Simon Property Group, Inc.

Q2 2024 Earnings Conference Call

8/5/2024

spk10: Greetings. Welcome to Simon Property Group's second quarter 2024 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 of Investor Relations. Thank you. You may begin.
spk12: Thank you, Sherry. And thank you all for joining us this evening. Presenting on today's call are David Simon, Chairman, Chief Executive Officer and 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 1985, and actual results may differ materially due to a variety of risks, uncertainties, and other factors. We refer you to today's press release that our SEC filing for a detailed discussion of the risk factors relating to those scores and 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 today's format case 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 accept the request to limit yourself to one question. And please introduce David Sullivan.
spk15: Good evening, everyone. I'm pleased with our financial and operational performance in the second quarter. We are seeing increased leasing volumes, occupancy gains, shopper traffic, and retail sales volumes, resulting in the company's highest level of real estate NOI for the second quarter in our company's history. Demand for our space from a broad spectrum of tenants is strong and steady. Our company is focused on creating value through unique and disciplined investment activities that will continue to deliver long-term benefits growth in cash flow, funds from operations, and dividends, as you've seen by our recent increase in our dividend per share, and importantly, make our properties better for the communities in which they operate. I'm now going to turn the call over to Brian, who will cover our second quarter results and the full year guidance in more detail. Thank you, David. Second quarter funds from operations were $1.09 billion or $2.90 per share compared to $1.8 billion or $2.88 per share last year. SFO from our real estate business was $2.93 per share in the second quarter compared to $2.81 in the prior year, a 4.3% growth. Domestic and international operations had a very good quarter and contributed $0.12 of growth.
spk18: As a reminder, the prior year included a non-cash gain of $0.07 from investment activity related to ADG.
spk15: Domestic NOI increased 5.2% year-over-year for the quarter. Continued leasing momentum, resilient consumer spending, and operational excellence delivered results exceeding our plan for the quarter. Portfolio NOI, which includes our international properties at constant currency, grew 4.8% for the quarter. Malls and outlet occupancy at the end of the second quarter was 95.6%, an increase of 90 basis points compared to the prior year. The mills occupancy was 98.2%. Average base minimum rent for malls and outlets increased 3% year over year, and the mills increased 3.9%. As David mentioned, leasing momentum continued across the portfolio.
spk18: We signed more than 1,400 leases for approximately 4.8 million square feet in a quarter. Approximately 30% of our leasing activity in the second quarter was new deal volume.
spk15: Our traffic in the second quarter was up 5% compared to last year, and importantly, total sales volumes increased approximately 2% year over year. Reported retailer sales per square foot in the second quarter was $741 for the mall and premium outlets combined. We hosted our third annual National Outlet Shopping Day in June, and it was very successful for shoppers and participating retailers. More than 3 million shoppers visited our premium outlets and mill centers over the shopping weekend. Feedback from shoppers and retailers following the event has been great. Since launching this unique event three years ago, participating retailer and shopper momentum has built each year, with more than 475 retailers this year, and we look forward to an even bigger event next year. Our occupancy cost at the end of the second quarter was 12.7%. Turning to new development and redevelopment, we will open our TELSA premium outlets on August 15th at 100% lease, and we will also open a significant expansion at Busan Premium Outlets in South Korea this fall. We also started construction in the quarter on our first phase of a new luxury residential development at Northgate Station. This project will include 234 units and add other elements that further transforms Northgate into the ultimate live, work, skate, stay, and shop destination. At the end of the quarter, new development and redevelopment projects were underway across all platforms, in the U.S. and internationally with our share of net cost of $1.1 billion and a blended yield of 8%. Now to the balance sheet. We completed the refinancing of 10 property mortgages during the first half of the year for a total of approximately $1.1 billion and an average rate of 6.36%. We ended the quarter with approximately $11.2 billion of liquidity. Turning to the dividend, today we announced our dividend of $2.05 per share for the third quarter, a year-over-year increase of 7.9%. The dividend is payable on September 30th. And now finally for guidance. We are increasing our full year 2024 guidance range to $12.80 to $12.90 per share, compared to $12.51 last year. This is an increase of $0.05 at the bottom end of the range and 2 cents at the midpoint, and reflects overcoming approximately 15 cents per share from certain retailer restructuring, lower lease settlement, and land sales income this year.
spk16: With that, that concludes our prepared remarks. Thank you, and David and I are now available for your questions.
spk10: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Jeff Spector with Bank of America. Please proceed.
spk02: Great. Good afternoon, and congratulations on the quarter. Thank you, Jennifer. Yep. My first question, I guess my only question at this point, unless I circle back in, I guess let's focus on the consumer. Given you service to the consumer across various formats from the malls to premium outlets to mills, what is your latest thoughts on the consumer today? Clearly, the market is panicking that we may see a consumer-led recession. And maybe if you could tie it to what you're seeing from retailers and how they're acting today. Thank you.
spk15: Sure, Jeff. This is David. I'll take that. So, look, I think we've been pretty consistent for well over a year that the lower-income consumer has been under pressure for quite some time, primarily because of the inflation that's affected them. That continues to be the case. They are very focused on managing their bills and discretionary expenditures have been obviously not where we'd like to see them. So we're optimistic that we're gonna cycle out of that for the low-end consumer. given the inflation picture that we see now, which is relatively benign. It's way too early, Jeff. We haven't seen a slowdown in the higher-end consumer. Obviously, the market is in an interesting point. We have not seen the wealth impact at all impact us. higher-end consumer. So, you know, we're still pretty sanguine about it. I think, you know, as you know, we kind of budgeted at the beginning of the year flat sales. We're a little bit above that. So we've got a little bit of cushion. But the higher-end or the better-end consumer, you know, I think is in a good spot. Their liquidity is in a decent spot. So we don't expect anything dramatic. But obviously, they're going to take their cue from what's going to happen in the overall market and what the employment picture looks like. So in summary, I think we're going to cycle more positive in the lower end consumer. And I think the higher-end consumer, steady as she goes currently. Jeff, you can always ask another question. But, you know, Tom Lord has put a pretty tough restriction on people.
spk02: No, thank you. I'll be respectful. Thank you.
spk10: Thanks, Jeff. Our next question is from Samir Canal with Evercore ISI. Please proceed.
spk03: Hi, David. I guess what are you seeing in terms of leasing or pricing power? I mean, are you seeing any tenants taking a bit of a pause or taking a bit longer to sign new leases given what's happened with the macro? And I guess any color on July would be also helpful in terms of traffic or sales. Thanks.
spk15: Yeah, I don't have color on July. We don't really get those numbers until August 20th, which is my birthday, by the way, but usually 20 days after the month. So no early returns on that. So we had a field committee meeting, Brian, a week ago, and what I am told, I don't participate in these because, you know, I would probably be disrupted. But what I am told, it was the best New Deal committee meeting we've had ever. So I think, you know, what we're seeing is demand and what I said earlier in my opening remarks, Demand is strong and steady, not abating. It's really unabated. Obviously, you know, retailers and so are we. We're all sensitive to economic conditions. So as those develop, we have to be sensitive to them. But as we currently speak, we had a great deal committee, and the team's working hard. You know, all cylinders. So, you know, that's kind of the news from the front.
spk02: Thank you. Sure.
spk10: Our next question is from Caitlin Burrows with Goldman Sachs. Please proceed.
spk09: Hi, everyone. Maybe just following up on that retailer demand side. So portfolio occupancy has increased nicely over the last year, it sounds like. leasing remains strong. You just mentioned the best new deal committee. So that would support further occupancy increases. I'm just wondering versus the current 95.6%, how much further upside do you think you have? Or is there some reason to expect this rate of increase can or cannot continue going forward?
spk15: Hey, Caitlin. It's Brian. I think we're pretty comfortable thinking that we're going to end the year north of 96%.
spk16: Certainly still a little bit of noise out there, but given the robust demand in the type of environment where we think we're more than 96 by the end of the year.
spk15: And again, I'm sorry, I was just going to ask that. I think, obviously, you know, it's also not just the occupancy number. It's also replacing retailers that aren't performing with better retailers. So it's a mixed issue, too, which the team is very much focused on. Go ahead.
spk09: Yeah, I was just going to say bigger picture, like Brian, you just mentioned north of 96. Is there any reason to think maybe based on what David said, that's kind of a ceiling or there could still be continued upside potential?
spk15: Well, I'd be cautious. You know, that's a pretty good number for us year end. What was the rule last year? Tom knows every number, but he's fun for himself. It's a pretty good increase from last year, 95.8, 95.1, not that good. So maybe, maybe there's upside.
spk10: Okay, thank you.
spk15: Thanks.
spk10: Our next question is from Alex Goldfarb with Piper Sandler. Please proceed.
spk07: Hey, good afternoon, and David, certainly good to hear you on the call. Hope the recovery and all the stuff is going well. Just a question for you, big picture. Jeff kicked it off and a number of my peers have all asked the same question. But as we look at the environment today, certainly there's a lot less retail availability. There's been a big shakeup, not only among the retailers themselves, but also the landlords. And certainly, cost for new development has gone through the roof. So as you look at the picture today, you know, with the economic concerns, but also at the same time that the tenants seem to be in better capital positions. Are you as worried today when you see weak economic data and does that impact the way you think about expanding, putting money to work and how the leasing conversations are going? Or do you think that we're in a better situation or worse situation? Like, how do you, how do you judge where we are now? just given that the environment seems to be different than it has been over the past few decades?
spk15: Well, thank you, Alex, for the thoughts. And let me just answer your question. So I frankly think that, you know, listen, it sounds like I'm, you know, talking, you know, our book, which obviously you would expect us to do, but we have never been better positioned. So... I don't look at the current uncertainty and even a potential recession. No one wants to go through that, but given how we're positioned, I think we're in an absolute unequivocal position to improve and better our company. You know, again, we don't want to go through a recession, but if we do, the gap between us and everybody else just gets bigger and bigger. Our gap, you know, if you look at kind of where we started three years ago and where we are today, the gap is pretty damn big. It will only get bigger. And that's a testament to you know, the team and everybody else. And honestly, I'm not looking at a current, you know, potential recession or tough market as any basis to slow down. You know, look at an example. We just started construction in Northgate, building 234 apartments. We expect to do another phase of that probably in the next nine months as we go through the pricing. So from our standpoint, we're not slowing down. And if the economy slows dramatically, the gap between us and just about everybody else will only get bigger. And that gives us opportunities to do some interesting stuff.
spk07: And you see the same confidence from your retailer, from your partners, your tenants, or their waffling?
spk15: I think the better retailers that are – we have a number of retailers that are in really good financial standing, and I think they take a longer view just like we do. Not everyone, but I would tell you the majority of who we're doing – new business with is definitely taking a longer term view. So they're looking to gain sales and market share as well. So we're certainly not on the defensive, you know, into the kind of the turmoil over the last few weeks. And if anything, we'll step up our investment activity But not, you know, foolishly. I mean, we'll do it like we do everything else. But we don't see it as a reason to rein in at this point.
spk07: Thank you. Sure.
spk10: Our next question is from Michael Goldsmith with UBS. Please proceed.
spk13: Good afternoon. Thanks a lot for taking my question. You continue to drive nice NOI growth driven by both occupancy gains and higher rents. Now, you know, we've talked a little bit on the call about, you know, occupancy potentially approaching a potential ceiling. So do you see increasing pricing power with that to maybe offset that? I'm just trying to get a better understand of how the algorithm kind of looks in the coming quarters. Thanks.
spk15: Well, again, occupancies, you know, like any statistic is one. And, again, to be clear, we do think we'll increase our occupancy. The bigger opportunity for us is, again, to continue to increase better the mix. So... And that drives, obviously, the better the mix, the higher the sales, the higher the sales, you know, the more likelihood that you're going to have higher rents. So that's the big focus as we, you know, continue to merchandise our properties. Brian, I don't know if you want to add anything to it.
spk16: Yeah, Michael, look, we continue to see pricing power. You know, roughly rents are similar where we've seen escalation. Last year, we talked about rents in the 70s for new deals. That's continuing, and as we find more and more retailers and updates to mix, it drives demand, and it ultimately drives our pricing power.
spk15: So there's a recurring theme here relative to that.
spk13: Thank you very much. Good luck in the back half.
spk10: Our next question is from Craig Melman with Citigroup. Please proceed.
spk17: Hey, guys. Maybe shifting gears a bit to the balance sheet and just the rate environment here. Just your thoughts generally with, you know, a 3, 8, 10 year. If that's at all changing your view on kind of the upcoming debt maturities in the back half of the year and how to fund those versus how much cash to keep on hand versus, David, maybe your commentary about you know, the gap between you and others, your ability to be on the offensive to make investments now that, you know, if we do go into recession, by the time they're done, you're kind of on the other side of it and you're well positioned. So I'm just kind of curious, I know it's a broader question, but just how, you know, the kind of the softening rate environment here, does that change anything you're doing or how you want to be positioned on the margins?
spk15: Craig, it's Brian. You know, look, one day doesn't really change our financing plans for the year. You know, we're sitting on $3.1 billion of cash. We have $1.9 billion in maturity at the back half of the year. Current plan is still to refinance those out with cash on hand.
spk16: But to the extent we were to see opportunity to do alternatively or the market opened up with tight spreads, you know, certainly we could access the market at the back half of the year as well. But no current plans to do so at present.
spk15: Yeah, and I would just say, look, we got $11 billion in liquidity, so, you know, obviously a lower interest rate environment does increase our earnings potential. You know, there's all sorts of things associated with a lower interest rate environment, but, you know, by and large, that's beneficial to real estate. So if that's the case, that's going to be better than what we planned initially for this year and what we're thinking for next year. So that's good news in a nutshell. But again, remember, we're not living mortgage to mortgage. We're a different kind of company. We don't have the holy Toledo. I was going to say another word. Holy Toledo, we can't refinance its mortgage. So anyway, by and large, if rates go lower, that's better for this company.
spk10: Our next question is from Juan Sanabria with BMO Capital Markets. Please proceed.
spk18: Thanks for the time, and David, I hope your recovery is going well as well. Just curious on the investment front, you clearly sound more bullish or wanting to invest more capital in dev and re-dev, but just curious about external acquisitions with the statement that you said that you're only going to kind of widen the gap between yourself and others with that. make you want to wait because there's going to be a better maybe spread down the road between your performance and those of others, or not necessarily?
spk15: Well, it's a good question, and that's when I would just say judgment comes into play. I mean, we have been, as you know, right, because if there was any material, we'd disclose it. really done anything external for quite some time. And we're going to just be looking at quality stuff where we can add value that's appropriately priced. And up until this point, frankly, we haven't found it. So that doesn't mean that we're discouraged, but we'll keep doing that because that is an element of what this company is good at. We would like to add quality where we could add value at the right price. If it's not at the right price or if it's not at the right quality, there's just nothing here for us to do. We're basically out of the portfolio business. you know, as far as I can see. I mean, you know, things change, but I just don't see us buying, you know, another big portfolio that, you know, that we'd have to, you know, slop off a handful of properties. So we're really going to be selective. But again, it's going to be at the right price. And if we can't get it at the right price, then... We've got plenty to do, and that's, you know, we'll keep our liquidity and keep doing what we're doing. Thank you. Sure.
spk10: Our next question is from Ronald Camden with Morgan Stanley.
spk04: Please proceed. Great. Best wishes to you, David, as well. Just a quick one from me. Just could we double-click on some of the strengths that you talked about in the portfolio, maybe breaking it down between maybe malls versus outlets or some of the tourist centers as well would be helpful.
spk16: Well, Ron, I think you're seeing broad-based demand across all of our classrooms, so it's difficult to kind of give you an individual kind of thumbnail to it.
spk15: Certainly, we over-index in our outlet business, certainly towards international tourism. That's still been very strong for us. That's a driving factor kind of in our outlet business results. But certainly, retailers are doing business across all three formats. You know, you're going to say mills and tie boxes together. So demand is broad-based from all retailers across all three major platforms of ours. Yeah, it's kind of interesting. I just don't think there's like a unique trend, you know. So it's not Florida or Texas. It's not outlets or malls. It's not enclosed versus outdoors. It's really very property specific. And I would say that, you know, the quality and the good stuff is getting better and it's almost, you know, our traffic, which is, you know, is a good indicator, was pretty much, you know, across the board. So I say there's no unique, unlike COVID where, you know, when you came out of COVID, it was, kind of the smile states and whatever. I think it's really property specific. So you could have a great property in XYZ city and a not so good one in XYZ city and they're a tale of of two stories. So I really think it's property specific and I don't think there's any one particular trend to focus on, at least in this quarter. Might have a better sense of it by year end and see how things shake out, but not right now.
spk04: Great. Thank you. Sure.
spk10: Our next question is from Handelsy, just with Mizuho Securities. Please proceed.
spk06: Hi, thank you, and David as well. I wanted to wish you best wishes and hopes for a speedy recovery here. My question tonight is, I wanted to go back to the strong and broad-based demand you mentioned you're seeing for space across the portfolio. I was hoping you could provide a bit more color on the size of the backlog of leases that are coming online, maybe some color on the timing of that, and is there also any update you can provide on the 3% or the at least 3% domestic NOI growth from last quarter for the core? Thanks.
spk16: Hey, NDAO, it's Brian. As we think about demand, you know, we've got a signed but not open pipeline of about 300 basis points.
spk15: You heard David talk about mix, and so we are moving some tenants around, so that's not all just attitude. There'll be some coming out of the bottom of that for sure. But, you know, that's just a further indication of the work that our team has done in demand for space to have a 300 basis points signed but not open pipeline for us. So really kind of that defines or kind of really gives you a really good sense of the breadth of what's out there for us as far as demand for space.
spk06: Three percent at least.
spk16: As you know, we don't update that as we go. We establish it at the beginning of the year, Handel, and try to do our best to exceed that number which we have thus far.
spk02: Got it. Thank you.
spk10: Our next question is from Vince T. Bone with Green Street. Please proceed.
spk08: Hi, good evening. How much do you think changes in the stock market impacts consumer spending at the higher end? Just from your experience over the years, at what point does stock market volatility really start impacting consumer behavior and consumer sales?
spk15: I think it's more, you know, I wish I had an algorithm. I don't. But I'm sure we could get AI to do something for us. I would, my history would suggest short-term fluctuations mean absolutely nothing. But over time, you know, if you had a down market for, you know, six or nine months, you're going to rein in consumer spending. So I do think it's going to have to take the downward trend or the volatility is not going to really impact the consumer in the next short period of time. But if you see it for several months, then I would expect us to see some slow down in consumer spending. So, you know, it does take time to see, but I think that, you know, the consumer is used to seeing some volatility, and they have some probably built-in gains that they never thought they would have had, right? So, you know, when companies get valued at trillions, you know, I remember when you know, $50 billion market cap was good. When companies get valued at trillions of dollars, you know, and that's a lot of retail, I hope those retail investors are smart enough to sell and then spend the money in our malls. I mean, that would be a good cycle for us, okay? So I think even if these levels were in pretty good shape, if you have kind of a longer... longer downturn, then, you know, it's realistic to think that, you know, consumer spending is going to be reined in. Offsetting that, obviously, will be, you know, low inflation, lower interest rates, and, you know, you could potentially see a scenario that we dealt with pre-COVID, right? So it's, you know, there's a lot of variability out there against But I don't think short-term fluctuation is going to have an immediate impact.
spk08: It makes sense. If I could maybe ask one quick follow-up along those lines. Like, just how should we think about the sensitivity of Simon's cash flows to tenant sales? I mean, with all kind of the COVID changes, seems like most of that's unwinded at this point. But kind of just, yeah, is there any guideposts you can share of, like, how much rent? or how much of your total revenue, rather, is made up of overage and percentage rents, or just how much, you know, volatility is there on your business from, you know, if tenant sales were to... Yeah, look, Brian may have a number.
spk15: I would just say big picture, a lot less coming out of COVID, but higher probably than pre-COVID. And so I don't know what percent that is. Brian, if you don't, we'll... We could probably give that number to you, but it's certainly a lot less than when we started in COVID, but higher than probably pre-COVID.
spk08: We'll follow up offline, Vince. Great. Appreciate the time. Thank you. Thank you.
spk10: Our next question is from Greg McGinnis with Scotiabank. Please proceed.
spk01: Hey, good afternoon. David, we share a birthday, so I'm pretty excited about that for my question. How old are you going to be? Do you really want me to share that? No, no, no, no. So we noticed the overall same-store NOI growth this quarter was healthy but largely driven by the consolidated portfolio. We had international NOI was down 1% year-over-year, JV revenues down about 4%. first last year. Is there anything in particular that's impacting the international and JV assets this quarter, and do you expect to see those return to your growth in the back half?
spk16: Greg, from an international perspective, Greg, last year we did recognize a one-time performance fee in our McCarthy Fund business, so third-party managed capital there. So that did not repeat this year, so that's why you see a decline in that line of that will normalize itself just by sheer operation going forward. Okay.
spk15: Yeah, I would just say our international assets, both in Asia and in Europe, are pretty much on plan, if not a little bit better. So, Clay Pierre, as you know, reported last week to better results. And, you know, they're, you know, obviously nicely positioned going forward. And, you know, Europe and Asia is, I mean, there's some movements in the different countries. Japan having extraordinary growth because of the yen, a couple other markets flat. But generally speaking, international markets, It's got, as Brian mentioned, good comp NOI growth this year and pretty much on budget.
spk03: Okay, thank you very much.
spk15: Sure.
spk10: Our next question is from Floris Van Dijkum with CompassPoint. Please proceed.
spk05: Hey, thanks. Glad to hear you're doing well, David. You sound great. Question on value retail. I know you guys own a stake in that. It's sold at an incredibly low cap rate to Catterton, who I think is the investment arm of LVMH. Could you maybe talk about maybe, and I think that it's a different market, obviously, but if you could talk about, you know, the, the cap rates environment in Europe versus here, and maybe also the long-term nature of some of these big luxury brands? And do you see them putting money to work at those kinds of cap rates? I mean, I guess they have already on Fifth Avenue, but in the mall business as well in the U.S., in your view?
spk15: Well, let me thank you. Let me try to unpack that a little bit, okay? So, Flores, let me, I would say, first of all, Elk Carrington, very smart investors. And value retail is a unique structure, so I don't think you can look through their investment that was at a significant discount to NAV to get to a cap rate without really having intimate inside knowledge which, you know, which you and I don't have, okay? But they're very smart investors. And I don't think this is a... So that's the first point I'd like to make just on that question. Second is I think, you know, I think, again, it depends on what branch you're talking about, whether it's luxury or, you know, higher end or whatever, better, moderate. You know, every retailer is different. Everyone's looking different. you know, to increase their sales. And every brand is different. So you cannot paint a luxury investor by one broad stroke. And even within some of the larger groups, their brands are different. You know, you may have one brand growing, one shrinking, what have you. I don't expect, and again, Elk Catterton is also owned by the principals of Elk Catterton, so it's not just the group. I don't think there is a trend for them to suddenly invest gobs of money in retail and real estate, but I could be wrong. I think it really depends on each brand and what their strategy is.
spk05: And if I may follow up, how are your discussions going with your institutional partners here in the U.S. in the mall business? Are those partners happy? And are there opportunities for you to maybe buy some of them out, or are they pretty comfortable owning some of those top malls that you typically JV with them?
spk15: Well, I would say overall, I would hope that our relationships with our institutional partners is excellent. And again, it's very hard to paint a broad brush. I would say by and large, most are very complimentary, very happy to be our partner. You know, there's always an asset here or there that may not fit with them long term. But I would say generally, you know, it's kind of business as usual with our institutional investors.
spk05: Thanks, David.
spk10: Our next question is from Linda Tsai with Jefferies. Please proceed. Hi.
spk00: Good afternoon. On the 300 basis points of signed but not occupied, what does that represent in dollars? What's the timing of that coming online? And would you expect this to compress going into next year?
spk16: Linda, most of that's going to be back-end weighted. There'll be a little bit this year.
spk15: Most of it will really manifest itself next year, just given where we are in the year and how retailers traditionally position their store fleet to get most of it open before back-to-school holidays.
spk16: So most of it's going to be back-end weighted for next year, or front-end weighted for next year, excuse me.
spk00: And would this sign-but-not-occupy be down year-on-year at the end of next year? from where you sit today?
spk15: It's really difficult to predict what's going to happen, you know, 12 months from now. So, you know, it is what it is right now. You know, ultimately, as we continue to kind of move through, we've seen some consistency in that number and some increase, right? We were talking about it is about 200 basis points a year ago. So you see an increase over the past 12 months to get to 300 basis points per day.
spk00: Thanks. And what's that represent in dollars?
spk15: I don't have that number in front of me here. Yeah, that's usually not something that we're, you know, that's something we're not going to really disclose because then you would add all the leases up and annualize the number, but it's a big number.
spk10: Great. Thank you.
spk15: Thank you.
spk10: Our next question is from Mike Muller with JP Morgan. Please proceed.
spk14: Yeah. Hi, David. We're glad you're on the call as well. For the question, TRG's year-over-year base rent growth looks like it was over 8% in the second quarter. Can you talk about what's driving that growth?
spk15: It's just a mix of the deals that they're doing at the assets they're doing, Michael. So they're doing some better leasing at their better assets, and that's really coming through the average rents for that period of time. You know, not every state is created equal, not every asset is created equal. So they're seeing great wins at the best assets that have the best pricing. And it's not a small portfolio, so you're getting a bigger percentage. You know, it's a smaller portfolio, a much smaller portfolio than ours, so you're just getting a bigger percentage jump from it.
spk14: Got it. Okay. Thank you.
spk10: Our next question is from Ki Ben Kim with Truist Securities. Please proceed.
spk11: Thank you. And good to see you sounding better, David. So just curious, if there was a consumer downturn, could you discuss how your portfolio might perform today versus a few years ago? I realize the tendency might have changed significantly over the years, you know, towards less apparel, more services, restaurants, or other uses. And trying to look at this from a sales sensitivity standpoint, versus maybe a credit sensitivity standpoint, because I can understand those two things might be different.
spk15: Yeah, sure, I'll take a shot at it. So, I mean, historical recessionary times, and again, we're not in that camp just yet. I mean, call me in two months and we might be, but I would say our NOI cash flow tends to flatten out You know, it's very, obviously there's so many variables that go into it, but, you know, and, you know, I hate still talking about COVID, but, you know, we really didn't see other recessions, really didn't see, you know, cash flow from the properties go down, they flattened. I would think not knowing exactly you know, if and what kind of recession it is and how hard and how deep and all that other stuff, you know, it would be hard to give you a number other than to say history would indicate, you know, our cash flow is relatively flat. We weathered pretty nicely, you know, because, you know, what happens is, tends to happen is, you know, big ticket items tend to go on the back burner and, uh, And the stuff that we sell, the properties, tends to maintain itself. So that would be the best guess at this point. But it is almost impossible without kind of knowing exactly what kind of market that we're in. But again, we're not in that camp yet. And, you know, we might be later on in the year or whenever, but I would think our cash flows would be relatively flat, assuming it's, you know, it's hard to say what a typical recession is anymore. But, you know, I would say that's probably the best guess at this point.
spk11: Okay. Thank you, David.
spk10: Our next question is from Caitlin Burrows with Goldman Sachs. Please proceed.
spk09: Hi, again. This has been a very efficient call. I guess maybe on retailer bankruptcies, Express and Route 21 were retailer bankruptcies of 2024, and I'm guessing you have had exposure from a rent perspective to additional smaller ones also that maybe aren't as obvious. So could you comment on how the outcomes of the 2024 bankruptcies on Simon's Financials have ended up versus your expectations and then give a broader update on the current watch list and going forward?
spk15: Well, I'll just say, you know, in Brian's remarks, you know, we definitely have a, you know, a decent impact from the retail restrictions. I mean, he Also, we have a little lower income, a little lower land sales than we had budgeted. But if you put those three categories together, it's about 15 cents that we had planned on being there that aren't there this year. So, you know, obviously we factored in the express restructurings and, you know, Roo and so on. Those numbers are reflective of our new guidance. It doesn't reflect if there's a material new one coming up. But we don't know of anyone that's on the road. So Brian, you can add whatever you want to add. Yeah, watch list continues to be relatively flat. Those things that have happened, we had a thought that they would.
spk16: And it plans ahead. We don't really see much on the horizon at this point. No new additions to the watch list at this point either.
spk09: Got it. And then maybe one more if I could. Just the contribution to the portfolio from the retailers. I think your latest comment was for a Flattish contribution in 24. So just wondering if there was any update to that and maybe like your visibility or confidence in the back half of the year. Thanks.
spk15: Well, look, I think we continue to work through it. You know, if you look at that whole, you know, Penny, Spark, RGG, Jamestown, we basically have around 200 million plus or minus EBITDA in that kind of OPI bucket now that AVG is out. And it'll be plus or minus a couple of cents here or there. Because again, we have accounting, we've got lots of depreciation. You don't add that back. And the brands within Spark, the lower income consumer continue to fight through a tough market for that consumer. So there's not a lot of new news other than the team at Spark's working very hard. you know, the new stuff that they're buying is working, but, you know, it continues to, you know, be a very competitive marketplace.
spk09: Okay. Thanks.
spk15: Thank you. Thank you, Taylor. I think this wraps it up. Let me just say to everybody, thank you. I got a lot of well wishes, you know, during this tough time for me, and I'm working at it, and appreciate all your support, and we'll talk in the near future. Thank you.
spk10: Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
Disclaimer

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