The operator introduces the Simon Property Group Fourth Quarter and Full Year 2023 Earnings Conference Call and introduces the host, Tom Ward. Ward introduces the speakers, David Simon and Brian McDade, and reminds listeners that statements made during the call may be forward-looking. Simon provides some perspective on the company as they celebrate their 30th anniversary as a public company.

In the past three decades, our company has grown into a global leader in shopping, dining, and entertainment destinations. We have acquired over 300 properties and developed 50, resulting in a current portfolio of 215 assets. Our portfolio is supported by a strong balance sheet and a top management team. Our annual revenue and FFO generation have increased significantly, and we have paid over $42 billion in dividends to shareholders. Our assets have been in business for over 60 years and continue to grow and evolve, making them irreplaceable.

In the fourth quarter of 2023, Simon generated $4.7 billion in funds from operation, with domestic operations performing well and contributing to growth. Gains from investment activity were higher than the previous year, while other platform investments were lower. FFO from the real estate business also increased by 8.7% compared to the previous year. Domestic property NOI increased by 7.3% for the quarter and 4.8% for the year, surpassing pre-pandemic levels. Overall, portfolio NOI grew by 7.2% for the quarter and 4.9% for the year. Occupancy rates for malls and outlets were also higher than the previous year and pre-pandemic levels.

In the fourth quarter, the average base minimum rent for malls and outlets increased by 3.1%, with The Mills experiencing a 4.3% increase. Over 960 leases were signed, totaling 3.4 million square feet. 30% of leasing activity for the year were new deals, with going-in rents of $74 per square foot for new leases and $65 per square foot for renewals. The company also sold a portion of its interest in ABG for $300 million and opened 11 outlets in Europe. Construction is ongoing for two outlets and 13 significant redevelopments were completed. The company plans to begin construction on five to six mixed-use projects this year, with a total spend of $800 million. They expect to fund these projects with internally generated cash flow of over $1.5 billion. In 2023, the company completed $12 billion in financing activities and has approximately $11 billion in liquidity on their A-rated balance sheet.

In 2023, the company paid $2.8 billion in common stock dividends and repurchased 1.3 million shares of common stock. They announced a dividend of $1.95 per share for the first quarter of 2024, with a year-over-year increase of 8.3%. The company's FFO guidance for 2024 is $11.85 to $12.10 per share, with assumptions including domestic property NOI growth of at least 3%, increased net interest expense, and no significant acquisition or disposition activity. The company is excited to enter year '31 as a public company. During a Q&A session, the CEO discussed the leasing pipeline and how they are constantly adjusting their mix to improve retailer mix and drive NOI growth. Demand for leasing remains strong.

In this paragraph, David Simon discusses the positive trends in the retail real estate market, including strong demand from retailers, low supply, and the importance of brick and mortar stores. He also mentions the challenges of e-commerce and the need for a connection to physical stores for survival. He emphasizes the importance of execution and improving properties, and notes that retail demand is strong across various categories.

David Simon, CEO of Simon Property Group, discussed the recent sale of 2% of their ABG stock and their plans to continue monetizing investments in the future. He also mentioned their focus on creating value and deploying capital into their core business for better growth. When asked about key initiatives for the next five years, Simon mentioned a few things, but did not specify one or two in particular.

The company is focused on bringing mixed-use developments and redeveloping department store boxes to their properties. They are also excited about growing their outlet business in Southeast Asia and bringing technology to enhance the shopping experience for loyal customers. They are also working on evolving their retail mix by attracting new and innovative retailers to their centers.

David Simon discusses the possibility of increasing the dividend to pre-pandemic levels, stating that the company's financials are strong enough to do so. He also mentions the high yield of their stock and their desire to continue buying back shares. He believes that the company's yield is already attractive to investors and does not need to be increased.

David Simon, CEO of Simon Property Group, is discussing the company's current yield and how they would like it to be lower. He mentions that their yield is higher than the S&P and other REIT strip centers. Alexander Goldfarb, a non-paying customer, asks a question about the company's plans for the future. David Simon jokes with him and then moves on to answer a question about the company's base minimum rents and tenant sales. He believes that their rent prices are sustainable and mentions that their occupancy costs are currently low compared to their historical range.

The speaker addresses the question of reinvestment in anchor boxes and mentions that there is plenty of cash after the dividend. They also mention that they were spared from recent Macy's closings, but there is still potential for re-tenanting vacant spaces in the next few years. The speaker also acknowledges the current challenging leasing environment.

David Simon, CEO of Simon Property Group, discusses the company's plans for department store boxes and the impact of luxury brands. He mentions that they currently own only a handful of department store boxes, with under 10 currently under construction or in process. The company is more focused on mixed-use developments and opening up closed malls with restaurants and entertainment. Macy's recent store closings do not affect their properties.

The speaker discusses the state of their department stores and how they have been able to improve their properties through redevelopment and new tenants. They also mention a specific example of a redevelopment project that will bring in additional FFO in 2024.

The company has plans for redeveloping its properties and expects to open new stores in the UK in 2024. The redevelopments are expected to have a significant impact in 2025-2026. The company plans to spend $600-800 million annually on these redevelopments and aims for a yield of 8%. Some projects, such as the multifamily developments, may have a lower yield.

The speaker discusses the recovery of tourist centers and the impact of the pandemic on sales. They mention a specific example of Woodbury's fourth-quarter sales and expect a bounce-back in tourist centers, but do not anticipate a return to pre-pandemic levels for Chinese tourists.

The speaker discusses the company's positive performance in various areas, including variable rent and OPI. They mention a $0.28 improvement in domestic operations and a projected $0.10 to $0.15 growth in OPI, which does not include any one-time gains or sales. The team is working to improve performance in OPI through partnership efforts.

The overriding theme of the article is the struggles of lower income consumers, who are still dealing with high costs despite inflation subsiding. The good news is that their income is increasing, but it is not enough for them to have discretionary income. The company is being conservative with their numbers and is getting back to a more stabilized level after an extraordinary year. The company's tenants are also making operational changes to benefit their income, and the company is working hard to produce better results.

The speaker discusses the company's performance in comparison to pre-pandemic levels and mentions that they have outperformed in some areas and underperformed in others. They also mention that the retailers they work with are generally in good financial shape and are investing in their stores. The speaker also mentions that the Taubman portfolio saw strong rent and occupancy growth in the fourth quarter, driven by supply and demand, retail sales, and operational excellence. The company expects the Taubman portfolio to have a comp NOI of over 3% this year.

In the paragraph, the speaker discusses the impact of redevelopment on their company's performance. They mention that there was some drag from redevelopment, but it is not an excuse for their performance. They explain that re-tenanting a mall can result in downtime and delays, especially for restaurants which can take up to a year to build. They also mention a specific delay caused by a gas hook-up issue in the Bay Area. The speaker estimates that re-tenanting costs them approximately $0.10 to $0.20 per year. The speaker also answers a question about their operating expenses being down in the fourth quarter and confirms that it is sustainable. Lastly, they mention a partial sale of ABG and clarify that it was below the previously estimated valuation of $18 billion.

The speaker discusses the equity and enterprise value of the company, and clarifies that $18 billion is the enterprise value. The next question is about the company's pipeline and the guide for bad debt and lease term fees. The speaker explains that they are assuming a normal level of bad debt and lease term fees, and the number for the year is around $30 million. The next question is about the company's relationship with Jamestown and the potential for mixed-use projects, and the speaker says that there is nothing currently in the works but they are open to exploring opportunities in the future.

The speaker is discussing their positive partnership with another company and mentions they are working on one development project together in the Southeast. They also mention that their discussions are more strategic and corporate-focused rather than property-specific. The management thanks everyone for participating in the conference call.

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