Q1 2025 Simon Property Group Inc Earnings Call
Speaker Change: Greetings and welcome to the Simon Property Group First Quarter 2025 Erning Schofferts Call.
Speaker Change: At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentations.
Speaker Change: If anyone wants to require operator assistance, please press star zero on your telephone to that. As a reminder, this conference is being recorded. It's now my pleasure to introduce Tom Ward, Senior Vice President and Vessel Relations.
Tom Ward: Thank you Joe, and thank you for joining us this evening. Presenting on today's caller, David Simon, Chairman, Chief Executive Officer, President and Brian McDade, Chief Financial Officer
Speaker Change: A quick reminder that Stephen's been during this call, maybe deep, forward-looking statements within the meeting of the safe harbor of the private securities litigation reform act of 1995, and actual results made different materially to the 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. Please note that this call includes information that may be accurate only as of today's day.
Speaker Change: Reconciliation of non-GAAP financial measures for the most directly comparable GAAP measures are included in the press release and the supplemental information in today's form AK filing.
Speaker Change: Both the press release and the supplemental information are available on our IR website and in letters.sauce.com
Speaker Change: Our conference call this evening will be limited to one hour. For those who would like to participate in the question and answer session, we ask that you please respect our request to limit yourself to one question. I'm pleased to introduce David Simon. Thank you, Tom. Good evening, everyone. We're off to a good start for 2025 with results that exceeded our plan.
Speaker Change: We continue to enhance our retail real estate platform through development and redevelopment.
And acquisitions are a rated fortress balance sheet with over 10 billion.
Speaker Change: And liquidity sets us apart and we had the lengthy track record of that in our capital allocation and operating strategy.
Speaker Change: To confront.
Speaker Change: And take advantage of diverse macro economic cycles.
Brian: Now I'm going to turn it over to Brian who.
Brian: We will cover our first quarter results and we will take it from there.
Brian: Thank you David and good evening.
Brian: Real estate <unk> was $2 95 per share in the first quarter compared to $2 91.
Brian: Yeah.
Brian: And international operations had a very good quarter and contributed 14 pence.
Brian: Driven by a 5% increase in income.
Brian: As anticipated interest income land sales at least settlements were 10 cents lower year over year.
Brian: We signed 200 leases for more than $5 1 million square feet in the quarter.
Brian: Proximately, 25% of leasing activity for the quarter were new deals and approximately 80% of the leases expiring through 2025 are ahead.
Brian: We're ahead of last year at this point in time.
Brian: Malls and premium outlet occupancy at the end of the quarter was 95 nine.
Brian: <unk> percent.
Brian: The decrease of 40 basis points compared to the prior year the nose.
Brian: Vinci was 98, 4% an increase of 70 basis points compared to the prior year.
Brian: Average base minimum rent for the malls and outlets increased 4% year over year, the mills increased three 9%.
Brian: Mall and premium outlet retailer sales per square foot was $7.33 for the quarter.
Brian: Occupancy costs at the end of the quarter was 13, 1%.
Brian: Driving domestic NOI, which increased three 4% year over year for the quarter and portfolio NOI, which includes our international properties at current constant currency grew three 6% for the quarter.
Brian: First quarter funds from operation or 1.0 billion or $2.67 per share compared to 133 billion or $3 50, 756 cents per share last year.
Brian: A reminder, the prior year results include 81 cents per share in after tax net gains primarily from the sale of the company's remaining ownership interest in E. G.
Brian: First quarter results include a 17 cents per share loss, primarily from the noncash unrealized mark to market and fair value adjustments on the place here exchangeable bonds. This is offset by a 7%.
Brian: Gain on the sale of Securities.
Brian: The non cash loss on the derivatives due to the outperformance of play for your stock price, which increased 11% in the first quarter.
Brian: The first quarter also includes an after tax loss of five cents per share related to catalyst restructuring costs, turning to our development activity at the end of the quarter development projects underway across all platforms with our share of net cost of 944 million people that didn't yogurt nine person.
Brian: Got it.
Approximately 40% of net costs are mixed use projects.
Brian: We expect to begin construction on additional projects in the coming months, including a residential development at Bray them, all and new retail dining and outdoor spaces at the shops at mission Viejo.
Brian: Both in Orange County, California as.
Brian: Well its a redevelopment of a former department store.
Brian: The fashion mall at Keystone and Indianapolis, It's a dynamic mixed uses starts for this year will be approximately $500 million.
Speaker Change: Turning to the balance sheet.
Speaker Change: Active in the first quarter, where we completed 12 secured loan transactions totaling approximately $2 6 billion U S dollars.
Speaker Change: Weighted average interest rate on these loans was 573%.
Speaker Change: At the end of the quarter, we had net debt to EBITDA is five two times and our fixed charge coverage ratio was one.
Speaker Change: One six times.
Speaker Change: And as David mentioned earlier, we are well positioned to allocate capital and be opportunistic various economic cycles.
Speaker Change: The dividend today, we announced our dividend of $2.10 per share for the second quarter of year over year increase of 10 cents or 5%. This dividend is payable on June 30th.
Speaker Change: Turning to guidance for 25.
Speaker Change: We are reaffirming our full year 2025 real estate S F O guidance range of $12.
Speaker Change: The $12 65 per share as we stated in February when issuing our initial full year 2025 guidance.
Speaker Change: Range reflects real estate assets and does not include OPI.
Speaker Change: We expect the results to trend towards the middle of the range given the current macro economic and tariffs.
Speaker Change: Potentially impacting retailer sales.
Speaker Change: With that thank you to everyone, David and I are available for your questions.
Speaker Change: Yes.
Speaker Change: Thank you, ladies and gentlemen would you like to ask a question. Please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the starches.
Speaker Change: And the first question comes from the line of Steve Sochua with Evercore ISI. Please proceed.
Steve Sochua: Yeah. Thanks, Good evening, David and Brian I guess I know the tariff situation has certainly been de escalated, but I'm just curious.
Steve Sochua: What sort of conversations you are maybe having with retailers kind of leading up to.
Steve Sochua: Today's announcement and you know how do you think it impacts if at all the leasing and I guess, you sort of talked about sales, but I guess what are you baking in for sales today, maybe versus three months ago.
Speaker Change: Yeah, Hi, Steve So I'll I'll, let me, let me take that and Brian can.
Steve Sochua: And color so.
Speaker Change: Oh, Yeah, Yeah, just on the new lease.
Speaker Change: When we ask obviously every week.
Speaker Change: To the to the leasing team.
Speaker Change: But it's only affected.
Speaker Change: For deals you know that I am aware of from one.
Speaker Change: Our European retailer because they.
Speaker Change: You know we're worried about the imports.
Speaker Change: Cost, bringing over goods from Europe.
Speaker Change: And you know it wasn't wasn't big deals, but that's the only one other than that.
Speaker Change: At this point it hasn't really affected Amy.
Speaker Change: Any demand.
Speaker Change: And you know we're hopeful that it won't because as you know retailers are looking long term on new stores and.
Speaker Change: You know at some point, we're all hopeful that this stabilizes.
Jack: Jack team and predicting sales.
Jack: It's really difficult because.
Speaker Change: To the extent that there is a retailer that imports.
Jack: Goods from China.
Jack: Even with today's kind of.
Jack: Duction in.
Jack: Is it kind of a tit for tat you know you're still talking about a 30% tariff which is material.
Jack: And at this point, many retailers are either holding off bringing into goods from China.
Jack: Which could affect their inventory levels trying to source it elsewhere.
Jack: Which they may or may not be successful with.
Jack: And so it's a it's a relatively big.
Jack: I know to the extent that there is a reliance on China, even on today's recent news.
Jack: And you know given margins.
Jack: Those terrorists in the 30 ish percent.
Jack: Our.
Speaker Change: You know I think you're gonna get retailers pause, whether or not they can afford to have goods shipped from China.
Speaker Change: To the extent that it is.
Speaker Change: You know in the more.
Speaker Change: Slide 10% I think.
Speaker Change: It's really retailer dependent I think theyre going to probably operate business as usual.
Speaker Change: I know I think I think they'll try to pass a little bit onto the consumer.
Speaker Change: So I'll try to get the manufacturer to take some of it.
Speaker Change: And then maybe some of it as well.
Speaker Change: But it shouldn't affect you know.
Speaker Change: How they operate and how they.
Speaker Change: You know how they.
Speaker Change: Inventory in their stores, but China still is.
Speaker Change: Big unknown.
Brian: And and so that's why you know as Brian said in his comments.
Brian: Sales were relatively flat if we were relatively flat as you know we have a history of no.
Brian: Certainly, beating the midpoint in and always trying to achieve the upper end and even higher.
Brian: It's impossible for us to say what sales are right now just because we don't know.
Brian: Inventories I mean, I think we're going to obviously the land.
Brian: Within our original guidance, which is good given all the uncertainty, but we're thinking there.
Brian: Inventory levels could be affected.
Brian: Because of the.
Brian: Yeah, the China tariffs, even with these reduced ones as I went through and so I think it's it has the potential to affect sales and that's why we're being a little more conservative.
Brian: And we're thinking it's probably going to be more in the midpoint.
Brian: One quarter ish into a very.
Brian: No.
Brian: Very uncertain volatile thing.
Brian: But I'd also say to you. The good news is other than this one anecdote on it you know some small deals from one European retailer.
Brian: You know demand is still strong.
Brian: And we haven't seen you know across the board by any stretch of imagination and reduction in our leasing demand.
Brian: And so that in a nutshell is the latest and greatest I'm sure. If you ask US a couple of weeks.
Brian: We might have something new.
Brian: But you know you've got retailers that are scrambling now remember.
Brian:
Brian: The the.
Brian: The way this thing works is that for retailers.
Brian: The U S retailers pay the tariff.
Brian: So they cant get the goods on the boat.
Brian: They pay the tariffs tariffs at.
Brian: At the time, it's delivered to the boat.
Brian: So that's why you're probably seeing a lot of boats that are.
Brian: Make the journey over or a lot of inventory at the shores in China.
Brian: So it's a you know it's a it's an unusual situation that we're just gonna have to.
Brian: Let's see how it how it shakes out now we're obviously.
Brian: Pleased to see that at least.
Brian: Their relationship.
Brian: Wait relationships seem to be thawing.
Brian: And seem to be on a more constructive paths.
Brian: But you know.
Brian: How it all shakes out I mean, our guess is as good as yours are.
Brian: Your economist or anybody else.
Brian: Thank you that's it from a store.
Brian: Steve.
Brian: The next question comes from the line of Craig Mailman with Citi. Please proceed.
Speaker Change: Hey, good afternoon.
Speaker Change: As a follow up call David that was really helpful. Providing your thoughts I'm just.
Speaker Change: Interested in and where do you think private retailers stand from an inventory perspective in terms of when they do start to run out to the extent shipments from China don't kind of Reaccelerate here following the filing and what have you seen that kind of pull forward.
Speaker Change: Demand in your traffic data here in April and May as consumers kind of pulled forward to get ahead of the terrorists just kind of curious how you think that plays out with just the cadence served.
Speaker Change: Our retail sales this year and the last piece just how you think the de Minimis rule impacts of the year retailers shoe.
Speaker Change: Yeah, do you feel like you'll get up market share boost from.
Speaker Change: The loss of block kind of overdue for a two week out for hospitals to some extent.
Speaker Change: Yeah, all right. So let me let me take it in.
Speaker Change: Only because I can remember it this way I hope Tom Tom took notes, but de Minimis is great for you know American based companies de Minimis really hurt.
Speaker Change: I know a number of retailers that obviously paid.
Speaker Change: Paid terrorists and werent able to avoid that loophole so.
Speaker Change: And obviously couple of Chinese companies.
Speaker Change: You know it took real advantage of it so that is a great outcome I want to applaud the administration for dealing with this loophole.
Speaker Change: Hopefully it continues and I think that's going to.
Speaker Change: Would be a material benefit.
Speaker Change: Benefit to our to our retailers are to defend themselves against Chinese retailers that are shipped directly to the consumer okay.
Speaker Change: So that was really really really important now to risk you know with respect to forever 21, I wish they had done it a couple of.
Speaker Change: Years ago, because it would level the playing field, but.
Speaker Change: It is what it is.
Speaker Change: Your second question or maybe it was your first.
Speaker Change: I would say.
Speaker Change: Is that the we don't see in our.
Speaker Change: Or what we what our retailers sell.
Speaker Change: All of that you know.
Speaker Change: All forward that's been talked about so I think what you have to look at in the first.
Speaker Change: True basically April now you know, where where you know we'll just April sales shortly but because you know we're in arrears on that from our retailers, but I'll give you a general thing first of all choice three things happened and I'll touch on traffic one is Easter that was.
Speaker Change: In April versus March so that was obviously very important.
Speaker Change: You know so that's why you March sales or a little bit higher last year than this year you had a.
Speaker Change: Weather issues certainly in the outdoor outlet centers for us in February.
Speaker Change: The weather was historically bad compared to 24.
Speaker Change: Hum.
Speaker Change: And.
Speaker Change: Traffic you are through the corner was I would say down slightly but when you look at year to date.
Speaker Change: Through April is actually up year to date, because now we've taken into account.
Speaker Change: So you know traffic is holding up the malls are actually.
Speaker Change: The performing of bonds in the outlets are relatively.
Speaker Change: Flat and.
Speaker Change: And I would say, what's what we're seeing in the outlet on a traffic point of view is we have.
Speaker Change: Assets.
On the board.
They're in Mexico, or Canada, and obviously, there has been a slow down.
Speaker Change: Traffic and.
Speaker Change: Sales on some of our border great long term asset, but currently you know.
Speaker Change: With all the rhetoric.
Speaker Change: Rhetoric, we're seeing some.
Speaker Change: Some traffic Guinea recognition.
Speaker Change: Some of the border assets.
Speaker Change: With with Canada in our Mexican customers, so hopefully as that rhetoric die.
Speaker Change: I doubt, we'll get back to normal on what and I think your first question what rate retailers basically have the way I understand it which is not perfect in every retailer is different.
Speaker Change: I would say they have.
Robert Lee: Robert Lee another.
Robert Lee: A month or so maybe longer.
Robert Lee: To decide what they're going to do with respect to China for.
Robert Lee: Q4 inventory.
Robert Lee: So I and I've seen a number of retailers have already reduced their exposure to China dramatically.
Robert Lee: And so as I said earlier, those those retailers are more or less taken a 10%.
Robert Lee: Told you kind of how they're thinking about it.
Robert Lee: But you know it's business as usual.
Robert Lee: The staff is China, they're either trying to replicate the goods.
Robert Lee: Elsewhere, if they can't they're I think holding off on making a shine a decision.
Robert Lee: And I think they probably you know.
Robert Lee: This is of course, she but they probably have a month ish. So when you know if they still are in a holding pattern whether to pull the trigger or not it could affect inventory levels in Q4.
Robert Lee: But I think that's so retail.
Robert Lee: T O C crowded it's it's it's hard for me to make that blanket statement and then obviously I think the European retailers.
Robert Lee: I have much better control over their production.
Robert Lee: Production and I don't see any change coming.
Robert Lee: From that and I think their you know their approach will be more on how they're going to price their goods to the ultimate end consumer.
Robert Lee: I hope that's helpful. Because I think I cover all three.
Speaker Change: Yeah, Yeah, you got it thank you okay. Thanks.
Speaker Change: The next question comes from the line of somebody I was cut off where bank of America. Please proceed.
Speaker Change: Good afternoon, everybody I'm I'm, David I guess, given the uncertainty out there and kind of what you said retailers scrambling.
Speaker Change: To make sort of a long term decision has that has your approach and kind of how youre dealing with your tenants.
Speaker Change: Whether it's you know when you're negotiating leases, whether it's you know on new deals, whether it's pricing or a T is I mean, how are you approaching.
Speaker Change: The situation sort of here given the uncertainty out there.
Speaker Change: Tenants to make long term decisions.
Speaker Change: Oh I like I said, the only anecdotal thing is.
Speaker Change: One one retail are backing out of a four outlet deals yet.
Speaker Change: But that's not a big deal to us because they're they were replacement tenants that we were.
Speaker Change: We already have least honestly as I said earlier.
Speaker Change: You know it's business as usual so.
Speaker Change: You know.
Speaker Change: Supply is still very much constrained demand is still strong.
Speaker Change:
Speaker Change: And the reliance as I said earlier from China is much reduced.
Speaker Change: So right now you know I can't guarantee it but right now it's it's business as usual I don't think we're doing really anything out of the ordinary dealing with them.
Speaker Change: Obviously.
Speaker Change: Now.
Speaker Change: To the extent they have a specific issue we will try to address it but.
Speaker Change: You know there they they have come a long way on their supply chain.
Speaker Change: Hum and been reducing.
Speaker Change: The Chinese imports for a long time, I do worry a little bit about you know.
Speaker Change: Not the bigger once again, we haven't seen.
Speaker Change: You know.
Speaker Change: I think that the.
Speaker Change: The bigger retailers have.
Speaker Change: Sophisticated supply chains, and long term relationships with suppliers everywhere.
Do think you know the main street retailers local moms and Pops.
Speaker Change:
Speaker Change:
Speaker Change: We all need is as a country to be focused on.
Speaker Change: They could have more prep again, we haven't seen it.
Speaker Change: But you know if I had to venture.
Speaker Change:
Speaker Change: You know if if if.
Speaker Change: If things don't stabilize which you know today is a good step, but if they don't ultimately stabilize.
Speaker Change: I think you'll have.
Speaker Change:
Speaker Change: Potential pressure points.
Speaker Change: On the local mom and pop retailers that are important to the you.
Speaker Change: And I went to the country.
Speaker Change: And.
Speaker Change: And obviously, we you know we do lease space to them, so again I'm not.
Speaker Change: Hopefully I'm not anticipating.
Speaker Change: You know, we're not seeing a problem, but I do worry about that a little bit more than you know I would say.
You know X Y Z that has 100 stores.
David Simon: Thank you David.
Speaker Change: Sure.
Speaker Change: Yeah.
Speaker Change: Your next question comes from the line of Michael Goldsmith with UBS. Please proceed.
Michael Goldsmith: Good afternoon. Thanks, a lot for taking my question can you talk about the back leasing with forever 21 boxes. What types of tenants are you seeing interest in taking the space. Those are tend to be bigger boxes. So cause he tended to break them up and how quickly can you get rent paying tenants.
Speaker Change: Yes.
Speaker Change: Yeah I'll I'll.
Speaker Change: Look I think the demand has been really good we've got basically over half of them leased.
Speaker Change: With that those economics, we've already replaced the rent.
Speaker Change: And forever 21.
Speaker Change: Yeah, I was was paying us.
Speaker Change: So.
Speaker Change: You know and I think it's a combination of all those.
Speaker Change: Oh, we're doing a lot of business with prime arc.
Speaker Change:
Speaker Change: You know czars as a world are there in some cases splitting it up.
Speaker Change: And.
Speaker Change: And we're very focused on it but we will more than double at the end of the day and I'll take a couple of years, but.
Speaker Change: All in to at least a basically 100 stores would more than double the rent.
Speaker Change: At the end of the two year process, Brian do you agree with that.
Brian: Absolutely we've got about 50 of them address we think those 50 about half of that will start commencing rent. This year. The other half next year with the balance kind of finishing out.
Speaker Change: Michael.
Speaker Change: But to David's point, we do think rents are going to at least double.
Speaker Change: Thank you very much good luck in the second quarter.
Speaker Change: Thank you thank you Mike.
Speaker Change: The next question comes from the line of Alexander Goldfarb with Piper Sandler. Please proceed.
Speaker Change: Hey, good afternoon out there and David I appreciate your comment about the mom and pop retailers are pretty interesting, especially given your platform.
Speaker Change: So a question if I hear you correctly it sounds like the consumer is fine despite what we read in online in the newspapers et cetera.
Speaker Change: Recession job loss or whatever but it sounded like the consumers find the shopper is fine it sounds like the real wildcard to our inventory levels.
Speaker Change: So it sounds like restaurants, and the other similar services that aren't impacted by tariffs are doing well. So is that correct that we should the real concern to earnings is really about inventory levels and whether you know they can sell out products and hit percent rent or are there other things that are.
Speaker Change: Playing into a into your outlook.
Speaker Change: No I I would I'd say, it's all it's all around sales not sales, there's more than just inventory levels right, it's consumer sentiment right.
Speaker Change: And you know that that's hard to predict Alex as you know I mean, right now it's pretty good.
Speaker Change: Our sales are flat you know ex you know to retailers are basically flat.
Speaker Change: Again, we don't have April sales, but that was that's basically flat through end of March and again.
I explained the the Easter being in Q1 versus Q2. This year. So I expect sales once I get April numbers to be up.
Speaker Change: You know first four months over the year.
Speaker Change: Compared to last year. So the consumer I think is fine I do think they're being a little more cautious and I do think.
Speaker Change: You know I do think.
Speaker Change: Tourism.
Speaker Change: Is it is.
Speaker Change: This may be the wrong word.
Speaker Change: Flattening waning.
Speaker Change: What are the different phases of the Moon waxing and waning.
Speaker Change: Whatever it is.
Speaker Change: I think it I think tourism.
Speaker Change: You know.
Speaker Change: In the U S.
Speaker Change: He is going to be cautious this year.
Speaker Change: Whether it's from Mexican Nationals Canadians Europeans I do think.
Speaker Change: And again, we have we we've just.
Speaker Change: Seen a little bit on the border.
Speaker Change: Hum.
On the other hand, the dollar is weaker so maybe that offsets it.
Speaker Change: But I do think there should be a little bit cautious caution to the wind on just you.
Speaker Change: You know.
Speaker Change: Some you know the.
Speaker Change: Is it the.
Speaker Change: The sales that are generally generated by non U S.
Speaker Change: <unk>.
Speaker Change: And so you put it all together.
Speaker Change: Uh huh.
Speaker Change: Economy is a.
Speaker Change: Clearly a little bit uncertain, you put it all together and it.
Speaker Change: Makes it really hard to predict sales right now, but even if it's you know like I said, we're just thinking it's going to be a little more cautious and that's why we're now.
You're indicating it's probably more likely you know we have this history of beating and raising and we're trying to be realistic given that set of circumstances that we're dealing with and that's why we're.
Speaker Change: Thinking sales and it's really only sales that.
Speaker Change: That had that that have the variability that could ultimately produce us more in the middle of the ranch.
Speaker Change: And David if I could just ask a clarification your comments on the U S. Consumer is that the same for your European and Asian portfolios or those consumers are experiencing different trends in the U S.
Speaker Change: They're actually the the.
Speaker Change: Or and it's basically our portfolio and investment in quite hear you.
Speaker Change: Japan is it's all international it's all very good right. So they're not there they're playing field there hasn't changed.
Speaker Change: So we don't expect.
Speaker Change: Yeah.
Speaker Change: That whole business, whether it's Europe.
Speaker Change: And or Asia for Us is basically stability.
Speaker Change: So we are outperforming in Europe and in Asia.
Speaker Change: And.
Speaker Change: Obviously, you know there is fluctuation was korea could be up Japan could be down.
Speaker Change: But generally.
Speaker Change:
Speaker Change:
Speaker Change: It's it's it's it's basically according to plan I don't expect any change there or was it the U S. Consumer that goes to these places really doesn't drive our business.
Speaker Change: Thank you it's more that it's more the Germans go into Italy.
Speaker Change: Yeah that kind of stuff.
Speaker Change: Certainly more likely the Chinese go to Europe, and they come here.
Speaker Change: Okay.
Speaker Change: Operator.
Speaker Change: The next question comes from the line of Caitlin Burrows with Goldman Sachs. Please proceed.
Caitlin Burrows: Hi, everyone I'll, maybe one thing that's tougher to predict than the tenant sales for solstice OPI, but with that in mind I guess wondering David if you could go through some of the OPI performance Q1I'm kind of talk about what's going on there and I know they arent part of guidance, but just trying to understand how some of the revenue and cost synergies that were planned for 2002.
Caitlin Burrows: Five are going expectations for those to progress throughout the year and then I guess separately would be how the tariff situation could impact jcpenney any other catalyst friends here.
Caitlin Burrows: Again, you know OPI is.
Caitlin Burrows: <unk> had improvement.
Speaker Change: Again, OPI has basically three businesses just sorry, everybody knows it's our e-commerce business, our G G shop Simon.
Speaker Change: Which we own roughly 45%.
Speaker Change: Our interest in catalysts group, which is penny in.
Speaker Change: The other operating brands Brooks brothers, Lucky et cetera, which we know well and remind me per se.
Speaker Change: 39% and.
Speaker Change: Our 50% interest in Jamestown. So that's all it is that's all it plans could be.
Speaker Change: And it is not.
Speaker Change: No it is not.
Speaker Change: You know, it's not what we live and breathe every day, though we're focused on creating value there as we have.
Speaker Change: You know what with.
Speaker Change: A b G.
Speaker Change: Our other OPI invest shelf getting to your question, we had we had quarter over quarter improvement in cattle and the other two businesses are stable fine going going according to plan.
Speaker Change: The catalysts brands had real improvement quarter over quarter.
As you know part of that was beam.
Not only the synergies that it was achieving in the merger, but also the F 'twenty one.
Speaker Change: Bankruptcy.
Speaker Change: 'twenty one is gone.
Speaker Change: And they're getting their synergies and you know penny in terms of sourcing goods.
Speaker Change: You know they have a lot less reliance on China.
Speaker Change: There is a there is some reliance on China theyre trying to source it elsewhere and if not I think they're going to be one of these retailers that has to decide in the next six weeks.
Speaker Change: Are there to pull the trigger to bring goods here or not.
Speaker Change: And and obviously, they're negotiating very.
Speaker Change: Very hard with.
Speaker Change: With their suppliers.
Speaker Change: And they have you know I mean, the administration is right they have more leverage.
Speaker Change: In negotiating with suppliers because the U S is a big market.
Speaker Change: But it's where are they are in a tricky spot.
Speaker Change: It's very hard to predict sales for those brands just like it would be for some other retailers.
Speaker Change: You know, but some of the brands in a catalyst like Brooks brothers is doing great. So.
Speaker Change: Yeah, no there there achieving the synergies that they wanted.
Speaker Change: Plan the business is on plan.
Speaker Change: And the bottom line is even with today's uncertainty we still expect to have.
Speaker Change: Again, it doesn't show on our numbers because of depreciation that I've explained to everybody, but we expect catalyst had positive EBITDA.
Speaker Change: This year, even with all the.
Speaker Change: The.
Speaker Change: No the tariffs are.
Speaker Change: And economic uncertainty that is causing.
Speaker Change:
Speaker Change: Going forward, So you know again.
Speaker Change: I would suggest you don't worry about it all that much.
Speaker Change: You know that's why we're telling the market, but we're happy to answer any and every question, except with the price of our cotton sure. It isn't books book that I don't know.
Speaker Change: Actually I do but I don't want to I don't Wanna be no at all.
David Einhorn: Ah Thanks, David Einhorn actually it's wherein you probably look very nice okay. That's a good luck at share it actually.
David Einhorn: Especially it's better than what you're used to where that was weird shirts. Okay. So I think he says he's a brooks brothers consumer.
Thank you.
David Einhorn: Youre welcome.
Speaker Change: The next question comes from the lineup Greg Mcginniss with Scotiabank. Please proceed.
Greg Mcginniss: Hi, Ah Hey, David Hey, Brian the balance sheet continues to be in great shape, but has macroeconomic uncertainty reached a point, where you're making adjustments to capital plans to maybe become a bit more defensive whether that's reconsidering certain development activity capex or.
Speaker Change: Your appetite for acquisitions or otherwise.
Speaker Change: That's it that's the that's a that's a great question and.
Speaker Change: I would say, we're still making a long term decision so.
Speaker Change:
Speaker Change: We're very fortunate to.
Speaker Change:
Speaker Change: Since we've been public as far as I can remember even with Covid.
Speaker Change: Yeah that's.
Speaker Change: And the great financial recession and everything else.
Speaker Change: We've never since I've been involved we've never been over our skis.
Speaker Change:
Speaker Change: And we are.
Speaker Change: We haven't even put our on our skis.
Speaker Change: If I can keep with the analogy right is that the right work.
Speaker Change: So we're not we haven't even put out on our skis recently right. So we've been cautious.
Speaker Change: To begin with are now we have all these opportunities where there are any.
Speaker Change: Sure He gets and then but I would say.
Speaker Change: Yes.
Speaker Change: I believe we're more cautious right now.
Speaker Change: No we are expecting.
Speaker Change: Our development pipeline is there, but it's not.
Speaker Change: No, we're not going crazy with it.
Speaker Change: I think that'll continue.
Speaker Change: We are expecting.
Speaker Change:
Speaker Change: Construction cost to increase.
Speaker Change: So you know the things that haven't started.
Speaker Change: Obviously, we don't start construction until we have to.
Speaker Change: You know a guaranteed Max price anyway, but there are things that are on the docket to start.
Speaker Change:
Speaker Change: Or we're getting through you know you know we're not.
Speaker Change: We're not pulling triggers until we have all that all the costs finalized and everything else. So.
Speaker Change: Yeah I.
Speaker Change: I think caution is the word of order, but that doesn't mean, we won't buy something.
Speaker Change: Or that we won't continue to do our pipeline.
Speaker Change: But you know it would be foolish for us not to be a little more cautious.
Speaker Change: Greg I think the only thing I would add there is as you know you know as volatile volatility increases sometimes for us opportunities increase and so now we have a we have a strong pipeline and we aren't clinical work our capital as you know so you know nothing really materially changed, but obviously a bit more caution on that.
Speaker Change: Relative to the headlines these days.
Speaker Change: I'll give you a simple example.
Speaker Change: I was just thinking out loud, but you know we had a we had one.
Speaker Change: Development and.
Speaker Change: Asia.
Speaker Change: I was going to say it but you know it just didn't feel like the right time.
Speaker Change: To do it.
Speaker Change:
Speaker Change: Just because you know.
Speaker Change: Yeah, It wasn't material and you know it just it just it just feels like we should be a little more cautious and again I don't want to hide.
Speaker Change: I don't want to say that we aren't going to do.
Speaker Change: A couple of deals here that could even be non.
Speaker Change: Non trivial.
Speaker Change: But you know it is you know caution as the as this award of order right now.
Speaker Change: Yeah.
Speaker Change: Okay. So if I'm looking at development pipeline, maybe we don't go much above this kind of $1 billion level for now and acquisitions still on the table, but of course everything depends on the underwriting.
Speaker Change: Well, Greg I would say and as you heard me in my prepared remarks, we ultimately believe that we're gonna start about $500 million of projects that are not included in that $1 billion spend levels. So we are still advancing our projects that are ready to move forward, but we're just doing so far.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: Thank you Brian.
Speaker Change: Sure.
Speaker Change: Yeah.
Speaker Change: The next question comes from the line of course outcome with Compass point. Please proceed.
Speaker Change: Thank you David you sound very chipper I'm glad to hear your voice.
Speaker Change: Can I ask you about the <unk> pipeline, where it stands today I think ended the fourth quarter was the 250 basis points has that grown.
Speaker Change: And and how do you see that can you quantify that for us and what's the timing of those you know rents coming online.
You may ask but I'm going to have Brian answer that.
Brian: It's about 300 basis points today.
Brian: From a ethanol pipeline, we're spending about a 300 basis points when you run the math on that.
Brian: About $150 million worth of rent at our average rents.
Brian: But again, that's not all incremental to the existing kind of space. So it's not all going to be.
Brian: We'd probably ease in the back half of this year, you're probably going to see 30% to 40% of that.
Brian: And the bulk of that will hit in 'twenty six or is there also some spillover in 27 26 27.
Brian: And it's working out further or had been working out purposes. Some of that is included in that as well.
Brian: And that includes the <unk> and that includes the forever 21 spaces as well.
Brian: It does yes.
Brian: Great. Thank you.
Brian: Ones that are leased signed up.
Speaker Change: And the next question comes from the line of Vince to bone with Green Street. Please proceed.
Speaker Change: Hi, Good evening do you discuss trends and tenant sales in a little bit more detail I'm curious if there are any civic tenanted or our categories are having an outsized impact on the decline in trailing 12 month portfolio sales results.
Speaker Change: Well I mentioned.
Speaker Change: You know one of the one of the decreases I mean, it's a marginal decrease to get to.
Speaker Change: Two.
Speaker Change: But as you know, we don't like to get into specific retailers, but we had to the well.
Speaker Change: Basically flat if you.
Speaker Change: But those two retailers aside.
Speaker Change: And again, the Easter was not in this worse versus.
Speaker Change: Last 12 months or last time, so when do you think.
Speaker Change: When you cut through it.
Speaker Change: It is relatively flat and we had a little.
Speaker Change: The malls were a little bit above outlets were a little bit down and I mentioned earlier.
Speaker Change: Part of that was because of the weather.
Speaker Change: We had a very tough one you probably never experience of being in southern California in Newport Beach, where it's sunny.
Speaker Change: Most of it most of the time you have other issues there right or two quakes.
Speaker Change: Unfortunately fires, but.
Speaker Change:
Speaker Change: So and then again, we have we had a little softness in some of our border activity.
Speaker Change: But I would say by and large our top 25 retailers had.
Speaker Change: You know, we're pretty much doing okay or not.
Speaker Change: So you know no other than that color.
Speaker Change: No no nothing nothing unusual on sales.
Speaker Change: No that's great to hear appreciate the color and then one more switching gears.
Speaker Change: You Didnt mentioned in department stores as it relates to any tariff related or inventory concerns and I would imagine many of their products are sourced from China and I'm. Just curious what is your current outlook for you know department store closures over the next few years hasn't changed at all with you know any of the macro uncertainty.
Speaker Change: Yeah. So you know it depends on the department stores. So for instance.
Speaker Change:
Speaker Change: You know if they don't want if they don't have private label.
Speaker Change: They really.
Speaker Change: They really don't have.
Speaker Change:
Speaker Change: They they they're not sourcing their own goods.
Speaker Change: They they really don't have the tariff.
Speaker Change: You know the China tariffs.
Speaker Change: Closure that you might think.
Speaker Change: So it really depends on.
Speaker Change: Which department store.
And you're talking about.
Speaker Change: And how big their private label business, yes.
Speaker Change: So if they sell mostly branded.
Speaker Change: Good day, and its really their relationship with the wholesaler.
Speaker Change: And what's a wholesaler so the wholesaler has to pay the important if they get it from China or.
Speaker Change: Elsewhere.
Speaker Change: They want to negotiate that between our wholesalers manufacturer.
Speaker Change: And what they want to pass that onto the <unk>.
Speaker Change: Part of the store.
Speaker Change: And you know that's a whole complicated.
Speaker Change: And what and what the consumer pays so there's just no way to really.
Speaker Change: No how that all shakes out.
Speaker Change: And as far as we can see on department store closures.
Speaker Change: Don't see you know we as you know we had the Macy's.
Speaker Change: Smith, we had one that was affected by that.
Speaker Change:
Speaker Change: No it wouldn't surprise me.
Speaker Change: If you if again you don't see pruning.
Speaker Change: Just like you do from every retailer on.
Speaker Change: On their store.
Speaker Change: <unk> level, but I.
Speaker Change: I don't expect any real.
Speaker Change: Any real major changes right now and again the tariff situation is idiosyncratic to that department store and mostly impacts were.
Speaker Change: They are not they are a part a big private label business.
Speaker Change: Great. Thank you.
Speaker Change: Sure.
Speaker Change: Our next question comes from the line of Mike Mueller with JP Morgan. Please proceed.
Speaker Change: Yeah, Hi, I'm coming back to sales for a second I know you flagged eastern and to retailers, but whats your recent sales trends being materially different either positively or negatively if you look at things on an NOI weighted basis.
Speaker Change: Yeah, I would say we used to always do that we have I didn't see it we haven't we.
Speaker Change: We don't do it by the way, what we should do that by the way, but but much. That's another that's me tell my guys but.
Speaker Change: I would say.
Speaker Change: When I look at it you know they do.
Speaker Change: There's no question that the better properties are getting better.
Speaker Change: So the simple answer to that is sales would be up.
Speaker Change: And we can give you the specific numbers that sales would be up.
Speaker Change: If you if you NOI weighted unequivocally.
Speaker Change: 500 assets are up about one 5%.
Speaker Change: And that doesn't include the bad debt that again has he Easter in.
Speaker Change: March of last year not April he should.
Speaker Change: Got it okay, okay great.
Speaker Change: And maybe one other one on the $500 million of development starts I think Brian you mentioned mixed use components in there how much of those dollars or even the overall redevelopment pipeline.
Speaker Change: Those dollars are you know directly retail versus some other property type whether it's office hotel.
Speaker Change: Bradley.
Speaker Change: I mean effectively the 60% that is it makes us quite honestly Michael.
Speaker Change: Okay.
Speaker Change: So 60% retail and the other 40% would be mixed use all the other okay.
Speaker Change: Okay perfect. Thank you.
Speaker Change: And by the way that's at our share. So so some of the so we have.
Speaker Change: Again, where we're gonna do a big residential development and bring them all but we have a partner for that so that's that's.
Speaker Change: 500, new starts its hard for sure.
Speaker Change: It's it's a bigger pipe to just that it just squeak, we boil it down to our shares.
Speaker Change: Got it thank you.
Speaker Change: Sure.
Speaker Change: The next question comes from the line of Ron Camden with Morgan Stanley. Please proceed.
Speaker Change: Great Hey, just wanted to go back to the guidance and I think some of the some of the assumptions and inputs that come into last time I. Appreciate it's still early but how are you guys thinking about sort of domestic property NOI bad dad as long as the 25 and 30 sand our interest cost headwind for this year just high there's all sorts of change.
Speaker Change: Since the last three months thanks, so much.
Speaker Change: No change really.
Speaker Change: Yeah, no well no change to any of those mass as you can see the interest income starting to come down.
Speaker Change: In the quarter.
Speaker Change: We would expect that to carry forward through the balance of the year. You will also see some more interest expense come through as we refinance our debt. Later this year are slightly highest coupon time, but no material change to the other elements of the guidance you stopped.
Speaker Change: Great. Thanks, so much.
Speaker Change: Sure. Thank you.
St Juste: The next question comes from Atlanta, and Dallas, St Juste with Mizuho Securities. Please proceed.
Speaker Change: Hi, there. This is ravi behavior on the line for Hyundai Oh. So you guys are doing well I wanted to particularly ask about your luxury tenants are you seeing what are you. What are you hearing from them in terms of sales and foot traffic and maybe has there been any sort of pause or pull back on leasing demand from luxury tenants in particular.
Speaker Change: Not not really again and I think it's you.
Speaker Change: You know, it's very brand specific so.
Speaker Change: We have some that are.
Speaker Change: No I'm absolutely on fire others that are.
Speaker Change: You know.
Speaker Change: Bringing in new designers and.
Speaker Change: No upgrading the the brand, but all of that's been pretty consistent for our outlook and what's been going on and so.
Speaker Change: They they think very long term like we do so.
Speaker Change: There really hasn't been a change of mood war.
Speaker Change: Commitment.
Speaker Change: From from those from those brands.
Speaker Change: Overall I'd say the business is now there's always ups and downs, but I'd say overall from a sales point of view relatively flat.
Speaker Change: So it's you know it's we haven't seen that you know the big thing else shrunk I think a lot of that is this more you have a few brands that are just in the midst of.
Speaker Change: Bringing in new designers and no more of you know updating their their brand.
Speaker Change: Got it thank you.
Speaker Change: Sure.
Speaker Change: The next question comes from the line of Linda Tsai with Jefferies. Please proceed.
Yes, hi in terms of not seeing pull forward in demand now do you think there's a scenario where pull forward demand materializes.
Speaker Change: U S consumers shop earlier for the holiday season, if there's concern that inventories are low our product is more expensive.
Speaker Change: You know we have seen that.
Speaker Change: A little bit historically, so I would say it's possible.
Speaker Change: And you know if that's the case you know margins might be okay because.
Speaker Change: Price you know trying to get out.
Speaker Change: From four retailers twice as good as it could go up so I do think.
Speaker Change: It's possible we have seen that in.
Speaker Change: Other cases.
Speaker Change:
Speaker Change: So I wouldn't rule it out.
Speaker Change:
And I think you know it it's to be determined but I wouldn't rule it out.
Speaker Change: Thank you.
Speaker Change: Sure.
Speaker Change: The last question comes from the line of almost Tayo Okusanya with Deutsche Bank. Please proceed.
Speaker Change: Oh, yes. Good afternoon, just a quick question on the 2.8 billion of debt refinancing.
Speaker Change: We can just talk a little bit about what that is.
Speaker Change: The market looks like today.
Speaker Change: Changes in terms of Ltvs or how lenders in general just kind of looking at the asset class at this point.
Speaker Change: Well I'd say that lenders are.
Speaker Change: No, we're very comfortable with the asset class.
Speaker Change: We've been upgraded with <unk>.
Speaker Change: We've been upgraded from <unk> to stay up to positive for Monday, I'll look on it from an S&P perspective.
Speaker Change: From an unsecured perspective, you know one 6 billion of maturities here.
Speaker Change: We will refinance that back in the unsecured market throughout the balance of the year.
Speaker Change: And on the mortgage side.
Speaker Change: Lenders can be a life insurance companies and other I'm looking at the asset class and looking to deploy capital even our leverage levels. You know we were relatively conservative.
Speaker Change: From a financial point of view as you know and so that opens us up to you know a opportunity to refinance.
Speaker Change: What we did earlier in the year is representative of that toll road has done in the first quarter.
Speaker Change: Yeah.
Speaker Change: Theater with finance.
Speaker Change: But importantly, we're rolling over at that we're not looking for incremental capital, we're not looking to extract excess proceeds to redeploy each of our business, we're doing that with our free cash flow.
Speaker Change: But I, but the good news is you know.
Speaker Change: A good retail real estate has.
Speaker Change: It is.
Speaker Change: People are very financially, they're very comfortable financing.
Speaker Change: And certainly our company.
David: Thanks, David.
Speaker Change: Thank you. Thank you.
Speaker Change: Thank you.
David Simon: This concludes the question and answer session I'd like to turn the call back over to Simon for closing remarks.
Speaker Change: Okay.
Speaker Change: Thank you everybody I think well talk soon and.
Speaker Change: I believe.
Speaker Change: At least I do think the mood is getting.
Speaker Change: More certain and more stable. So we're optimistic about this.
Speaker Change: Uncertainty resolving itself shortly.
Speaker Change: This concludes today's conference you may disconnect your lines at this time and enjoy the rest of them.
Speaker Change: Okay.
Speaker Change: Yeah.
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