Simon Property Group, Inc.

Greetings and welcome to the Simon Property Group fourth quarter and full year 2023 earnings conference call. With 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 zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tom Ward, Senior Vice President, Investor Relations. Thank you, Tom. You may begin.

Thank you, Paul, and thank you, everyone, for joining us this evening. Presenting on today's call are David Simon, Chairman, Chief Executive Officer, President, and Brian McDade, Chief Financial 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. Reconciliation 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 8 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. Thanks, Tom. Before turning to the results, I would like to provide some perspective on our company as we celebrated our 30th anniversary. as a public company mid-December of last year. We have grown our company into a global leader of premier shopping, dining, entertainment, and mixed-use destinations, managing through, and in some cases, very turbulent times. Over the last three decades, from our base of 115 properties in 1993 We have acquired approximately 300 properties, developed more than 50, and disposed of approximately 250, resulting in our current domestic portfolio of 215 assets. We expanded globally and today have 35 international outlets, including world-renowned outlets in Asia. And our portfolio is differentiated by product type, geography, enclosed and open-air centers located in large and dense catchment areas. Our portfolio is supported by the industry's strongest balance sheet and a top management team. We are the largest landlord to the world's most important retailers, and not by accident. Our diversified tenant base has solid credit, and our mix is always changing and adapting, best illustrated by the fact that compared to 30 years ago, only one retailer is still in our current top 10 tenants. Our team's hard work has resulted in industry-leading results, including some of the following. Our annual revenue increased 3%. 424 million to nearly 5.7 billion. Annual FFO generation increased 30 times from approximately 150 million to nearly 4.7 billion, a 12 percent CAGR. Total market capitalization has increased from 3 billion to 90 billion. We have paid over $42 billion in dividends to shareholders. We have assets in our portfolio that have been in business for more than 60 years. Those assets are still growing today, with many generating $100 million in NOI. These assets are in great locations, have a loyal and large customer base, and are where the retailers want to be. No other asset type has the longevity, including the NOI generation and embedded future growth that these assets have. Yes, they change. Yes, they evolve. Yes, they adapt. But yes, they also grow. Our collection of assets cannot be replicated, and there are hidden, always hidden opportunities within them. I want to thank the entire Simon team who have contributed to 30 years of success as a public company. And now let me turn to our fourth quarter, 23 results. We generated approximately $4.7 billion in funds from our operation in 2023, or $12.51 per share, and returned $2.9 billion to shareholders in dividends and share repurchases. For the quarter, FFO was $1.38 billion or $3.69 per share compared to $1.27 billion or $3.40 per share. Let me walk you through some of the highlights for this quarter compared to Q4 of 2022. Domestic operations had a terrific performance this quarter and contributed 28 cents of growth, primarily driven by higher rental income with lower operating expenses. Gains from investment activity in the fourth quarter were approximately 7 cents higher in a year-over-year comparison. Other platform investments at $0.03 lower contribution compared to last year. FFO from our real estate business was $3.23 per share in the fourth quarter compared to $2.97 from last year. That's 8.7% growth and $11.78 per share for 23 compared to $11.39 last year Domestic property NOI increased 7.3 percent year-over-year for the quarter and 4.8 percent for the year. Continued leasing momentum, resilient consumer spending, operational excellence delivered results for the year exceeding our initial expectations. Our NOI ended the year higher than 2019 pre-pandemic levels. Portfolio NOI, which includes our international properties at constant currency, grew 7.2 percent for the quarter and 4.9 percent for the year. Ball and outlet occupancy at the end of the quarter, fourth quarter, was 95.8 percent, an increase of 90 basis points compared to last year. The mills occupancy was 97.8. Occupancy is above year-end 2019 levels for all of our platforms. Average base minimum rent for malls and outlets increased 3.1 percent year over year, and the mills rent increased 4.3 percent. We signed more than 960 leases for approximately 3.4 million square feet in the fourth quarter. For the year, we signed over 4,500 leases, representing more than 18 million square feet. Approximately 30 percent of our leasing activity for the year were new deals with going in rents of approximately $74 per square foot, and renewals had going in rents of approximately $65 per square foot. Leasing momentum for the last couple of years continues into 2024. Reported retailer sales per square foot per quarter was $743 for malls and outlets combined and $677 for the mills. During the quarter, we sold a portion of our interest in ABG for gross proceeds of $300 million. in cash and reported pre-tax and after-tax gains of $157 million and $118 million, respectively. We opened our 11th outlet in Europe last year. Construction continues on two outlets, yes, one in Tulsa, Oklahoma, and yes, one in Jakarta, Indonesia. We completed 13 significant redevelopments and will complete other major development projects this year. In addition, we expect to begin construction this year on five to six mixed-use projects representing around $800 million of spend from Orange County to Ann Arbor to Boston to Seattle to Roosevelt Field are some of the ones that are planning to start this year. And we expect to fund these redevelopments and mixed use projects with our internally generated cash flow of over $1.5 billion after dividend payments. During 2023, we completed $12 billion in financing activities, including three senior note offerings for approximately 3.1 billion, including the Clay Pierre exchangeable offering. We recast and upsized our primary revolver credit facility to $5 billion and completed $4 billion of secured loan refinances and extensions. Our A-rated balance sheet is as strong as ever. We have approximately $11 billion of liquidity. During 2023, we paid, as I mentioned earlier, $2.8 billion in common stock dividends. We repurchased 1.3 million shares of our common stock at an average price of just over $110 per share in 2023. And today we announced our dividend of $1.95 per share for the first quarter, a year-over-year increase of 8.3%. The dividend is payable on March 29th of 2024. Now, moving on to 2024, our FFO guidance is $11.85 to $12.10 per share. Our guidance reflects the following assumptions. Domestic property NOI growth of at least 3%. Increased net interest expense compared to 2023. of approximately 25 to 30 cents per share, reflecting current market interest rates on both fixed and variable debt assumptions and cash balances, contribution from other property, other platform investments of approximately 10 to 15 cents per share, no significant acquisition or disposition activity, and our current diluted share count of approximately 374 million shares. So with that said, it's safe to say we're excited to enter year 31 as a public company. Thank you for your time, and we're ready for Q&A.