The operator introduces the Simon Property Group First Quarter 2024 Earnings Conference Call and reminds participants that the call is being recorded. Tom Ward, Senior Vice President of Investor Relations, introduces the speakers and reminds listeners that statements made during the call may be deemed as forward-looking statements. He also provides information on where to find additional information and sets a time limit for the call. David Simon, Chairman, Chief Executive Officer, and President, expresses satisfaction with the company's first quarter results.

In the first quarter, funds from operation for the company were $1.33 billion, a significant increase from the previous year. This growth was driven by higher rental income and gains from investment activity. The company's real estate business also saw growth, with domestic property NOI increasing by 3.7%. However, there were some one-time charges at certain retailers that impacted the overall NOI from OPI. The company's occupancy rates and average base minimum rent also saw increases, and leasing momentum remained strong with over 1,300 leases signed in the first quarter.

The company has seen strong demand from the retail community and a 2.3% increase in retail sales volume in the first quarter. They have also sold their remaining interest in Authentic Brands Group for a significant gain and expect their FFO contribution from OPI to be around breakeven this year. They have opened a new hotel and plan to open a new outlet and expand an existing one later this year.

The company has multiple new development and redevelopment projects underway in the US and internationally, with a net cost of $930 million and a blended yield of 8%. They expect to start construction on more projects in the near future, including a residential project in Seattle. The company was able to retire $600 million of senior notes in the quarter and ended with $11.2 billion of liquidity. They announced a dividend increase of 8.1% for the second quarter and have increased their full year guidance range. Despite a challenging macro-environment, the company's business and tenant demand remain strong, with increasing occupancy and growing property NOI. The company also made a significant profit on their ABG investment.

David Simon, CEO of Simon Property Group, thanks Caitlin for the positive comments on their recent quarter and the sale of ABG. He addresses news reports about possibly getting involved with Express and explains that they were approached by the IP owner and offered to participate in the turnaround of the company without providing any capital. He also mentions their previous success with SPARC and their value in adding their expertise to the brand. Simon sees this opportunity as a win-win situation and is confident in the value and potential of Express.

The speaker, David Simon, expresses optimism about the performance of their portfolio and tourist centers in the first quarter of the year. They have seen improvement in California and the Northeast, in addition to the already strong market in Florida. The strong dollar may have a slight impact, but domestic tourism is still strong and people enjoy shopping while on holiday. There is also a resurgence in physical stores and malls. However, the lower-income consumer is still facing challenges due to inflation, and the higher-income consumer continues to spend and visit their properties.

The speaker, David Simon, discusses the traffic and same-store sales growth for the first quarter, which was up around 2%. He also mentions that they do not update their same-store sales guidance every quarter, but still feel that their initial guidance of at least 3% is achievable. Simon also mentions that they have accounted for potential pressure on rental income from certain retailers in their budgeting process. The speaker then answers a question about the $500 million development starts and their potential opportunities.

David Simon, CEO of Simon Property Group, sees opportunities for growth in the mall space as fundamentals improve and peers look to sell assets. With rates stabilized, the company is confident in making investment decisions. Simon breaks the opportunities into two categories: redevelopment efforts, including mixed-use properties and multi-family development, and external new deals. The company is prioritizing and valuing opportunities while also focusing on their existing portfolio. Simon believes there could be more external opportunities, but they must be high-quality assets at a fair price where the company's expertise can add value.

Michael Goldsmith asks David Simon about the impact of a potential macro slowdown on the company's business. David acknowledges that they are not immune to the macro environment, but they have $11 billion in liquidity and have historically performed well during tough times. He expresses confidence in the company's ability to navigate a potential slowdown and further separate themselves from their peers.

David Simon, CEO of Simon Property Group, is asked about the volatility of their retailer investments during a call with analysts. Alexander Goldfarb from Piper Sandler questions whether the company will continue to participate in these investments, considering the significant profits they have made from them. David Simon responds by stating that their decision to invest in retailers is based on return on investment, just like building a new shopping center. He also clarifies that the volatility is only a small part of their overall business and that they have made significant profits from these investments. He uses the example of ABG to illustrate this point.

The speaker explains that their company's investments are analyzed carefully for their potential impact on cash flow and portfolio value. They acknowledge that the market may not be happy with their approach, but they believe it adds value to the enterprise. They also mention their diverse range of investments, which sets them apart from other companies in the same industry. The interviewer agrees that this unique approach has been successful for the company.

David Simon, CEO of Simon Property Group, discusses the company's focus on catering to the high-income consumer. He mentions the success of their luxury offerings at Woodbury and Sawgrass and plans to expand these services to 20-25 of their properties. The company aims to provide the best retailer mix, fine dining, and ease of access to appeal to this demographic. They have a dedicated team and want to maintain their position as a preferred landlord for top retailers.

David Simon, CEO of Simon Property Group, discusses the company's plans for luxury developments at Sawgrass, Woodbury, Houston, King of Prussia, Phipps, and Boca Raton. He also mentions the company's recent sale of ABG for $1.450 billion and their plans to hold onto the cash for now. Brian McDade, CFO, adds that the cash may be used to pay down debt or fund upcoming maturities.

During a conference call, David Simon, the CEO of Simon Property Group, discussed the charges taken in the first quarter related to SPARC and J.C. Penney. The charges were $33 million and primarily dealt with personnel and inventory. Simon also mentioned that J.C. Penney is able to produce positive EBITDA even with low sales, and they may actually benefit from opening new stores rather than closing them. Simon emphasized that cash flow, EBITDA, and comp sales are important to him, but there is no pressure from Wall Street to shrink the store count as long as the stores remain profitable.

The speaker discusses the difficulty of achieving positive EBITDA in any industry, but believes that maintaining a store for the community is important. They do not anticipate much portfolio real estate activity at the J.C. Penney level and have a good relationship with Brookfield, who also has the right to reclaim space from J.C. Penney for redevelopment. The speaker also mentions an upcoming redevelopment of a J.C. Penney location.

David Simon, CEO of Simon Property Group, discusses the company's plans to cancel a lease with J.C. Penney and find new opportunities for the store's profitability. He also mentions that there will be other similar situations with Brookfield that have already been negotiated. Simon also addresses a question about the company's watchlist of bad debt, stating that it had assumed a 25 basis point last quarter and that the portfolio was flat overall, with a 2.3% increase in reported sales.

The speaker responds to a question about the potential uses for the cash from the retail monetization. They mention that the stock is currently trading higher than the loss they took, implying that buying back stock may be less likely. They also mention the possibility of special dividends needing to be paid on the gain.

The speaker asks about the decrease in TRG property count and the potential for a special dividend. The company responds that two properties were bought out by a partner and that the capital on the balance sheet is being used for stock buybacks. They also mention that the ABG sale happened near quarter-end and that there is no required special dividend. The speaker then asks about the company's involvement with Express, to which the company states they will not provide capital but will assist the brand in other ways.

David Simon, CEO of a retail company, discusses his company's potential partnership with a struggling retailer coming out of bankruptcy. He mentions their expertise in running a retailer after bankruptcy and the lease negotiation process that will occur. He also mentions that they are not involved in the store closure process, which is currently being handled by the existing management team.

David Simon, CEO of Simon Property Group, discusses the demand for tank categories in their malls, including restaurants, entertainment, athleisure, sports, and various clothing brands. He also mentions the $745 per square foot sales, which is portfolio-weighted, and the $950 per square foot sales, which is NOI-weighted. He clarifies that SPARC and J.C. Penney are equity-accounted investments and not on their balance sheet, and that the company considers everything as both core and non-core. They recently sold ABG after receiving an offer, and would consider selling any of their assets in the future.

David Simon, CEO of the company, discusses the company's assets and their willingness to sell them at the right price. He mentions the company's strong balance sheet and their ability to replace any lost earnings. He also mentions their indifference towards monetizing assets and their options for using the cash. The call was held after the end of earnings season and tied to the company's Annual Meeting.

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