The paragraph introduces the Simon Property Group Third Quarter 2023 Earnings Conference Call and provides information about the participants on the call. It also mentions that statements made during the call may be deemed forward-looking statements and provides a reminder to refer to the press release and SEC filings for a detailed discussion of risk factors. The call is limited to one hour and participants are asked to limit themselves to one question during the Q&A session. CEO David Simon reports that third quarter funds from operation were $1.2 billion or $3.20 per share and highlights some of the key points for the quarter.

In the third quarter, both domestic and international operations had strong performance, contributing to a growth of $0.17 per share. This was driven by higher rental income and gains from the partial sale of ownership interests in SPARC and ABG. However, there was a setback of $0.07 from higher interest expense and a lower contribution from other property investments. FFO from the real estate business was $2.91 per share, and the Taubman family exercised their put right, resulting in TRG now owning 84% of TRG. Domestic property NOI increased 4.2% and portfolio NOI grew 4.3% for the quarter.

In the third quarter, mall and outlet occupancy increased, with the mills having the highest occupancy levels. Leasing momentum remains strong, with a significant number of leases signed and expected to generate over $1 billion in revenue. Redevelopment and new development projects are ongoing. The company completed mortgage refinancing and has a strong balance sheet. A dividend increase and stock repurchases were announced, and the full-year guidance has been raised.

The speaker is pleased with the company's third-quarter results, noting strong tenant demand and increasing occupancy. They are confident in their ability to manage through volatile periods and believe they will achieve 3% organic growth in 2024. They also mention potential interest expense headwinds, but still expect to grow the business. The speaker explains that the guidance raise of $0.30 cents is due to a $0.32 cent gain and a $0.05 cent decrease from the SPARC-SHEIN deal and mark to market on public securities. Overall, the real estate business has been a significant contributor to their growth.

David Simon, CEO of Simon Property Group, was asked about recent leasing activity and how it compares to pre-pandemic years. He mentioned that year-end occupancy is expected to be higher than it is currently, with demand for retail space remaining strong. Pricing for new deals is comparable to 2015-2017 levels, and there is a lot of demand from various categories of retailers, including luxury brands. Despite some caution from certain retailers, overall tenant demand is strong.

The speaker discusses how their retail properties, both malls and outlets, are performing in different regions and notes that sales are generally up in the Sun Belt and tourist areas. They also mention an increase in sales at a specific outlet center and a trend of consumers looking for value. Overall, there is not a significant difference in performance between malls and outlets.

The speaker discusses the performance of different types of properties, noting that there was no significant difference in sales between outlets and malls. They mention that luxury sales flattened out in the third quarter, but this was not a consistent trend and was more dependent on specific retailers. The Sun Belt and tourist centers are performing well, and there has been some flatlining in the luxury category. The speaker also mentions that they are not seeing a change in leverage over retailers, but they are not far enough into the process to determine if this will lead to more favorable lease terms and increased rent growth.

The company has a diverse and high-quality portfolio, which has been improved through recent transformations. There is currently a favorable supply and demand situation, and retailers are confident in the company's stability and ability to follow through on deals. This gives the company an advantage in attracting retailers and competing with other mall owners.

David Simon, the CEO of a company, discusses how their company has outpaced their peers in terms of growth, earnings, dividends, quality of operations, and more over the past 5, 10, 15, 20, and 25 years. He also mentions their ability to develop and redevelop due to their lack of capital constraints. However, they are waiting for rates to increase before making any major changes to their redevelopment plans.

David Simon discusses the performance of the real estate business, which has been strong, but notes that they sold off some of SPARC this quarter. He emphasizes the need to refine ancillary parts of the business to continue the strength of the core business. The real estate business is now less than 5% of their earnings and their FFO contribution is different from their EBITDA due to not adding back depreciation. Despite this, their endeavors have been profitable.

David Simon discusses the volatility of their small earnings in comparison to their total earnings power and their strategy to monetize investments and buy back stock. He also mentions the recent exchange with TRG and the increase in ownership by 4%, but the dip in occupancy is not a concern. Brian will provide more details on the exchange, including the price of the stock issued and the implied cap rate.

The paragraph discusses the negotiations between Taubman and Simon Property Group regarding Taubman's 4% interest in the company for the next five years. The negotiation resulted in a deal that was close to the appraised value of the stock. Simon Property Group then used their capital to buy back their stock and the Taubman family also decided to invest in the company due to its undervalued stock and attractive dividend. The paragraph also mentions that Taubman's occupancy has increased by 110 basis points in the fourth quarter.

David Simon is discussing the fourth quarter earnings and the appraised value for TRG. He mentions that the cap rate at the time of the deal was in the six handle range and that the negotiated deal settled at a price that would have attributed to Taubman's per share number in the $51 range. He also mentions that TRG's NOI is higher than it was in 2019. He then answers a question about leasing spreads, stating that minimum base rents were about 3% year-over-year, which is similar to contractual bumps, indicating that leasing spreads may also be in the low single-digit range.

The speaker explains that the overall portfolio is difficult to move up due to the large number of leases, but new leases are driving the base minimum rent up. Renewal spreads are around 3%, but the average base minimum rent is higher due to the large number of leases. The speaker promises to provide more information on the math behind these numbers.

David Simon responds to a question about the potential impact of higher interest rates and inflation on customers and tenants. He notes that it is affecting the affordability of goods for moderate income consumers, but employment and wage growth are balancing it out. He also mentions that retailers are not seeing a significant impact on their growth plans. Simon also mentions that their cost of capital has increased.

David Simon discusses the company's approach to investments and asset sales, stating that they are always evaluating the potential return from these activities compared to buying back their stock. He also mentions that they will continue to focus on buying back their stock and potentially monetizing assets to create liquidity. When asked if they would have bought back stock without the TRG issuance, he states that it is a hypothetical question and their decisions will depend on future liquidity events and asset sales. There is no mention of any change to OPI guidance in their current FFO outlook.

David Simon, CEO of Simon Property Group, states that they have lowered their contribution by roughly $0.20 for the fourth quarter due to owning less of SPARC. For the entire year, they have lowered their contribution by about $0.15. He also mentions that they are open to asset sales and other monetization opportunities, but there are not many transactions happening in the domestic retail market. Only a small percentage of their leases are on a month-to-month basis, and they do not expect this number to significantly increase.

The speaker discusses the expiration of leases in 2023 and 2024 and mentions that many have already been agreed upon and are being finalized. They also note that there has been a decrease in square footage in the "12% expiring in '24" category. The speaker then responds to a question about consumer retail sales, stating that their portfolio sales were flat during the quarter and they expect them to remain flat in the near future. They mention that they feel confident about the higher-income consumer.

The company is facing a balancing act as some of their value-oriented centers may play a more important role for consumers in light of inflation and rising interest rates. They are being cautious and expecting relatively flat sales growth for the fourth quarter. The company has started new redevelopments at 6% yields and their hurdle rate varies depending on the real estate and their goals for it. They focus on creating value and making arbitrage, but will not invest in assets that do not meet their criteria.

The speaker discusses the company's need to increase profits due to rising costs, and mentions their history of avoiding dilutive deals. They also mention a small increase in the number of retailers on their watch list, but it remains relatively low compared to previous years. The CFO confirms this and adds that the list is currently on page 22 of their report.

The speaker states that the discussed category is not in their top 10 or top 20. They also mention that their department stores do not pay much, as they have to cover rent expenses. The speaker thanks the person who asked the question and the conference is concluded.

This summary was generated with AI and may contain some inaccuracies.