Simon Property Group, Inc.

Greetings. Welcome to Simon Property Group third quarter 2023 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 during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Tom Ward, Senior Vice President, Investor Relations. Thank you. You may begin.

Thank you, Sherry. 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.

Good evening, and I'm pleased to report our third quarter results. Third quarter funds from operation were $1.2 billion, or $3.20 per share. Let me walk you through some of the highlights for this quarter. compared to the same quarter of 2022. Domestic and international operations had a very good performance this quarter and contributed 17 cents of growth, primarily driven by higher rental income. Non-cash after-tax gain, gains of 32 cents in the third quarter, were related to the partial sale of our ownership interest in SPARC, and ABG as a result of ABG selling primary shares in the quarter. Higher interest expense was a setback of seven cents year over year. We had a 15 cent lower contribution from our other property investment platform compared to Q3 2022. and a $0.02 loss on mark-to-market of publicly traded securities. FFO from our real estate business was $2.91 per share in the third quarter, compared to $2.83 in the prior period last year. So far, our real estate has produced $8.55 per share for the first nine months, compared to 840 from last year. We are pleased with the transaction SPARK completed with Sheehan during the third quarter that demonstrated the value that we have created in that business. The transaction was significantly above our basis and as a result we recognize a gain in the corner and the transaction ultimately reduced our ownership interest in SPARK from 50% to 33% as we admitted Sheehan as a partner. Given our lower ownership interest in the back end weighting of profitability in the fourth quarter, we now expect five cent lower FFO contribution from Spark in the fourth quarter of this year. During the third quarter, the Taubme family exercised their put right on a portion of their interest in TRG. We exchanged 1.725 million partnership interest units for an additional 4% ownership interest. We now own 84% of TRG. Domestic property NOI increased 4.2% year over year for the quarter and 3.8% for the first nine months. Portfolio NOI, which includes our international properties at constant currency, grew 4.3% for the quarter and 4% for the first nine months of the year. Mall and outlet occupancy at the end of the third quarter was 95.2%, an increase of 70 basis points compared to last year. Our third quarter occupancy is higher than than fourth quarter of last year, which has not occurred historically. The mills occupancy was 97.4%, and occupancy is above all year-end 2019 levels for all of our platforms. Average base minimum rent for malls and outlets increased 2.9% year-over-year, and the mills was 3.6%. year over year. Leasing momentum continues across our portfolio. We signed more than 970 leases for approximately 4.3 million square feet in the quarter. Through the first nine months of 2023, we signed more than 3,500 leases for 15 million square feet, which is expected to generate over a billion dollars of revenue. We have an additional 1,100 deals in our pipeline, including renewals, for another 400 million in revenue. We are seeing strong broad-based demand from retail community, including continued strength from many categories. Reported retail sales per square foot the third quarter was $744 for the mills and outlets combined, and 676 for mills. We continue to be active in redevelopment, new development. During the quarter, we started construction on a significant redevelopment at Brea Mall and a new upscale outlet center in Jakarta, our first premium outlet in Indonesia. We completed the refinancing of 11 property mortgages during the first nine months of the year for a total of $960 million at an average rate of 6%. We have our balance sheet is strong with approximately $8.8 billion of liquidity. Today we announced a dividend of $1.90 per share for the fourth quarter, which is a year-over-year increase of 5.6%. The dividend is payable on December 29th. And we also purchased approximately $1.27 million shares of our common stock for $140 million. We are increasing our full year 2023 guidance from $11.85 to $11.95 to $12.15 to $12.25 per share. This is an increase of 30 cents at the midpoint. So to conclude, I'm pleased with our third quarter results. Our business is performing well and is ahead of our plan. Tenant demand is strong. Occupancy is increasing. Base minimum rent levels are at record levels. And we are very experienced at managing our business through volatile periods of time. And as you all know, this is when we do some of our best work. So we're now ready for your questions.