The operator introduces the Simon Property Group's Second Quarter 2024 Earnings Conference Call and turns it over to Senior Vice President of Investor Relations, Thomas Ward. He reminds participants that statements made during the call may contain forward-looking statements and refers them to the press release and SEC filings for more information. The call will be limited to one hour and participants are asked to limit themselves to one question during the Q&A session. CEO David Simon expresses satisfaction with the company's performance in the second quarter.

In the second quarter, the company saw record-high real estate NOI due to increased leasing volumes, occupancy gains, shopper traffic, and retail sales volumes. The company is focused on creating long-term growth and value through disciplined investment activities and improving their properties for the communities they operate in. Brian McDade, who covered the second quarter results and full-year guidance, reported a 4.3% growth in FFO from the real estate business and a 5.2% increase in domestic NOI. The company also saw a 90 basis point increase in occupancy and a 3% increase in average base minimum rent. Leasing momentum continued with over 1,400 leases signed for 4.8 million square feet in the quarter.

In the second quarter, 30% of leasing activity was new deals, with a 5% increase in traffic and a 2% increase in sales volume. The National Outlet Shopping Day event was successful, with over 3 million shoppers and positive feedback from retailers. The company's occupancy cost was 12.7% and they have several new development and redevelopment projects underway. They completed the refinancing of 10 property mortgages and ended the quarter with $11.2 billion in liquidity.

The company announced an increase in their dividend and an increase in their full-year guidance. They are optimistic about the lower-income consumer cycle improving due to a more favorable inflation picture. They are not able to predict the impact of current market concerns on the consumer.

The company has not seen a slowdown in the higher-end consumer market and is optimistic about their sales. They have budgeted for flat sales, but are currently above that. The higher-end consumer is in a good spot with decent liquidity. The company expects to see a positive cycle in the lower-end consumer and steady demand from the higher-end consumer. They recently had a successful deal committee meeting and are seeing strong and steady demand for new deals.

The speaker discusses the sensitivity of retailers to economic conditions and the strong demand for leasing. They mention the best new deal committee and expect occupancy to increase to over 96% by the end of the year. There may be potential for further upside, but the current increase from last year's 95.5% is already significant.

David Simon, CEO of Simon Property Group, believes that the company is well-positioned in the current retail environment, despite economic concerns and a potential recession. He is confident that the company will continue to improve and outperform its competitors. This is due to the team's efforts and the company's strong position compared to three years ago.

David Simon, CEO of a real estate company, is not worried about a potential recession or tough market affecting their business. They have started construction on a new project and plan to continue expanding, even if the economy slows down. Simon believes that their strong financial standing and long-term view will allow them to gain market share and attract good retailers. He also mentions that they will continue to focus on increasing occupancy and rents to drive NOI growth.

The company expects to increase occupancy and improve the mix of tenants in their properties. They also anticipate continued pricing power and are not significantly impacted by the current interest rate environment. They have a strong cash position and do not expect any changes to their financing plans for the year.

The current plan is to refinance with cash on hand, but if there are opportunities to do otherwise or the market opens up, they may access it in the second half of the year. They have $11 billion in liquidity and a lower interest-rate environment is beneficial to real estate. They are not dependent on mortgages and are open to external acquisitions, but it will depend on their judgment and any material disclosures.

The company is focused on finding quality investments at the right price but has not found any recently. They will continue to be selective and not likely to make any big portfolio purchases. The portfolio is strong across all platforms, with the outlet business benefiting from international tourists. Retailers are doing well across all three formats and occupancy is at its highest.

The demand for space in Simon Property Group's retail properties is strong and broad-based across all three major platforms. The company's CEO, David Simon, believes that there is no unique trend driving this demand and that it is property-specific. There is a backlog of leases coming online, and the company is on track to achieve at least 3% domestic NOI growth in the core portfolio.

David Simon discusses the demand for space and the team's efforts to accommodate it, with a 300 basis points signed but not open pipeline. They do not update the 3% max as they go, but have exceeded it thus far. Vince Tibone asks about the impact of stock market volatility on consumer spending, and David Simon states that short-term fluctuations have no impact, but a sustained downward trend could lead to a slowdown in spending. He also notes that consumers may have built-in gains from the market.

The speaker discusses the potential impact of companies being valued at trillions of dollars and the importance of retail investors selling and spending their money. They also mention the variability of consumer spending and the potential for a longer downturn. The sensitivity of Simon's cash flows to tenant sales is also mentioned, with the speaker stating that it is currently lower than during COVID but higher than pre-COVID. A question is asked about the percentage of revenue made up of overtime percentage rent, which will be followed up offline.

The speaker, Greg McGinniss, shares the same birthday as David Simon and asks about the same-store NOI growth in the consolidated portfolio, which was healthy but impacted by declines in international and JV assets. Brian McDade explains that the decline in international NOI was due to a one-time performance fee not repeating this year. David Simon adds that international assets are generally on plan and performing well, with good comp NOI growth and strong results from Value Retail, which was recently sold to Catterton at a low cap-rate.

The speaker discusses the cap rates and investment strategies of luxury brands in Europe and the US, specifically mentioning the recent investment by L Catterton in Value Retail. They caution against making broad generalizations about luxury investors and note that each brand has its own unique strategy. The speaker also mentions that there is no trend for luxury brands to suddenly invest in retail real estate, and that discussions with institutional partners in the US are going well.

David Simon, CEO of Simon Property Group, discusses the company's relationships with its institutional partners and the potential for buying some of them out. He states that most of their partners are happy to work with them, although there may be some assets that do not fit long-term. Brian McDade, CFO, adds that the 300 basis points of signed but not occupied represents a significant amount of future revenue, but it is difficult to predict if it will decrease in the next year.

During a recent conference call, David Simon, CEO of Simon Property Group, was asked about the company's year-over-year base rent growth. Brian McDade, CFO, explained that the growth was due to a mix of successful deals at their best assets. Simon also discussed how the company's portfolio has changed over the years, with a shift towards less apparel and more services and restaurants. He noted that while a potential consumer downturn could impact sales, the company's focus on strong assets and diversified tenancy could help mitigate any negative effects.

The speaker, David Simon, discusses the impact of COVID-19 on their NOI cash flow, stating that it tends to flatten out during recessions. He mentions the difficulty in predicting the exact impact without knowing the severity of the recession, but believes their cash flow will remain relatively flat. He also mentions the impact of retailer bankruptcies, specifically Express and Rue 21, on Simon's financials and provides an update on their watchlist.

The company has experienced a decrease of $0.15 in expected earnings due to restructuring and rule changes. The watch list remains flat and there are no new additions. The contribution from retailers is expected to be flat in 2024, with around $200 million in EBITDA. The team is working hard but facing a tough market for the lower-income consumer. The call is now ending.

The speaker received many messages of support during a difficult time and is grateful for the support. They will continue to work on their situation and look forward to speaking with everyone in the future. The operator thanks everyone for participating in the conference and reminds them to disconnect their lines.

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