Simon Property Group, Inc.

Greetings and welcome to the Simon's first quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Tom Ward, the SVP of Investor Relations. Thank you, and you may proceed, sir.

Thank you, Claudia, and thank you for joining us this evening. 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. 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 relating 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. 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, good afternoon, and I'm pleased to report our first quarter results. We are off to a good start with results that exceeded our plan. First quarter funds from operation were $1.03 billion, or $2.74 per share. Let me walk through some variances for this quarter compared to Q1 of 2022. Domestic operations had a very good quarter and contributed 15 cents of growth, primarily driven by higher rental income. Our international operations also performed well and contributed two cents of growth. These positive contributions were partially offset by declines from the headwind from a strong U.S. dollar of two cents, higher interest rate expense, of $0.05, lower lease settlement income of $0.06 compared to Q1 of 2022, and we had a mark-to-market gain on publicly held securities of $0.06 for the quarter, and a $0.13 lower contribution from our other platform investments compared to Q1 2022. Let me walk you through some of that. and remind everyone that for OPI results, we are generally on our plan. Please keep in mind, OPI was up against very tough comparisons from last year's Q1. This quarter also includes one-time transaction costs from ABG's recent acquisition activity, JC Penney's deployment of their new beauty initiative, and investments related to physical stores, IT, and one-time reorganization expenses, all flowing through our FFO number. The retailer part of our OPI investments has seasonality associated with it, generally with losses in the first quarter and the majority of our profit in the fourth quarter and should be modeled accordingly. Overall, we continue to expect OPI to meet our 2023 guidance we provided at the beginning of the year, which is similar, which will be a similar FFO contribution that was compared to 2022. Now, domestic property NOI increased 4% year over year for the quarter. Portfolio NOI, which includes our international properties at constant currency grew 3.9% for the quarter. Our mills, malls, and outlet occupancy at the end of the first quarter was 94.4%, an increase of 110 basis points compared to the prior year. Mills was 97.3%, and TRG was 93.3%. Importantly, average base minimum rent was $55.84 per square foot, an increase of 3.1% year over year. Leasing momentum continued across the portfolio. We signed more than 1,200 leases for more than 5.9 million square feet in the quarter. We have an additional 1,500 deals in our pipeline, including renewals for approximately $570 million in gross occupancy cost. More than 25% of our leasing activity in the first quarter was new deal volume. We're seeing strong broad-based demand from the retail community, including continued strength from many categories. By the end of the second quarter, we expect to be approximately 75% complete with our 2023 expiration. Retail sales momentum continued. Reported retail sales per square foot reached another record in the first quarter at $759 per square foot, for malls and premium outlets combined, an increase of 3.3%. All platforms achieved record sales level, including the mills at $6.83 a foot, a 2.2%, and PRG was $1,100 per square foot, a 6% increase. Good news is tourism is returning with our tourist-oriented centers outperforming The portfolio average in terms of sales, our occupancy cost at the end of the first quarter was 12%. We opened our West Paris designer outlet in Normandy, France last week. Our 35th international outlet center during the quarter construction restarted on our upscale outlet center in Tulsa, Oklahoma, which will now open in the fall of 2024. We have several densification projects under construction and a pipeline of identified projects that includes approximately 2,000 residential units and hotel rooms. Now turning to the balance sheet, we completed a dual tranche U.S. senior notes offering that totaled $1.3 billion at a combined average term of 20 years at an average coupon of 5.67%. We close on our new $5 billion multi-currency revolving credit facility with a maturity in 2028. Importantly, the pricing's unchanged from our prior facility. The traditional secured mortgage markets continue to support the refinancing of our assets across geographies and property types. Our A-rated balance sheet is as strong as ever. We ended the quarter with $9.3 billion of liquidity. Today we announced our dividend of $1.85 per share for the second quarter, a year-over-year increase of 9%. The dividend is payable on June 30th of this quarter. Guidance for this quarter, given the results of this quarter and our current view of the remainder of the year, we are increasing our full year 2023 guidance range from $11.70 to $11.95 per share to $11.80 to $11.95, $11.95 per share compared to last year of $11.87. This is an increase of 10 cents at the bottom end of the range and 5 cents at the midpoint. Excuse me. And I'm pleased with our first quarter results. Tenant demand is excellent and brick and mortar stores are where shoppers want to be. And even with the economic uncertainty, we are running ahead of our internal plan. Excuse me. Here I have some kind of frog in my throat, but we're ready.