating our loyalty program.
So, and then obviously we've got events.
Speaker Change: thousands of events that drive traffic through the year whether it's breast cancer awareness programs
Valentine's Day, basically every major event that
Speaker Change: that occurs at, you know, within the U.S. We try to drive a event around that Easter, you know, down the road. So, I couldn't be prouder of our marketing efforts.
Speaker Change: They're very digital. They're very fun. They use new media in a lot of ways.
Speaker Change: and I just expect more and more and more importantly we're seeing return on investment and you know we've got the data to prove that and I and you know not that our peer group is
Speaker Change: wide and deep, but to the extent that it is, you know, there's nobody doing more when it comes to data.
Speaker Change: You put it all together, we're leaps and bounds, you know, compared to what else is out there.
Thank you.
Next question is from Steve.
Sackler.
from Evercore ISI, please go ahead.
Speaker Change: Yeah, thanks, good evening. David, you guys obviously had a great year with 21 million square feet of leasing, occupancy up.
Speaker Change: Given where you're sitting on the occupancy side, I'm just curious how the discussions that your leasing team are having with the retailers is kind of shifting and maybe talk about the pricing.
Speaker Change: Howard and how that's kind of returned to the mall for the A's and and you know I guess to tie that in dental eye growth you know you've talked about greater than 3% you certainly beaten
Speaker Change: 4% for the last like three years in a row. So, you know, what are we missing on the 3% front and you know Maybe just comment on pricing power. Thank you
Speaker Change: Well, let me just talk about the 3%. So, look, we, you know, as we did last year, we budget...
this year.
Speaker Change: you know again maybe not maybe not overall but the retailers that matter you know we generate overdraft which which obviously pops are
and Eli Grove.
I hope we're being conservative. Obviously, there's...
Pretty good animal spirits in the U.S. and its economy.
Speaker Change: We expect to participate in that. And again, I don't like the word Tyson power, I just think...
Speaker Change: You know, we're able to, you know, we have deep relationships with our retailers, and we're able to generate a lot of new business.
We've seen new retailers.
Speaker Change: approaches all the time and new uses all the time, which essentially allows us to
Speaker Change: And one of the big things of growth and loud, you know, we're not we're never stuck with the tenant mix that we have So what what?
Speaker Change: And I think Brian knows the numbers specifically, but I think 25% of our leases this year were new. So what's driving...
Speaker Change: A lot of what we do is we're able to take
You know, the retailers that aren't doing the sales.
Speaker Change: and replace it with ones that will. And that, because it'll do better volume, that drives rent growth. And then I don't call that pricing power. I just think that's improving our mix.
Speaker Change: and doing what we need to do, you know, to drive our business forward. And as I said, I think last call is we still think we have an opportunity.
because frankly we've been organizationally very focused on
Speaker Change: you know, that, you know, for no better or the A's, we do think there's
Real effort, focus, growth for us and the bees.
Speaker Change: where we're investing our, you know, our dollars. So that's a big program for us in 25 and 26.
Speaker Change: And just to cap off your question, we still feel, and again, it's hard to predict because there's always downtime, pendant bankruptcies, etc., but we still feel like we have upside in our occupancy.
Speaker Change: We're still not at our time. That was 97.1 if I remember right. In 2014, Tom Shading said yes.
Speaker Change: So, you know, we still, some message to my leasing team if they're listening.
Speaker Change: I don't mind if they're not, if they're making a lease, but assuming they're listening, let's get up to our record high in 2014, and then we'll take a deep breath, but we won't until then.
Speaker Change: Next question is from Michael Goldsmith from UBS. Please go ahead.
Thank you.
Speaker Change: Good evening, thanks a lot for taking my question. Maybe just following off the last one, right, the NOI expectation dropped from 4% last year and for the last several years down to 3%, so bridging the gap between those expectations, right, it sounds like some of that is retail sales, but you know,
Speaker Change: It sounds like occupancy, they're still upside, but is there the same magnitude of upside? And then also, are you taking into account any sort of tenant bankruptcies or credit reserve in that as well, which is driving that by a hundred pieces?
White, thanks.
businesses, we, you know, build out those stores.
Speaker Change: Last thing I would mention, you just mentioned bad debt, our numbers in 2025 take into consideration our historical approach to bad debt. We did slightly better than that in 2024, but we've taken an appropriate expectation into 2025 relative to our standard approach. So those are the three major drivers that would get you kind of back from this year's number down to a 3% number for, again, as a baseline starting in 2025.
Very helpful, thank you very much.
Craig Mailman: Next question is from Craig Mailman from Citi. Please go ahead.
Craig Mailman: Thanks, it's Nick Jessup here with Craig. David, I just want to touch on the potential impact for tariffs. Obviously, the news keeps changing. But just broadly, what are you hearing from your retailers? How is it impacting their business and kind of the uncertainty there and the potential impact of the de minimis exemption going away?
Yeah, uh, I don't...
You know, it's interesting, you know, just our
First hand, I don't know where every retailer...
sources their goods, but if you take
as an example.
You know, they only source 20% of their goods.
with all the brands.
of about 20 in China.
Okay, so...
and, you know, we talked to Catalyst.
and their view of it is
with respect to China, that they'll, um,
Pass some of it on to the consumer.
Craig Mailman: but also hope that the supplier heightens up, you know, the cost of goods sold. So, many, many retailers have moved a lot of production.
out of China over the last several years.
And the good news is where we had.
And the most exposure was shoes.
Craig Mailman: which Reebok you know would have been more exposed but as you know we disposed of the Reebok operating business in January so so no one is really
Honestly, it hasn't affected day-to-day decision-making and it's relatively
Craig Mailman: reduced amount for the retail. What's really going to be helpful
The American Retailer.
and the non-Chinese reporters.
Craig Mailman: is to get rid of the De Minimis Rule, which basically exempts...
tariffs if you send a package over $800.
you know, to a customer.
That's not a level playing field.
retailers to pay more that ship in bulk
Craig Mailman: and it's given real benefits to someone like the Temu where they've shipped purposely under the $800.
A congress is taking it up.
I know the president is taking it up.
Craig Mailman: And that will absolutely be, you know, if enacted, we'll give a real shot in the arm to retailers that don't purposely...
Craig Mailman: don't purposely try to send their goods to get under the $800 limitation, not only to say it's also more green
Craig Mailman: It saves packaging costs, etc. It's good for our country, and I hope Congress and or the President enact it. That, to me, is more material than any tariffs that are being talked about.
It's very helpful.
Speaker Change: Our next question is from Forest Van Dischen from Compass Point. Please go ahead.
Speaker Change: Hey, thanks for taking my question, good to hear your voice, David.
Speaker Change: A couple of questions, but I guess I'm going to focus on your latest acquisition in Italy. I note that Caring just snuck into your top 10 list this past quarter prior to the acquisition.
Speaker Change: I'm curious if you can talk about that acquisition, the returns that you expect to achieve.
Speaker Change: how you might be able to manage those assets going forward? And also, what would Caring's percentage have been had they been included? I guess I know that you're
Speaker Change: Top 10 is domestic only, but how much of an impact would that have on the, if you were to include Caring's exposure in Europe as well?
Speaker Change: Well, let's, on that particular point, you'll see that in our...
Speaker Change: I will tell you, you know, we've been very, as you know, very selective on
acquisitions.
and we're only buying top stuff at the right price.
this follows
Speaker Change: 100% of that strategy. So it's top stuff at the right price.
Speaker Change: Karen will remain a long-term tenant in that they have a very they've had historically a very competent group that ran it for them obviously because they're not you know they're not
Speaker Change: that's not their main business as you know. We've taken over that team you know we'll help them with strategic
Speaker Change: guidance and we think there's upside in the business. We think it's NAV accretive for us. We also think it's earnings accretive for us.
Speaker Change: So, it again is something we wanted to do years and years ago.
But they weren't ready to do it. We're extremely excited.
Speaker Change: about doing it, the location. Italy's, you know, in a renaissance.
Speaker Change: So, it's got one of the positive growths in the EU.
Speaker Change: You know and this is these are the kind of deals we want to do is buy it at the right price It's accretive to NAV, accretive to earnings
But it's also high quality with the right retailers.
Speaker Change: and we couldn't have done a, you know, we couldn't have picked a better asset in terms of, you know, in terms of this.
Thanks, David.
Thank you, Boards.
Speaker Change: Next question is from Craig McGinnis from Scotiabank. Please go ahead.
Craig McGinnis: Hey, good evening. David, following up on your comment regarding the focus on B-Mall investments in 2025-26, are you able to talk about the types of investments that you make in those malls, whether it differs from how you would approach investing in an A-Mall, and then any detail on the magnitude of those investments and expected return? Thanks.
Guys, I need you to get out.
Craig McGinnis: I'll just be very generic, you know, Brian can lay it out for you later, but to me it's a whole combination of things. These are, you know, important assets in the communities.
Speaker Change: We've been focused on the bigger assets historically, so it's a combination of adding boxes.
Speaker Change: updating the look, feel of the place, restaurants, tenants. Everyone changes a little bit differently, but I'll just take
You know, Smith Haven is an example. We're going to
Speaker Change: I think I got to be careful because I don't know if I can announce it even though the lease is signed, so...
Speaker Change: I think an announcement is coming, but this is in basically eastern Long Island where we're going to update, renovate the property, add a great retailer and a huge box.
We just added Primark, the hospital just opened up their...
and one of their health facilities.
and that that will probably be about a 12% return.
Um.
Speaker Change: and you know over the next couple of years and it'll be a renovated rejuvenated asset that you know because of all the progress we've made in the bigger ones you know we're able to kind of
Speaker Change: re-energize our focus on an asset like that. But the list of those is long, so...
Speaker Change: You know what Brian can go through it, but you know that's just one and that kind of
Speaker Change: jumps to jumps to top of mind. And to my team,
Speaker Change: I'm supposed to see a press release on that, but I haven't seen it. So please move that along
Thank you.
Phone 1 disconnected.
Hello?
Speaker Change: I'm sorry, next question is from Alexander Goldfarb from Piper Sandler. Please go ahead.
Speaker Change: expense that Brian laid out. So my question is, is this back to sort of the old
days, pre-pandemic, where you guys just had strong internal growth.
that was accelerating or is this...
Speaker Change: from the future. I'm just trying to understand if this is just all the side but not yet leases taking effect, or if truly the underlying portfolio is accelerating and we're going back to where you guys used to be, you know, pre-pandemic when the core portfolio would just was really just humming along.
Well, the 1240 to 1265 excludes cats.
the other
Speaker Change: investments in OPI are small. So they, you know, they're, you know, and again, they're neither, you know,
Speaker Change: FFO is probably the wrong way to look at those investments, but they run through FFO anyway because they're ones in asset management company and the ones in e-commerce.
Speaker Change: marketplace and an e-commerce retailer and so FFO is the least important metric on those but you know they run through our numbers so catalyst is outside of that number and I don't like the word old
Speaker Change: Alex but yeah no we're you know we're growing the portfolio you know we said at least 3% I think we've said at least 3% the last two years
Speaker Change: 83, I don't remember. Three years, Brian's saying. So hopefully we can beat that. And that's basically, you know, all the stuff that leads to that, which is leasing, you know, focused operational margins.
Events, Simon Brand Ventures.
replacing boxes, restaurants,
Speaker Change: You know all of the you know all of the The basics and we still see that I think we've had a pretty good run
Speaker Change: Forget that, you know, the big juice that we got back from, you know, getting back to business after we were, you know, unreasonably shut down by various state governments.
Thank you. Bye bye. Bye bye.
Speaker Change: But, you know, we've been clipping along four plus percent, even though we guided to three.
and you know let's see how this year
Speaker Change: transpires, but we've got a lot going for us, and the biggest of which is great team, leasing is focused. We feel that there's upside in the portfolio.
Speaker Change: across the board but you know primarily in our historical bread-and-butter properties we're going to do smart deals
Speaker Change: We're prudent, got a hell of a balance sheet, and, you know, I think, and we're lease-lease-lease. I think it's, you know, not overly complicated.
and then Catalyst, you know.
Speaker Change: Well, it's obviously a big six months as they go through it.
and we'll have a better sense of kind of
Speaker Change: You know, it will be positive, even though I'm sure we'll have better idea of FFO, you know, as the year progresses, but just just to be clear.
It's not in our number.
as of
Speaker Change: as of what we've guided to in the 1240 to 1265.
Okay, good to see the magic.
Thank you, David.
Speaker Change: Our next question is from Juan Sanabria from BMO Capital Markets. Please go ahead.
Juan Sanabria: Hi, great to hear your voice, David, as well. Just a question on the leasing
Juan Sanabria: Looks like about 5% is still month-to-month. I think that's still kind of above where you were pre-COVID in 2019, so just curious on how you think that will evolve over time.
Juan Sanabria: is just like a second or part B of a question. How has the SNO pipeline changed if at all over time and could you just give us where it is as of year-end please?
Brian Mcdade: Hey Juan, it's Brian. SNL at the year-end was about 250 basis points as we brought occupancy on in the fourth quarter and you saw that in the numbers.
Brian Mcdade: Month to month, we'll, as we move leases through our leasing process, ultimately not everything gets signed at the same time. So we put that into that category. Nothing there, we're in the process of renewals and year-end leasing. And so ultimately we would expect that number to come down throughout the year. I just would say we're slightly,
Brian Mcdade: For the life of me, I don't understand why it takes so long, but put that aside, we do get our releases.
signed up.
Brian Mcdade: and we are slightly ahead of where we were last year on our renewal check.
inside, I should say.
Brian Mcdade: But, you know, we've got commitment on a lot of, sure.
Speaker Change: Next question is from Vince DeBone from Green Street. Please go ahead.
Vince DeBone: Hi, good evening. I have a few questions related to the mixed-use projects you mentioned earlier. So what is the expected pro rata spend on the four to five mixed-use projects to break ground in 25?
Vince DeBone: And also, like, what's the common structure? Are you doing this primarily on your own balance sheet or using joint venture partners and the non-retail component? And then also, you know, is it mostly residential? Or, like, what are some of the other non-retail property types?
Vince DeBone: in there. Sorry. Yeah. Yeah. I'm sorry to interrupt you. So, um, it'll be around four to 500 million.
Vince DeBone: And again, we are, when I look at the ones that were...
expecting to start this year. They're all JVs.
and they will run from residential
to a couple of hotels, to office.
And just to give you a sense...
Speaker Change: What's in that category? You know, we expect to start a hotel in Roosevelt Field.
a big residential project in Brea.
office at Clearfork.
Speaker Change: and we're expanding a hotel at the Domain in Austin, Texas.
Those are all pretty much...
plan for, I would expect...
Thanks to add to that this year.
As you know, we've got Northgate under construction.
you know, we
anything we're planning in
Speaker Change: California. I am very nervous about construction costs there given the horrific events in Southern Cal. So we're looking at a couple of
Projects there that we might
pushed before, you know, before
Speaker Change: What's going on there, but but I would expect us to add.
Speaker Change: More of the pipeline, but those are kind of the ones that were.
Pretty much.
Speaker Change: you know, then you got a shovel on the ground and then over, but those were all pretty much baked in the cake. And in this case, they all happen to be JVs, but you know, that could change.
Speaker Change: No, that's really helpful. If I can maybe just get one more clarification. When you say joint ventures, like is Simon typically like a 10 or 20% partner in the non-retail portion or are you an 80% owner of the non-retail? Just trying to get a sense of the appetite for non-retail.
yeah no no that's usually 50-50 yeah
Great, thank you. No problem, thank you.
Next question.
and Mike Muller from J.P. Morgan, please go ahead.
We do have SaaS later.
Speaker Change: I missed the question. Can you say it one more time? I didn't understand. Yeah, I was saying, on the Italy purchase, we know you can't talk about the cap rate and the economics, but just curious, as a hypothetical, if you have something comparable quality in the U.S.,
Speaker Change: How would you imagine the pricing would compare to what you were in for in Italy? Do you think it would be stronger, higher cap rate, lower cap rate, something similar? Just curious of the thoughts there.
Speaker Change: That's a good question and I'm trying to think if I can answer it.
I'll try to be artful.
I would say
Let me do a macro.
Macro
is what is usually macro-ordered.
Even though properties are powerful and comparable.
They'll tend to have higher calf rates.
than they would to the U.S.
and obviously
They're calculus.
Speaker Change: Next question is from Kaitlyn Burrows from Goldman Sachs. Please go ahead.
Kaitlyn Burrows: Hi everyone, maybe just another question on acquisitions or capital allocation generally, but it sounds like you were targeting the caring acquisition for a while, and I imagine there are many other deals that you've assessed over the past couple of years. So I was wondering if you could talk about the rest of the acquisition properties that might be out there that could be attractive to you, and how you're balancing perhaps buying those versus your stock, versus more redevelopment, versus increasing the dividend, and realizing that you're kind of doing a little bit of all of that.
Speaker Change: Yeah, listen, I would say, David, that we're not, there's no big, big deal that, you know, is on the drawing board. So we're still interested in it. You
High-quality transactions. We're working on them. There's no guarantee.
but I think
Since there's no big, you know
Um...
Speaker Change: We may, you know, if there were a big deal to do, you know, you can define big deal, but, you know, several billion dollars, billions of dollars, let's say, that
Speaker Change: Then we might have to readjust our thinking, but I think we're going to, the mindset right now is we can do it all. Remember we de-levered.
and so you know we're still working on a couple
You know, high quality.
Speaker Change: transactions, but they're not like, they're not going to tip the scales from a leverage or financial consequence or capacity point of view. And as you know, development, redevelopment,
Speaker Change: There's a three-year product, you know, just you know, you build that you build a house you buy a house It's one thing to build it. You got three years to To stroke the check every year. So or so or every month
Speaker Change: You know, obviously, subject to market conditions, we have the capacity to do so. And then I think the development, development.
Speaker Change: We announced Nashville. We're really excited about that land. It's in the growth corridor. It's on the interstate.
Great, great ingress, ingress, visibility.
terrific long-term 108th reciting
Speaker Change: So we've got stuff going on in Asia on development, nothing really on new development in Europe.
Speaker Change: So, you know, just to, you know, maybe a couple of things here and there, but we're also looking at expanding, you know, some of our better assets.
Speaker Change: You know, like a Woodbury or a Toronto Preview Mountain, you know, or Desert Hills.
etc. So that stuff is high priority. So
Speaker Change: You know, obviously things change, but right now, you know, we're planning to, you know, keep operating the same way we're operating.
A little bit of everything.
Sounds like a lot of opportunity. Great, thanks.
Thank you.
Speaker Change: Next question is from Hondo St. Just, from the Duho, please go ahead.
Hey there, good evening. Thanks for taking my question.
Good to hear you, David.
Speaker Change: My question, I guess, I wanted to go back a bit more to your plan on investing a bit more in your B-assets here. I guess I'm curious, how you're able to generate the 12% returns versus, I think, the 8% to 9% we've seen in more of your A projects here in the last couple of years? Is it the lower rent basis? Are you seeing, I guess, any sense of stronger demand for space in any of those B-malls? And is 12% more of an anomaly or more the norm for these B-mall investments you're making? Thanks.
Speaker Change: Yeah, I think the simple thing is right now we have
Speaker Change: But in this case, if you have an empty box or empty space, there's no existing income. And that really drives the, you know, kind of the incremental return. That's the biggest.
Speaker Change: element of it and you know they're not all the 12% I kind of referred to what we see at Smith Haven but you know they're not all that way but in a lot of cases it's just empty space or an empty box.
Speaker Change: You know, basically, there's no offset against it because there's no existing retailer or and then it's just the capital we have to put in to do it.
Speaker Change: Got it. I appreciate that. And just thinking about that 12%, is that kind of reflective of the incremental risk return or risk premium perhaps for some of these assets? Just curious how that perhaps would...
I think that's a good...
Speaker Change: that's it that's it that's a good point but I would recharacterize so
Speaker Change: We, let's say there's a, you know, and again, our B malls are probably some people's better than A malls, but let's just take a B mall.
Speaker Change: and where we think the value, very simplistically, is an A-capital, okay?
Speaker Change: return because that would be diluted 10 AD. So part of what you're going to see
Speaker Change: That kind of portfolio is, if we can't make any of the accreted investments, we won't do it.
Speaker Change: So, you know, we're better off in that case just managing the cash flow to the best of our abilities.
Speaker Change: So, I understand your point, I kind of re-characterized it, not because of risk.
Speaker Change: not really risk adjusted it's more what's the value of the asset and will this add to the value of that asset?
follow what I'm saying
Speaker Change: Absolutely, and that's partly what I was getting at, so I appreciate that. Thank you. Thank you.
You know, I would say mostly domestic.
Um...
This is because it's got to be really...
unique which is what we saw the model
which is rare, and again, as I mentioned earlier.
I think I talked to them
Hard to remember, but...
It was definitely a couple years pre-COVID.
So...
I just think there's very.
you know, jewels like that in Europe that
Speaker Change: that make sense with what we do in Europe, if you understand what I'm saying. So we're not going to buy...
Speaker Change: You know, a mall in Europe, just to have one mall in Europe.
Speaker Change: So, you know, the outlet business, we view it a little differently.
So, I would say by
Bye.
Speaker Change: Because of that, it's got to be really unique and more domestic.
Let's say more domestic.
Speaker Change: Thanks. And then how are you feeling about the consumer right now and, you know, high versus low end, U.S. versus Europe?
Well, I think they're very cautious in Europe.
And, you know, the U.S. consumers.
But still, I'm still nervous about the lower end consumer.
Thank you.
Speaker Change: Next question is from Ronald Camden from Morgan Stanley. Please go ahead.
Speaker Change: So, Ron, it's Brian. There wasn't a big bifurcation kind of between asset classes. I think, you know, all three platforms, you know, performed exceedingly well. You did see the outlet in the mills, which generally skew a little bit more value-oriented outperform a little bit into the fourth quarter. Wasn't really kind of an anomaly, just kind of expected performance. And, you know, we've not seen any, you know, real-time impact yet to the tourist-oriented centers, but we're, you know, February 4th, so still early in the year.
Richard
Speaker Change: Thanks so much. Yeah, and I would just say, you know, when we talked about it.
You know, re-energizing on
The answer is, don't you think most?
Thank you now.
Think outlets, think a few of our mills.
So yeah, it's a wide portfolio focus.
Speaker Change: not just when people talk B they always think balls but you know for us it's
You know, it's across our entire domestic portfolio.
helpful. Thank you.
Thank you.
This concludes the question and answer session.
for any closing comments.
Okay, thank you everybody.
Look forward to talking to you in the future.