Simon Property Group, Inc.

Ladies and gentlemen, thank you for standing by. And welcome to the Simon Property Group, Inc. First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference to your speaker today, Tom Ward, Senior Vice President of Investor Relations. Please go ahead, sir.

Thank you, Joelle. Good evening, everyone, and thank you for joining us today. Presenting on today's call is David Simon, Chairman, Chief Executive Officer and President. Also on the call are Brian McDade, Chief Financial Officer, and Adam Roy, Chief Accounting Officer. Before we begin, 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. We refer you to today's press release and our SEC filings for a detailed discussion of the risk factors related to those forward-looking statements. Please note that this call includes information that may be accurate only as of today's date. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included within the press release and the supplemental information in today's Form 8K filing. Both the press release and the supplemental information are available on our IR website at investors.simon.com. 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 and one follow-up question so we might allow everyone with interest the opportunity to participate. For our prepared remarks, I'm pleased to introduce David Simon.

Good evening, and thank you for joining us today. I wish everyone listening today the best in these challenging times. Before I turn over to our first quarter results, I want to express my appreciation sincere gratitude to the entire Simon team for the work they have done and continue to do since the COVID-19 crisis began. The team has adapted to a constantly changing environment. We made difficult decisions and successfully transitioned to a remote work environment in our corporate and regional offices. We implemented new protocols to adapt How we operate our properties for the safety of our shoppers, employees, and tenants. And I'm frankly very proud of the entire team, Simon team. Now turning to our first quarter results, they were largely in line with our expectations. Reported FFO, funds from operation, was $980.6 million, or $2.78 per share. As a reminder, the prior year period included 24 cents per diluted share from insurance settlement proceeds and a gain on a sale of our interest in a multifamily residential property. In the current period, the operations of our investment in retailers were negatively impacted by approximately 6 cents per share pre-tax due to store closures, as a result of the COVID-19 government shutdown. Adjusting the current period for the COVID-19 impact, our investment in retailers and the prior year period for the insurance proceeds and the residential asset sale gain that I mentioned above, comparable funds from operation for the current year period is $2.83. compared to last year of $2.80. Comp NOI was flat in the quarter and portfolio NOI decreased 20 basis points year over year. Occupancy for our premium and mall portfolio at quarter end was 94%. Average base minimum rent was $55.76. and our mall and outlet portfolio recorded leasing spreads of $2.80 per square foot or an increase of 4.6%. Reported retailer sales per square foot for our malls and outlets were $703 for the trailing 12 months ended February 29th compared to $660 in the prior year period An increase of 6.5%. When you include March, even though we were shut down since March 18th, reported retail sales still increased 2.1%. Our portfolio was performing well. We saw solid trends in shopper traffic, tenant demand, retail sales, and our results, including our retail investments, until the COVID-19 stay-at-home recommendations and orders began to be issued in the middle of March. Now let's talk about some of the actions we've taken. We were the first large retail owner and operator to close our property system-wide to address the spread of the pandemic. We're the first to reopen our properties, of course, subject to government stay-at-home orders and restrictions. We took immediate and decisive actions to aggressively reduce our operating costs and increase our financial resources, including but not limited to some of the following, suspended or eliminated more than $1 billion of capital for redevelopment and new development projects in the U.S. and internationally. Our current investment focus is on projects nearing completion. We will reevaluate all suspended projects over time. Importantly, our share of remaining net cash funding required to complete the new development and redevelopment projects under construction is approximately $160 million. We significantly reduce property operating expenses and all non-essential corporate spending We also made some very, very difficult decisions regarding our employees, including a reduction in force and furloughed a certain of our field and corporate personnel due to closures of our properties as a result of government stay-at-home orders. We implemented a freeze on all hiring efforts. We lowered base salaries across the senior executive team and implemented a shared salary reduction plan for higher compensated employees and deferred certain executive bonuses. Our board also played their part by agreeing to temporarily reducing their cash retainer fees, and we drew down $3.75 billion under our revolving credit facility, which increased our cash position, including our share of joint venture cash, to over $4 billion at the end of March. Now, some positive news on reopening the health and safety of our communities. Of course, we'll always be our highest priority. Last week, we started reopening our properties and markets where local and state closures orders have been lifted and where retail restrictions have been eased. As part of the ongoing reopening process, we published our comprehensive COVID-19 exposure control policy that was developed in connection with the leading experts in the field of epidemiology and environmental health and safety experts in order to ensure the highest possible safety standards at our properties. You can see these online, but let me just name a few. Our safety protocols include preemptive employee health screening, employee safety protections, Promotion and enforcement of social distancing practices, enhanced sanitizing and disinfecting, and of course, shopper safeguards. These protocols meet or exceed the guidelines published by the CDC and are more robust than many of the measures deployed by essential businesses and online fulfillment centers that have remained open during this pandemic. We implemented the temporary closures of our centers to protect our shoppers and the communities in which we serve from the spread of the coronavirus. And we are now leading the effort for these local economies to get back to business while delivering a new elevated standard of safety for all. Now, we have opened, as of today, 77 of our properties and our planning to have approximately half of our U.S. portfolio opened within the next week. We are, of course, working in conjunction with state and local governments on our reopening plans. Shopper response to our reopening has been positive and sales of many tenants have been better than their initial expectations. Additionally, we have opened 12 of our designer and international premium outlets. Now let me turn to our tenant update. Of course, we're in the midst of discussions with our tenants regarding their individual situation, and as such, it is not appropriate to comment on specific details or terms at this point due to the confidential nature of those discussions. Each situation is analyzed individually based upon our tenant's Market position, their financial status, and the history and depth of our relationship. I am sure you can respect this. These discussions are ongoing, and as we complete them, we are more than prepared to share the appropriate information. Our tenants are eager to reopen their stores, and we are working with them to do so. We are also very focused on helping local entrepreneurs reopen and are also supporting our restaurant operators both nationally and locally. Now let me turn to the balance sheet. We have always maintained a strong balance sheet in order to capitalize on opportunities but also to withstand economic downturns. On March 16th, two days before we shut down our portfolio, we amended and extended our $4 billion credit facility with a $6 billion facility that includes a $2 billion delayed draw term loan. At quarter end, our total liquidity was $8.7 billion, consisting of $4.6 billion of available credit facility borrowing capacity and the $4.1 billion of cash mentioned earlier. As a reminder, the $8.7 billion is net of $1 billion of U.S. and Euro commercial paper that was outstanding to quarter end. Commercial paper market is open and continues to find stability. Investment demand for our paper has increased, allowing us to successfully issue over $375 million during the last couple of weeks. We currently have approximately $500 million outstanding between our U.S. and Euro CP programs. For the remainder of the year, we have $900 million of unsecured notes maturing and a limited number of maturing non-recourse secured loans to single-purpose entity borrowers. Our debt covenants remain well above, well above the required levels with significant headroom. Now, given the evolving nature of COVID-19 and the global economic disruption it has caused, it is not currently possible to predict with certainty the pandemic's impact on the rest of our year's financial results. As a result, we are withdrawing our full year 2020 guidance for estimated net income attributable to common stockholders per diluted share, estimated FFO per diluted share, and comparable property NOI growth, which we provided on February 4, 2020. As of today, over 700 public companies have withdrawn their full-year guidance. Let me turn to the dividend. The Board will declare... The Board will declare a second quarter dividend before the end of June, and that dividend will be paid in cash. We expect to pay out at least 100% of our taxable income in 2020 in cash. As a point of reference, there have been over 175 public companies who have either suspended or reduced their common stock Thank you for joining us. Before we turn it over to Q&A, most importantly, I want to thank all of my colleagues for busting their ass. I also reflect on the last few weeks and how our company has responded. Two words come to mind, resilience and innovation. We have managed through many severe crises over the decades, whether natural disasters, bubble bursts, numerous recessions, etc. Each crisis Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key.