Simon Property Group Q4 2022 Earnings Call Transcript

Presentation

[Operator]

Greetings. Welcome to Simon Property Group Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded.

I will now turn the conference over to your host, Tom Ward. You may begin.

[Tom Ward, Senior Vice President, Investor Relations at Simon Property Group]

Thank you, Smaria. Good evening from Atlanta. Thank you for joining us this evening. Presenting on today's call is David Simon, Chairman, Chief Executive Officer, President. Also on the call are Brian McDade, Chief Financial Officer; and Adam Reuille, Chief Accounting 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 1995 and actual results may differ materially due to a variety of risks, uncertainties and other factors. We refer you to today's press release and our SEC filings for a detailed discussion of the risk factors relating to those forward-looking statements. Please note that this call includes information that maybe 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 in today's Form 8-K filing. Both the press release and the supplemental information are available on our IR website at investors.simon.com. Our conference call this morning -- this afternoon be limited to one hour. For those who would like to participate in the question-and-answer session, we ask that you please respect our request to limit yourself to one question.

I'm pleased to introduce David Simon.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Good evening from Phipps Plaza where we recently completed our transformation, including a new office building, a new Nobu Hotel and a Life Time resort. I'm pleased to report our fourth quarter and full year results. We generated approximately $4.5 billion in FFO in 2022, or $11.95 per share. On a comparable basis, full year FFO per share was $11.87, an increase of 3.8% year-over-year.

We returned approximately $2.8 billion to shareholders in dividends and share. And total dividends today we paid since our IPO now totals approximately $39 billion. We invested approximately $1 billion, including accretive development projects and expanding our other investment platform into the growing asset and investment management businesses with our Jamestown partnership. These consistent strong results are a testament to the quality of our portfolio, our relentless focus on operational and cost structure, disciplined capital allocation and our team's commitment to our shoppers and communities.

The fourth quarter funds from operations were $1.27 billion or $3.40 per share. Included in the fourth quarter results was a net gain of $0.25 per share, principally from the sale of our interest in the Eddie Bauer licensing JV and exchange for additional equity ownership in Authentic Brands Group. We now own 12% of Authentic valued at approximately $1.5 billion.

Let me walk through some variances for this quarter compared to Q4 of 2021. Our domestic operations had a very good quarter and contributed $0.23 of growth, driven primarily by higher rental income and with some lower operating expenses. These positive contributions were partially offset by higher interest expense of $0.03 at a $0.15 lower contribution from our other platform investments. 2021 was a great year for our retailers. However, in 2022, Forever 21 and JCPenney were affected by inflationary pressures and consumers reducing their spend, despite not achieving the same profitability that we did in 2021, we are pleased on how we and the management teams dealt with beyond the anticipated external environment.

Turning to domestic property NOI, we increased 5.8% year-over-year for the quarter and 48% for the year. Portfolio NOI, which includes our international properties at constant currency, grew 6.3% for the quarter and 5.7% for the year. Occupancy for malls and outlet at the end of the fourth quarter was 94.9%, an increase of 150 basis points compared to prior year and an increase of 40 basis points sequentially. The Mills occupancy was 98.2% and TRG was 94.5%. Average base minimum rent was $55.13 per foot, an increase 2.3% year-over-year. For the year, we signed 4,100 leases for more than 14 million square feet. Over two years, we've now signed 8,000 leases for more than 29 million square feet, and we have a significant number of leases in our pipeline that will open for a late 2023 and 2024 openings.

Reported retailer sales momentum continued. We reached another record in the fourth quarter at $753 per square foot, with the malls and outlets combined, an increase of 6.6% year-over-year. All platforms achieved record sales levels, including The Mills at $679 per square-foot, which was a 5% increase; TRG was at $1,095 per square foot, a 11% increase; and our occupancy at the end of the fourth quarter was 12%.

We opened a new development in 2022, our 10th Premium Outlet in Japan. Construction continues on new outlet in Normandy, France, west of Paris. This will be our second outlet in France and our 35th international outlet. Our international outlet platform is a hidden jewel for SPG. As a frame of reference, it is bigger and much more profitable with much higher sales per square foot than another public company's portfolio. We completed 14 redevelopments and we will complete another major redevelopment project this year at some of our most productive properties. In addition, we expect to begin construction this year on six to eight mixed-use projects, all of this will be funded with our internally generated cash flow.

Now turning to other platform investments. In the fourth quarter, it contributed $0.23 per share in FFO as compared to $0.38 in the prior year period. For the year, OPI contributed $0.64 in FFO compared to $1.07 in the prior year. We are pleased with the contribution from our OPI investments, especially given our de-minimis cash investment we've made in these companies.

Turning to the balance sheet. We completed refinancing on 20 property mortgages for a total of $2.3 billion at an average interest rate of 5.33%. Our A-rated balance sheet is as strong as ever. Our fixed coverage ratio is 4.8 times, and we ended the year with approximately $7.8 billion of liquidity. In 2022, we paid approximately $2.6 billion in common stock dividends in cash. We announced $1.80 per share this quarter, which is a 9% increase over the same period last year. The dividend is payable at the end of March -- at the end of this quarter on March 31. We also repurchased 1.8 million shares of our common stock at an average purchase price of $98.57 in 2022.

Moving on to '23. Our comparable FFO guidance is $11.70 to $11.95 per share. Our guidance reflects the following assumptions: domestic property NOI growth of at least 2%, increased interest expense compared to 2022 of approximately $0.30 to $0.35 per share, reflecting current market interest rates on both fixed and variable debt assumptions similar OPI investment contribution, FFO contribution compared to 2022, the continuing impact of the strong US dollar versus the euro and the yen, no significant acquisition or disposition activity and a diluted share count of approximately 374 million shares.

To conclude, we had another excellent year, effectively navigating external headwinds that included rising interest rates, strong US dollars, inflation and a somewhat softening economy. We have consistently posted industry-leading results through our hard work, innovation, great people and great assets, and we continue to be excited about our plans for 2023. If you come to Atlanta, you will see what we're doing, and it's a great example of the future growth prospects of our company.

And we'll now allow for Q&A. Thank you.

Questions and Answers

[Operator]

[Operator Instructions] Our first question comes from the line of Ronald Kamdem with Morgan Stanley. Please proceed with your question.

[Ronald Kamdem, Analyst at Morgan Stanley]

Great. Just starting with the guidance of at least 2% sort of organic growth next year. Obviously occupancy is already back to 95%. Just a little bit more color on that. How much of that is occupancy gain? How much of that is rent bumps? Just trying to get a sense of what's driving that. Thanks.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Well, I think it's all the above. It's red bumps, it's occupancy gain. We still -- and this is very important to underscore -- we still have a lot of openings scheduled for the latter half of '23 and the early part of '24. So we're not going to see the full contribution of those tenants open until essentially really a run rate of 24, I'd say, sometime in '24. Now you ask why? Well, because we have a high quality group of retailers opening in these, and it takes a while to build out their quality stores, but it's occupancy gains, it's spread increases. It's a reduction in our temporary tenant income because we're leasing space permanently. And it's basically assuming -- a lot goes into this, but it's basically assuming relatively flat sales.

Now, if you remember last year, we said up to 2%. This year, we obviously blew past it. It was total for the domestic properties at clearly 5% -- roughly 5%, 4.8%. So, we're hopeful we'll do better. But again, we still have to make assumptions, and that's why we like where we're at. And the biggest assumption that is somewhat of the unknown is sales.

[Operator]

Our next question comes from the line of Steve Sakwa with Evercore ISI. Please proceed with your question.

[Steve Sakwa, Analyst at Evercore ISI]

Yeah. Thanks. Thanks for that answer, David. I guess, as you think about your other platform investments and some of the monetizations that you talked about with Authentic Brands, how do you sort of think about those on a go-forward basis against maybe making new investments in new retailers that may be struggling at this time?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Well, we have a unique relationship with Authentic. That's a very important partnership, so to speak, both as a big shareholder, but also we're 50% owners together, 50% for us, 50% for Authentic in SPARC. And we have a different ownership structure with JCPenney. We don't really have any plans for SPARC to buy additional retailers. We're very opportunistic on that. We had a very busy year last year with Reebok, where SPARC became the operating -- domestic operating partner for Reebok. A very complicated deal, as you remember, [Indecipherable] depress earnings. We mentioned that to you early last year that it did depress earnings because we had -- we knew we had some losses to occur this year. So, hopefully we'll be past that this year.

But we really don't have any plans to acquire anything. If we do, it will be opportunistically. And just we really -- we've done our -- most of our work has been with -- on the bankruptcy front or where somebody wanted to unload a business. And -- but generally, there's not a lot of distress in retail right now. I'm not saying it won't develop in a year, but there are some brands out there that are in trouble that obviously people know about, but we don't see playing in any of those situations.

[Operator]

Our next question comes from the line of Derek Johnston with Deutsche Bank. Please proceed with your question.

[Derek Johnston, Analyst at Deutsche Bank Aktiengesellschaft]

Hi. Good evening, everybody. Can we get a more granular update on Phipps Plaza? The repositioning has been open for, I'd say, most or at least part of 4Q. So I guess, how is it tracking versus plan? What changes in traffic are you seeing or any notable change of in-line rents? Any deeds would be appreciated. And then, I guess, lastly, the project seems to have increased your plan for accelerating some other mixed-use endeavors, I guess, with Jamestown, any more information would be helpful. Thank you.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Yeah. So, if you look in just open [Indecipherable] at the end of October, November, but it's really new. The office -- literally the first tenant just moved in January. Mid-January, we just did a tour of that. We still have a lot of lease up. Just to give you a rough number, pre-investment Phipps did in the low-20s of NOI. We think it will be stabilized close to 60. And we'll have invested around $350 million in it over that period of time. So, again, we don't -- we're a big company. We don't really get into like granular detail, but we basically increased the NOI by about $35 million.

Remember, this was a Belk's department store. So, in the Belk's department store, we couldn't lease up that wing. We now have Plaza that has been created external. We announced Armes [Phonetic] opening into the Plaza and part of the wing that really was difficult to lease with Belk as the anchor. We have an unbelievable Life Time resort. If you haven't seen what they build or their product both with Life Time work, the pool and the restaurants and the services and the salon, and obviously all the fitness activities, I'd encourage you to do so. And we have a Class A plus office, the best in Buckhead that just opened. So, again, low-20, 60, $350 million investment is the math.

Now again, we're doing -- and you mentioned Jamestown. Jamestown investment is in the investment and asset management business. So, these mixed-use developments that I mentioned in my call text, we're doing all of those by ourselves or with partners that we've used before. So that really isn't with Jamestown. Again, we looked at the Jamestown relationship, future endeavors that we can do together or in partnership, but we're very active in building out our platform now. And Seattle is an example, we're about to start a residence and hotel, which finally got approved, and that's going to start construction. We can go through the list.

But all that, Simon Property Group owned just like Phipps, which we own 100% of Nobu, we own obviously the Life Time, it was a lease and then the office building we own too, which is all 100% owned asset. So, I don't want you to confuse those two. But that's the rough math on Phipps. And then, the true lease up of Phipps, again, which goes back to the -- my earlier comment on the NOI. The true lease-up affects because you have Simon [Phonetic] and some of the high-end brands building out their stores. It's not a three-month build, it's, in many cases, nine months to a year.

The true offering that Phipps will have will really show in '24 when all of these retailers open the stores. So, Christian Louboutin, [Indecipherable] on and on and on. But most of those will either open late '23 or '24, and that's when Phipps really will be finished. These things don't just -- you don't just split the switch and it opens. So, that gives you a sense of it. And we think the true pro forma, this will ultimately manifest itself in year '25 or even in '26.

[Operator]

Our next question comes from the line of Alexander Goldfarb with Piper Sandler. Please proceed with your question.

[Alexander Goldfarb, Analyst at Piper Sandler Companies]

Good evening. Good evening out there, David. So, a question on the retailer brand portfolio and your equity stake in Authentic Brands. You guys have a headwind -- sorry, not a headwind. You guys have a fluctuating contribution from the retailers just based on their actual sales, right? Because it's not rents, it's based on sales. Yet I'm assuming you get some sort of recurring cash flow from the intellectual property that you own in Authentic Brands, managing the brands and all that. So, I'm just trying to understand, as you guys sell more of the brand equity and exchange it for a bigger stake of Authentic Brands, how does your income mix switch from being solely sales-dependent to being more consistent, whether it's managing or other sorts of more regular fee income versus volatility from however many genes or shorts are sold in a given quarter?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

All right. You're introducing [Indecipherable] so a year ago. SPARC operates the domestic business of the brands Lucky, Aeropostale, Forever 21, [Indecipherable] license the brands from Authentic. And it pays a royalty fee to Authentic. And then, we and our partner, Authentic, and it pays rent to landlords, including Simon, that will pay rent to Forever 21 could be in Bernado property. In fact, it is in times squirt pays rent to Steve Roth and Bernado. And that business has operating profit, and we share in that 50-50 with Authentic. So, we actually now that we converted and exchanged or licensed that we own together. Now we have historically done the license business on a JV basis.

We've decided over time to exchange that into stock of Authentic, and that's why we were not a shareholder in Authentic, but eventually have become a 12% shareholder in Authentic through the exchange of our interest in the JV license business for stock into Authentic. Authentic is a big company. It does $1 billion of revenue, close thereabouts, but it owns the license of many, many brands beyond SPARC. It owns -- its partnership with David Beckham, and its partnership with Shakil, Elvis Presley, Juicy Couture. And on down the list, you can Google it, it will give you all the names. So -- but SPARC is essentially the retail operating company. So when you think of SPARC, you should think of it similar to any other retailer like American Eagle or anybody else that operates stores, operate e-commerce, etc, it does wholesale. The only difference it pays a royalty to Authentic. It does not pay a royalty for Simon Property Group. So, the only vagaries that Simon Property Group has is, in fact, what the operating profits of SPARC are.

And in the case of '21 versus '22, the big difference was essentially Forever 21 because that teenage consumer obviously cut back with the rapid increase in gas prices and inflation in the uncertain economic environment. So, I know we're not allowed, but can we let Alex, I'm asking Tom Ward, who is the police of the call. Can we ask Alex if he understands this now?

Okay, Alex. Do you understand me? Was I perfectly clear?

[Alexander Goldfarb, Analyst at Piper Sandler Companies]

So, if I take away what you're saying, SPG lives really on the retail sales and performance. Your 12% stake in AB doesn't generate any fees to you. So, again, the focus is really the earnings derived purely from sales, there's not any sort of recurring.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Well, I mean, It's more than sure. Sales are important, but there's gross margin. They also sell wholesale, okay? So, Brooks Brothers does have wholesale accounts. So it's more -- but it generates EBITDA basically through running the business, which includes stores, e-commerce, wholesale and certain other ventures. Authentic, because we -- equity account, they're a very profitable company with high gross margins. It's an asset-light company essentially. We take our share of earnings from them, net income because they are a taxpayer, etc. But together, all of those businesses, SPARC or RGG, which is our partnership with Michael Rubin, who owns Fanatics, and Authentic, all of that rolls through OPI, and OPI contributed $0.64 out of $11.87%. So, it's in that range, to give you a sense. So, $0.64 out of $11.85. But that -- hopefully that helps explain it.

[Indecipherable], you got it?

[Alexander Goldfarb, Analyst at Piper Sandler Companies]

Got it, thanks.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

No problem. Thank you.

[Operator]

Our next question comes from the line of Vince Tibone with Green Street. Please proceed with your question.

[Vince Tibone, Analyst at Green Street]

Hi. Good afternoon. Could you provide some color on leasing economics and how those are trending in the current macro environment? Just given your current NOI guidance is about 2%, which is lower than average contractual bumps and there should be some occupancy upside, this just seems to imply leasing economics aren't great, but now let's contrary to what you said on recent calls. So can you just help me better understand kind of the dynamics at play here with guidance and maybe where leasing economics are right now?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Yeah. Look, I would say, we have positive spreads across the portfolio in renewals and in new leases versus existing leases for new specs [Phonetic]. And again, we also had operating spend increase because we're not immune to security cost increases, housekeeping, all of the normal operating expenses. To some extent, our fixed can bumps don't cover that. We're also projecting flat sales. Obviously, to the extent that sales outperform that, we'll outperform as well. And we have these cases when we're adding great retailers and great restaurants to our portfolio. They have to take out the tenants that was, in many cases, temporary. You have to take that out, and you basically have nine months of downtime where you have no income for it.

Now, like we did last time, Vince, we said up to 2%, we did 4.8%. I'm hoping to do better. But those are basically the determinants, and that's why we said better than 2%, but we have some operating expense increases, real estate taxes unbelievably continue even though we're the goose that continues to lay the golden eggs for all of the communities in which we operate, our taxes continue to go up. While we have operating expenses that go up with inflationary pressures, we had downtime, we had flat sales, and we lose temporary income while we're retaining and going to physical whether we're going to permanent income. All of that's great news, but our rent spreads are positive. Renewals are positive. And we -- and that's been the difference, then obviously we'll throw COVID out. But even the trend prior to COVID, renewals were under [Indecipherable]. And the demand continues to be very good.

[Vince Tibone, Analyst at Green Street]

Just one follow-up. Is variable lease income, do you expect that to continue to trend down just as you unwind, maybe some COVID lease modifications? Or how should we think about that part of the puzzle to going forward?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

We have budgeted it basically down slightly, because number one is to the extent that a tenant renews the lease, we're getting some of that overage into the base rent. If you remember, out of bankruptcy, Forever 21 pays basically percentage rent to all of its landlords, us included. It had a tough year last year. As I mentioned earlier, and we're budgeting basically flat this year. So there's a lot that goes on that kind of -- you got to again separated between overage at percent rent. It's a little bit of a crystal ball. There are always retailers that do well, some that slow down. We're pretty good at anticipating who's going to be great, who's not. But we're not the ones -- other than Forever 21, we're not the ones putting the stuff in the stores itself, okay? Forever 21, you can blame it on us, okay? So I hope that helps.

[Vince Tibone, Analyst at Green Street]

That was very helpful. Thank you.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Thank you.

[Operator]

Our next question comes from the line of Craig Mailman with Citi. Please proceed with your question.

[Craig Mailman, Analyst at Smith Barney Citigroup]

Great. Thank you. David, just you had mentioned Forever 21, JCPenney's managed some inflationary headwinds in their business. I'm just kind of curious, with your purview through SPARC and other investments, just how you think the retailers that your investors and maybe other tenants that people have concerns about or talked about the news are positioned heading into '23 from a gross margin management perspective and just balance sheet? And how much risk you see in this current environment versus maybe the kind of the headline fees that are in the market?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Yeah. Right now, we feel really good about our retailers. I think they were very focused on entering '23 with good clean inventories. We feel like most of them have managed that. I asked my leasing folks all the time any pullback on demand. It's not really happened. So we feel good about that. Demand continues to be generally very strong. And I think, they really -- because of the bounce back out of COVID really got the benefit of kind of getting their house in order. So, I think, on the credit side, we're feeling very comfortable. Mike? Brian?

[Brian McDade, Executive Vice President and Chief Financial Officer at Simon Property Group]

Yeah. Our watch list has been lower it's been in years. The tenant community rebuilt its financial position during COVID is coming out of it in a much better place.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

So, nothing yet. Obviously, you've got a couple of big names out there, but we really have very little exposure to them. And in some cases, we'd like -- most of them are boxed and are mostly in strip centers. So, the ones that were -- that we have and we like the box back, we think we can do better with them. So, I'd say, generally, knock on wood, I think credit side is pretty good and demand is good. And they ran -- December was very spotty for a lot of retailers.

On the other hand, after Christmas, most had a really good January. And again, I think the mistake we made, Simon Property Group made, is that -- again, SPARC was profitable even with -- even though it didn't meet the financial results of what -- and again, we shouldn't dwell on this too much because again, $0.64 out of $11.87. But it's important just so we'll do a little vehicle, but we made the mistake that thinking '21 -- we budgeted basically flat to '21, and '21 was for a couple of the brands there just extraordinarily profitable. We made some tactical mistakes Forever 21.

We brought in a new CEO to rectify those mistakes. She's doing a terrific job. So we're very pleased there. We also are very pleased with JCPenney. It's unbelievably profitable EBITDA. You can see the EBITDA. There are some public filings out there, but it is -- it didn't have the '21 -- year of '21, but we're very pleased where that company is positioned, and we're extremely pleased with the management team and all that they're doing to reinvigorate the brand, that means so much to that consumer in those communities. And we're taking a different tack than others that have managed or own that brand. We're actually reinvesting in that company to make it very important for those communities. So, very pleased with how we're positioning Penny. But it had EBITDA -- I don't know if I can disclose it, but it had a lot of EBITDA, okay? So, in our partner, Brookfield -- we'll let Brookfield take -- we'll let Brookfield announce if they do their -- I'm kidding. But it was very profitable from an EBITDA point of view.

So we're very pleased there with the brands, but we did make the mistake of thinking '21 would repeat. And then obviously, you had a lot of volatility from a macro point in '22 with huge increases in interest rates, huge increase in price and food and energy cost that the consumer was whipsawed, and we felt the impact that it's stabilized now, we believe.

[Operator]

Our next question comes from the line of Craig Schmidt with Bank of America. Please proceed with your question.

[Craig Schmidt, Analyst at Bank of America]

Thank you. Given the China reopening, I wonder if you could outline how these visitors would impact your coastal premium outlets and your dominant coastal malls.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Well, I think we haven't seen the benefit. But just walking, we -- I mean, I don't want to get into the kind of the geopolitics of what's going on. But we're -- we think there's a real benefit to our landmark assets that have always been shopped by the Chinese consumer or the Asian consumer. We're starting to see that a little bit, but we're not planning for that to really accelerate in '23, but we're hopeful that it will.

[Operator]

Our next question comes from the line of Floris van Dijkum with Compass Point. Please proceed with your question.

[Floris van Dijkum, Analyst at Compass Point]

Thanks. David, you had talked last quarter actually in response to a question I asked about recovering back to 2019 levels of same-property NOI, which we reckon to be about $6.2 billion. But obviously that includes -- that does not include some of your retailer investments. But depending on how you slice it, I'm just trying to do the math here, but you're at least $200 million short, even if you include those retailer investments. If you can walk us through -- that would imply that you would get to around 3.7% NOI growth to get back to those levels. So you're clearly not guiding to that yet, you're guiding to 2%. But what are the headwinds, if you will.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Floris, I think you can -- you really should just focus on domestic. To put the retailers in there, there's too much volatility. It's not something we look to -- we're focused on are domestic property NOI to get back to 2019 numbers before we were shut down by the pandemic.

The short answer is, we will get there on a run rate by the end of this year. That's the short answer. And you shouldn't put the retailer NOI in there. It's -- again, that's -- you got to remember, we have basically no cash investment in SPARC. So -- and I know we could talk about it all day, but it's -- when you think about Simon Property Group, we want you to think about those investments as it gets with purchase, okay?

We get this great company that owns all those real estate that's redeveloping it, great balance sheet, the ability to make smart investments with an unbelievable return on investment outside its core business. And that's what you get with a seasoned team that's experienced from recession to credit prices to a shutdown in a pandemic, okay?. And we managed it through it all. So the bottom line is, our domestic property NOI because of the delay in some of these openings, we will get back on a same property basis. Because remember, the other thing for us, we have properties in and out. So you can't go back in '19, the portfolio is different. But if you do the same portfolio that we own today versus the same portfolio that we own capable will be there by the end of this year.

[Floris van Dijkum, Analyst at Compass Point]

And David, does that include the $6.2 billion was included your stake in Taubman as well. But I'm just curious...

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

We're not helping in it. This is just the domestic property NOI. So we're not even including our international NOI. So, what we can give you, if you combine The Mills, outlets and malls, domestic portfolio that we owned in '19 and that we still own in '22, we will get on a run rate by the end of this year. As simple as that we're not that far off, but we have delayed openings. And depending on where sales come in, it's even possible we make it this year. And that's the way to look at it. And that's the only way to look at it really.

[Floris van Dijkum, Analyst at Compass Point]

I don't disagree. If I can -- the SNL pipeline, has that changed from the last quarter as well? You mentioned some of your spaces opening later in '23 and then '24, obviously, that has the potential to impact your NOI growth going forward by 5% to 7% depending on the rent that you signed, plus your fixed rent bumps. The math that we have suggests that 2% is -- it's the extreme low side of what's probably going to happen over the next two to three years?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Yes. I mean, certainly, if you look at it over that call to way outperform. And again, I just go back to last year, we try to be as thoughtful in doing this, but there are variabilities to it, overage rent being the biggest, but we also have some certain inflationary pressures that we as landlords and property owners have to deal with what I mentioned earlier. And again, you have downtime, but would hope that we would beat our number just like we did last year, and just like we have historically.

[Operator]

Our next question comes from the line of Michael Goldsmith with UBS. Please proceed with your question.

[Michael Goldsmith, Analyst at UBS Group]

Good afternoon. Thanks a lot for taking my question. In the past, you've talked about 80% of the NOI being generated by the top 50% of the properties. Does this remain true? And can you talk about the demand trends and pricing power that you have in the top half of the portfolio relative to the bottom half?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Well, I don't view anybody has that percent?

[Brian McDade, Executive Vice President and Chief Financial Officer at Simon Property Group]

Yeah. Michael, that does go through -- our top 100 assets generate roughly 80% of our domestic NOI.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Yeah. So it's more than 50%. It's more than 50 products. So, I'd say, demand across the board is good. Obviously, the higher end property probably has more demand. And -- but we're generally our leases still to this day, occupancy cost is low and our rent spreads across the board are generally positive, regardless of the sales front.

[Operator]

Our next question comes from the line of Mike Mueller with JPMorgan. Please proceed with your question.

[Mike Mueller, Analyst at JPMorgan Chase & Co.]

Yeah, hi. Just a quick one. For your platform investment FFO forecast, are you expecting any significant non-recurring costs like you had in the 2022 results?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

No.

[Mike Mueller, Analyst at JPMorgan Chase & Co.]

Okay. Thank you.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

That's a good question and the answer is no. We're not.

[Operator]

And our next question comes from the line of Haendel St. Juste with Mizuho. Please proceed with your question.

[Haendel St. Juste, Analyst at Mizuho]

Hey. Good evening, David, and team. Hope you're well. I was hoping maybe you could share some thoughts on deploying capital in the current macro -- we noticed you didn't buy back any stock in the fourth quarter. So I guess I'm curious what your level of interest and stock buybacks is here today? And second, I know you mentioned that there's no sizable acquisitions or dispositions in the guide. But I'm curious what your view of the transaction market for malls is at least today. Clearly, things are still a bit stalled across the board, but there have been a few trades in California the last couple of months. So, curious what you think of those trades and if there are any pricing read-throughs? Thanks.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Well, I think we're generally pleased that we're seeing some activity in our sector, and it's great that there's others out there that are real estate industries that are trying to grow externally. As an example, what was today that was announced. It's good to see we're not the only ones that like to make things happen externally. So that's good. I think our strategy has been essentially confirmed by players in our industry where size and economies of scale see the benefits. So, it's always good to see. We saw it in the warehousing world, and we saw it in the -- we might see in the storage world. So it's great that we see that.

From a stock buyback, I think our dividend is really where we're focused growing that. One of the thing I mentioned, hopefully, in my conference text that you heard was we paid out $39 billion in dividends, staggering number when you put it in perspective, that does not include any stock buyback, that's just pure dividends.

I'd say, that's obviously, the focus. But if the stock comes under pressure, we still have the ability to deal with that. So that is in our arsenal. We got a lot of mixed-use properties. I'd say generally, relatively quiet on the acquisition front, we did create our partnership with Jamestown, which we're focused on this year and obviously the years to come to grow that relationship. But we've got a lot going on, and the capital to continue to create external opportunities. And we've been -- we have embedded 1,000, but we've certainly moved the needle profitably with our investments and creating unbelievable return on investment, both in the real estate. Now, still one of the best deals ever done in real estate was our deal on Premium Outlets, which I'm happy to walk through the math not today, but still one of the best multiple deals ever done in our industry. And at that time, we were widely criticized for it, but one of the best deals done in the public company space.

[Haendel St. Juste, Analyst at Mizuho]

Got it. Got it. And I appreciate that. But it sounds like at a high level, not putting words in your mouth, that the focus of your capital investing today is going to be more the redo, less the stock buybacks, less the acquisitions. Question -- just a follow-up maybe on the FFO guide itself. I appreciate some of the headwinds, the unknowns, the opex, the interest expense, etc, but I'm trying to get a sense of what else might be limiting the FFO growth this year, which is basically flat year-over-year versus the 2% at least?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Yeah, it's really simple. It's interest rate. We're losing roughly $0.30 to $0.35 per share just from either floating rate debt that's now higher or our own assumptions of what our refinancing costs are going to be. The good news is, we're refinancing all of our debt. The market is there, but the cost of debt is higher. So that's really if you cut through it all, that's -- and when you look at kind of where the market was, very few analysts updated their numbers at all for higher interest rates. But I don't have to tell you they ballooned over the last 12 months.

[Haendel St. Juste, Analyst at Mizuho]

No, I appreciate that. I wanted to get a bit of clarity though, perhaps on bad debt. How are you thinking about that this year within the guide, FX headwinds, maybe...?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Yeah. I think we got to open it up a little higher -- we have a little higher bad debt expense budgeted this year than last year. Thank you.

[Operator]

Our next question comes from the line of Juan Sanabria with BMO Capital Markets. Please proceed with your question.

[Juan Sanabria, Analyst at BMO Capital Markets]

Thank you. Just hoping to get a little color on expected capex spend just in general for maintenance and then the development spend that we should be budgeting and what kind of returns or NOI contributions we should be thinking about on the debt stuff that would flow through into your model?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

I will look at our 8-K because the development spend will add to that. But obviously, when you start a real estate project, it's over two-year sometimes three-year process. So all that's disclosed in the 8-K. And the capex, including TA, will probably be roughly with what it was '22, if not a little bit less. Okay, thank you.

[Operator]

And our next question comes from the line of Greg McGinniss with Scotiabank. Please proceed with your question.

[Greg McGinniss, Analyst at Scotiabank]

Hey. Good evening, David. Regarding the large number of stores opening in late '23 and early '24, what's that expected NOI contribution in GLA, which you attributed to these leases that are signed but not yet been paying?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

At least $100 million.

[Greg McGinniss, Analyst at Scotiabank]

On NOI or [Indecipherable] Okay, thank you. And then, is there any contribution expectation from the Jamestown investment? And then, if you could talk about like place here that's built into guidance as well? That would be appreciated.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

That's all in Jamestown is accretive, but it wasn't a big investment. And so, it's in our budget, but it's not really the relationships material, but the financial impact is not material. So that's one. Greg, it is consistent with their guidance that they'll be developing when they announce their earnings in the next couple of weeks.

[Brian McDade, Executive Vice President and Chief Financial Officer at Simon Property Group]

There is some FX headwind still baked in there, Greg, in US dollars.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Yeah.

[Greg McGinniss, Analyst at Scotiabank]

All right. Thank you.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Thank you.

[Operator]

Our next question comes from the line of Ki Bin Kim with Truist. Please proceed with your question.

[Ki Bin Kim, Analyst at Truist Financial]

Dave, good afternoon. Hope to have a quick one here. So when I look at your 2023 lease expirations, your portfolio still has about 10.5% expiring, which hasn't really budged in the past couple of quarters. I remember from the last call, you said these things can take time, especially with larger national accounts. So, I was just curious if you can share an update on how we should mentally think about a realistic set of outcomes here?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Well, listen, we're negotiating for the benefit of our shareholders. They're negotiating for the benefit of their shareholders. And a lot of these things we have, what I'll say, handshakes and it's the process of being tapered. So, you should feel good that there's no smoking gun. There's nothing there that's going to lead to a fall out, it's just a process. And renewals are going. We're in fact ahead of our '23 renewals now compared to where we were last year, but some of the '22 -- and in some cases, because '22 took so long, we're doing '23. So, together it's a process, but it's going well and relationships are progressing appropriately.

[Ki Bin Kim, Analyst at Truist Financial]

Okay. And just one quick one. Where should we expect your portfolio occupancy to end up by end of this year?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

'23, slightly up, slightly up. I don't have the number, but Brian [Indecipherable]. Okay. That's one. I guess, we're over 6:00, but we have one more question and we want to finish the Q&A.

[Operator]

And our final question comes from the line of Linda Tsai with Jefferies. Please proceed with your question.

[Linda Tsai, Analyst at Jefferies Financial Group]

Hi. Thanks a lot for taking my question. On the guidance, the range you provided based on comparable FFO per share in the coming quarters when you have a better sense of mark-to-market gains or losses, will you also show guidance for estimated diluted per share for the full year like you did in prior quarters?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Yeah. Last -- you mean our mark-to-market equity investments?

[Linda Tsai, Analyst at Jefferies Financial Group]

Yes.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Yeah, sure. I mean, we outlined it, we separated, we'll do comparable and real numbers. So you'll see both. Hopefully, it will only be up. But last year, we did take a reported FFO number [Phonetic]. Brian, do you have a number?

[Brian McDade, Executive Vice President and Chief Financial Officer at Simon Property Group]

$0.08.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

But when we outline those for you, Linda, so you'll see them both.

[Linda Tsai, Analyst at Jefferies Financial Group]

Great. Thanks a lot.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Thank you.

[Operator]

And we have reached the end of the question-and-answer session. I'll now turn the call back over to David Simon for closing remarks.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Thank you. And again, I'm sure there are a lot more detail questions. Please call Brian and Tom, and they'll be happy to walk you through more details. Thank you.

[Operator]

[Operator Closing Remarks]

Participants

Corporate Executives

• Tom Ward, Senior Vice President, Investor Relations
• David Simon, Chairman of the Board, Chief Executive Officer and President
• Brian McDade, Executive Vice President and Chief Financial Officer

Analysts

• Ronald Kamdem, Morgan Stanley
• Steve Sakwa, Evercore ISI
• Derek Johnston, Deutsche Bank Aktiengesellschaft
• Alexander Goldfarb, Piper Sandler Companies
• Vince Tibone, Green Street
• Craig Mailman, Smith Barney Citigroup
• Craig Schmidt, Bank of America Co.
• Floris van Dijkum, Compass Point
• Michael Goldsmith, UBS Group AG
• Mike Mueller, JPMorgan Chase & Co.
• Haendel St. Juste, Mizuho
• Juan Sanabria, BMO Capital Markets
• Greg McGinniss, Scotiabank
• Ki Bin Kim, Truist Financial Co.
• Linda Tsai, Jefferies Financial Group Inc.