Simon Property Group Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 2, 2023

Key Takeaways

  • Simon reported Q1 funds from operations (FFO) of $1.03 billion, or $2.74 per share, driven by higher rental income in domestic (+$0.15) and international operations (+$0.02), partly offset by FX and interest rate headwinds.
  • Domestic property NOI rose 4% year-over-year and portfolio NOI grew 3.9% at constant currency, while overall occupancy improved 110 bps to 94.4% (Mills 97.3%, TRG 93.3%).
  • Leasing momentum remained strong with over 1,200 deals totaling 5.9 million sq ft signed in Q1 (25% new leases), 1,500 deals in the pipeline, and average base rent up 3.1% to $55.84 per sq ft.
  • Management raised full-year 2023 FFO guidance to $11.80–11.95 per share (from $11.70–11.95) and declared a 9% higher Q2 dividend of $1.85 per share, underpinned by $9.3 billion of liquidity.
  • The balance sheet was bolstered by a $1.3 billion dual‐tranche U.S. senior notes issuance at a 5.67% average coupon, a new $5 billion multi-currency revolver and continued A-rated mortgage refinancings.
AI Generated. May Contain Errors.
Earnings Conference Call
Simon Property Group Q1 2023
00:00 / 00:00

There are 10 speakers on the call.

Operator

Greetings, and welcome to the Simon's First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr.

Operator

Tom Ward, the SVP of Investor Relations. Thank you, and you may proceed, sir.

Speaker 1

Thank you, Claudia, and thank you for joining us this evening. Presenting on today's call is David Simon, Chairman, Chief Executive Officer and President. Also on the call are Brian McDade, Chief Financial Officer and Adam Roy, Safe Harbor of the Private Securities Litigation Reform Act of 1995 and actual results may differ materially due to a variety of risks, call, 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 may be accurate only as of today's date. Conference call, reconciliations of non GAAP financial measures to the most directly comparable GAAP measures are included within the press release The supplemental information in today's Form 8 ks filing. Both the press release and the supplemental information are available on our IR website at investors.

Speaker 1

Simon.com. Our conference call this evening will be limited to 1 hour. For those who would like to participate in the question and answer session, I'm pleased to introduce David Simon.

Speaker 2

Thank you. Good afternoon, and I'm pleased to report time, we are off to a good start with results that exceeded our plan. 1st quarter funds from operation were $1,030,000,000 or $2.74 per share. Let me walk through some variances for this quarter Compared to Q1 of 2022, domestic operations had a very good quarter and contributed $0.15 of growth, primarily driven by higher rental income. Our international operations also performed well And contributed $0.02 of growth.

Speaker 2

These positive contributions were partially offset by declines from The headwind from a strong U. S. Dollar of $0.02 higher interest rate expense of $0.05 lower lease settlement income of $0.06 compared to Q1 of 2022, and we had a mark to market gain on publicly held securities of $0.06 for the quarter and a $0.13 lower contribution From our other platform investments compared to Q1 2022, let me walk you through some of that And remind everyone that for OPI results, we are generally on our plan. Please keep in mind, OPI was up against very tough comparisons from last year's Q1. This quarter also includes one time transaction cost from ABG's recent acquisition activity, JCPenney's deployment of their new beauty initiative and investments related to physical stores, IT and onetime reorganization time, we have a number of expenses all flowing through our FFO number.

Speaker 2

The retailer part of our OPI investments has seasonality associated with it, generally with losses in the Q1 and the majority of our profit in the 4th quarter And should be modeled accordingly. Overall, we continue to expect OPI to meet our 20 2023 guidance we provided at the beginning of the year, which is similar which will be a similar FFO contribution That was compared to 2022. Now domestic property NOI increased 4% year over year for the quarter. Portfolio NOI, which includes our international properties At constant currency, grew 3.9% for the quarter. Our mills, malls and outlet occupancy at the end of the first quarter was 94.4%, an increase of 110 basis points compared to the prior year.

Speaker 2

Mills was 97.3% And TRG was 93.3%. Importantly, average base minimum rent was $55.84 per square foot, an increase of 3.1% year over year. Leasing momentum continued across the portfolio. We signed more than 1200 leases We're more than 5,900,000 square feet in the quarter. We have an additional 1500 deals in our pipeline, including Renewals for approximately $570,000,000 in gross occupancy cost, more than 25% of our leasing activity in the Q1 was new deal volume.

Speaker 2

We're seeing strong broad based demand from the retail community, Including continued strength for many categories, by the end of the second quarter, we expect to be approximately 75% complete With our 2023 expiration, retail sales momentum continued. Reported retail sales per square foot reached another record in the Q1 at $7.59 per square foot for malls and premium outlets combined, an increase of 3.3%. All platforms achieved record sales level, Including the mills at 6.83 a foot, a 2.2 percent and TRG was $1100 per square foot, a 6% increase. Good news is tourism is returning with our tourist oriented centers outperforming The portfolio average in terms of sales, our occupancy cost at the end of the Q1 was 12%. We opened our West Paris Designer Outlet, Normandy, France last week, our 35th International Outlet Center.

Speaker 2

During the quarter, construction restarted on our upscale outlet center in Tulsa, Oklahoma, Which will now open in the fall of 2024, we have several densification projects Under construction and a pipeline of identified projects that includes approximately 2 1,000 residential units and hotel rooms, now turning to the balance sheet. We completed a dual tranche U. S. Senior notes offering that totaled $1,300,000,000 at a combined average term of 20 years At an average coupon of 5.67%, we close on our new $5,000,000,000 multi currency revolving credit facility with a maturity in 2028. Importantly, the pricing is unchanged from Our prior facility, the traditional secured mortgage markets continue to support the refinancing of our assets Across geographies and property types, our A rated balance sheet is as strong as ever.

Speaker 2

We ended the quarter with $9,300,000,000 of liquidity. Today, we announced our dividend of 1.85 Per share for the 2nd quarter, a year over year increase of 9%. The dividend is payable on June 30 This quarter, guidance for this quarter given the results of this quarter and our current view of the remainder of the year, time, we are increasing our full year 2023 guidance range from $11.70 to 11.95 Per share to $11.80 to $11.95 per share Compared to last year of $11.87 this is an increase of $0.10 at the bottom end of the range and $0.05 at the midpoint Excuse me. And I'm pleased with our Q1 results. Tenant demand is excellent And brick and mortar stores are where shoppers want to be.

Speaker 2

And even with the economic uncertainty, we are Running ahead of our internal plan. Excuse me, here, I have some kind of frog in my throat, but we're ready for questions.

Operator

The first question comes from Caitlin Burrows from Goldman Sachs. Please proceed with your question, Caitlin.

Speaker 3

Hi, good evening, everyone. Maybe regarding upcoming lease maturities and what that means for potential cash So would you think it's fair to say that the rest of the 2023 maturities may face a headwind on renewal, but then the 24 maturities, Which are 12% of rents and have an ABR of $54 have significant opportunity. I'm guessing it's not that straightforward. So wondering if you could discuss that rent maturity and mark to market outlook.

Speaker 2

Yes. Thank you, Caitlin, for the question. One of the numbers I threw out there while I was Coughing during my presentation was our renewals and new leases will add $570,000,000 of Basically, gross rental income in that is included some renewals, Which is the roll off of some of the numbers that you quoted, we are renewing above our Overall, above our expiring rents. So even with that said, we expect time, we continue to have positive rental spreads even with the higher number for the balance of this year and certainly in 2024. So The outlook on that front is very positive and unchanged since Our commentary certainly at the beginning of this year and Q4 of last year as well.

Speaker 3

Okay, thanks.

Operator

Thank you. The next question comes from Steve Sakwa from Evercore

Speaker 4

Yes, thanks. Good evening, David. Good morning, David. Good morning, David. Good morning, David.

Speaker 4

Good morning, David. Good morning, David. Good morning, David.

Speaker 2

Good morning, David. Good morning, David. Good morning, David. Good morning, David. Good morning, David.

Speaker 2

Good morning. Good morning, David.

Speaker 4

Good morning, David. Good morning, David. Good morning. Good. I was wondering if you could Maybe shed a little more light on the leasing demand that you're seeing.

Speaker 4

Is there anything that you could discuss with us on kind of price point, either luxury versus more moderate tenants, anything by region, anything by product type, whether it's The mills, the outlets, the traditional malls, just looking for a little color given what we're going through and kind of what your tenants are telling you, Just kind of curious where the strongest demand is and maybe to the extent that there are any weak spots, what would you call out?

Speaker 2

Well, I mean, I know this is Kind of in the face of a lot of economic uncertainty, but demand really has not changed, one iota. Now Let's talk about the luxury side. Clearly, They're running up against tough comps compared to Q1 of last year. But Those brands and those companies think long term. And, I mean, the best example is if we were at the opening of The Tiffany store on 57th Street, you have to take a long term view when you Open stores like that and all of those brands whether LVMH Group, Kering, Richemont, Etcetera, they're looking at 2023, 2024, 2025.

Speaker 2

We're making commitments. Nothing there It's really abated. So all systems go on that front, even though they're running up against tough comps Compared to Q1, you look at the restaurant category, very strong demand, Lots of new deals across lots of price points from P. F. Chang's Cheesecake Factory to some of the chef driven brands, so all systems go there.

Speaker 2

You've got the box demand, lots of new business with DICK'S, Lifetime Fitness, The best of the best, Scheels department store demand, Von Maur is happening. Then you look at athleisure, Vuori, Aloe, Lululemon, All Brooks Brothers, all of that pretty much across the board, we're seeing new stores. So I said this at the end of last year, early this year, even with even though Comps are going to be tougher this year in terms of sales compared to last year. The demand on leasing really has not changed. We're seeing the entertainment concepts We're feeling very good.

Speaker 2

Obviously, we're cautious. We don't expect sales like they were over 2021 2022, and we planned accordingly. But Demand, we check every day and there's certainly a couple here or there that have slowed down, but nothing of Nothing really noteworthy. VF, North Face, Timberland, Cotton On, they're all growing and it's all pretty healthy.

Speaker 4

Great. Thank you.

Speaker 2

Thank you.

Operator

Thank you. The next question comes from Ronald Kamdem from Morgan Please proceed with your question, Ronald.

Speaker 5

Great. Thanks. I remember last quarter, we talked about Domestic property NOI growth of at least 2%. And you're thinking about looking at 1Q already at 4. Just maybe can you give us an update how you're thinking about that number for the rest of the year?

Speaker 5

And looking at the guidance raise, how much is that Property core property NOI versus maybe other factors. Thanks.

Speaker 2

Sure. Yes, we're going to be 2%. And I would hope we would do at least 3 plus. I mean, there is some It's very interesting the 1st 6 months from a retail point of view, costs will be tough, but we think the second half for the retailers We'll be more positive. Lots of economic Uncertainty out there with the big macro things, but assuming sales come in the way we initially budgeted, we should be Hopefully, at least 3%.

Speaker 2

If we have an uptick in sales, we'll do better.

Speaker 5

Thank you.

Speaker 2

Thank you.

Operator

Thank you. The next question comes from Alexander Goldfarb from Piper Sandler. Please proceed with your question, Alexander.

Speaker 6

Thanks and good evening, David. How are you? So I'm doing well. So first, thank you for all The detail on the retailer platform and the emphasis on the seasonality, that's helpful. My question is bigger.

Speaker 6

You guys seem to have a lot of positive trends with the redevelopment program coming back, retailer demand healthy. Obviously, some of your competitors are having trouble on the capital side. It strengthens your portfolio. So my question is, as you look over the next few years to invest incremental capital, is your focus still on The best returns are internal in your existing malls and adding more densification? Or are you starting to see some external opportunities where it may make sense to use capital and whether that's domestically or abroad, Yes, sort of curious.

Speaker 2

Yes, I don't see let me do it in pieces with No particular order. I do see I still do feel strongly that the best Use of our capital is making our existing portfolio better and better. I think We have spent $8,000,000,000 plus over the last Several years upgrading the portfolio and doing new development. So we continue to see that as our best I don't see and as I mentioned in the call, I mean, we have a residential pipeline that looks really attractive and hotels that are generating really good accretive values Around 2,000 units. Now that's not going to happen overnight, but that's going to happen over the next Few years, so that to us is a real opportunity.

Speaker 2

I don't see Much of our external capital doing any kind of acquisition opportunities internationally, I still think we'll grow our International Asia outlet portfolio with redevelopment and new development over time, essentially recycling the capital, the cash flow that we have there in accretive New development. And we're looking at everything domestically here And nothing really has with I think I could say this, with our whistle here to make us I can say that, right? Okay. So nothing here that would

Speaker 6

You said it.

Speaker 2

Yes, I said it true. Good point. Nothing here that would really like we're not jumping up and down to do external an external transaction. So it's mostly The same stuff that we've been doing and just Keep plugging away on that. And look, I do think we have to respect the capital markets.

Speaker 2

The capital markets are telling all companies to be more prudent to do more accretive investments And we are listening very closely to that.

Speaker 6

Okay. Thank you.

Speaker 2

Thank you.

Operator

Thank you. The next question comes from Vince Tiboney from Green Street. Please proceed with your question, Vince.

Speaker 7

Hi, good afternoon. I wanted to follow-up on your comment regarding the 2,000 residential and hotel units in the upcoming pipeline, just curious how quickly you could start these projects, how much spend this could potentially represent and if this is something that you're going to maybe do through joint ventures or Would be wholly owned on the balance sheet and any color on some of these points would be helpful.

Speaker 2

Sure. All right. So I think we will do selective JVs on certain of the residential Development, so that's and it may it also may be that We could potentially bring in 3rd party equity too. So that would We'll look at each deal individually, but that's certainly a possibility. And then I think Vince, essentially, we're looking at to reach all those 2,000 units, it's really probably a 5 year build process, we expect to start several this year, but yet we're Frankly, being a little bit cautious.

Speaker 2

We're still permitting some things in California And the Northwest, so we don't we're going to just see how the world is, but we don't have to make a decision Yes. And I would think at the end of the day, I'd rather, Brian, give you a more scientific number because a lot of these are part of redevelopments too. And so to really isolate the hotel Apartments or rental stuff, I'd want to give you a number, but my instinct would be probably about $1,500,000,000 But I think Brian can give you a more detailed number, but somewhere in that range. And these go from Austin, Texas to Orange County, California to Seattle, some hotels in Florida, Some residential in Florida, multifamily. So it's kind of where you'd expect it to be where supply and demand is in our favor.

Speaker 2

But we're considering building a hotel in Cape Cod because we think there's a good supply demand Imbalance there. So it really is across in every I think generally, as we Get back real estate through our redevelopment efforts. The big focus is on where we Where we can add some mixed uses, because we do think like what we did in Buckhead It's having a tremendous impact on the overall value of that real estate. So not only does it is it Accretive from a value point of view just on the cost to the return on the build Versus what the value of that is after it's built, but also the residual benefits that we see from the mall.

Speaker 7

Got it. No, that's all super helpful. And then somewhat related follow-up question. Just curious if you could share any updates on the Carson Outlet project and if you think you'd be moving forward there in the near term.

Speaker 2

That's a complicated We are that's a complicated one, but we're every day we make progress. So it's terrific real estate, very complicated transaction, but We continue to make progress, but no final decision has been made to do it, But I expect one to be made over the next few months.

Speaker 6

Great. Thank you.

Speaker 2

Thank you.

Operator

Thank you. The next question comes from Craig Mailman from Citi. Please proceed with your question, Craig.

Speaker 2

It's actually Nick Josephong here with Craig. David, just on executive comp and the $24,000,000 one time cash bonus related to OPI, I know at least one of the proxy analysis firms has raised some concerns on it. So I was hoping you could give some more color on What rationale behind it in terms of the amount and the structure of it ahead of

Speaker 4

the vote later this week?

Speaker 2

Yes. Look, I think This was essentially paid 23, 24 executives Last February, so about 15 months ago, fully disclosed in an 8 ks, our Rationale and reasoning by the comp committee was fully disclosed in our filed proxy As well as a supplemental letter to our shareholders, I think If you look at the company in totality, which is important, I mean, we can always Take a moment in time to say why this, why that. But if you look at the history of the company, You look at executive comp, you look at our stock program, You look at our burn rate, you look at our G and A as a function of our NOI or asset value, We are at the lowest of the low. Anybody can pick out one particular number they don't like. But if you look at it in totality, we are absolutely proud of How we run this business, if you want to get more detail, I encourage you to talk to Head of our top committee or a lead independent director, any shareholder can do that, but I would encourage everyone to look at the totality of our history and then come to whatever conclusion they think and we're very happy To talk to anybody that would like to go through it from a shareholder point of view.

Speaker 2

Thank you. Thank you.

Operator

Thank you. The next question comes from Greg McGinnis from Scotiabank. Please proceed with your question,

Speaker 7

Hey, good evening, David. I just want to make sure that I understand that $570,000,000 gross rental income number that you mentioned, is that new and renewal leases? Is it on a pro rata basis, inclusive of international and DRG? How much of that, I guess, is incremental to in place rents or is all of it? And then what's the timeframe

Speaker 2

that you're contributing? All terrific questions. And we highlighted that just to Give you a sense of the scope of the business that's going on here. So that's a huge number. That's just one lease One level of activity in the year and it's bigger than some companies that exist today.

Speaker 2

So let me try to unpack it. It does include renewals. It's just SPG. It's just domestic. And If you look at the renewals in the new business, there's a really good uptick from kind of the in place income on that.

Speaker 2

And that will come in not really this year, but over 24 and 25 as those stores get open. And I think it just adds a sense of our future growth that we see in front of us from our Existing portfolio. But I'm not in a position to break it out between renewals and new incremental business, but You'll see that flow through the NOI in the upcoming quarters. Okay. So it is both though,

Speaker 7

because you mentioned 100,000,000 Of new income last quarter, of new NOI.

Speaker 2

Correct. Okay. Yes, it includes both, correct.

Speaker 4

Thank you.

Speaker 2

Thank you.

Operator

Thank you. The next question comes from Derek Johnston from Deutsche Bank. Please go ahead with your question, Derek.

Speaker 4

Hi, everyone. Good afternoon. Occupancy is now at 94.4 percent and that's just 70 bps below pre pandemic levels. Do you expect to surpass 4Q 2019's 95.1 percent occupancy this year? And given the leasing demand we've discussed, How is the team weighing occupancy versus rates now that the gap is so narrow?

Speaker 2

Well, let me take that part first. I do think The good news is that when we're and again, every lease is different, every relationship Different rollovers, some rollovers go down. But I would say, generally speaking, We are finally seeing renewals that are Overall, above the expiring rents. So that And part of that is just supply demand is in our favor and we are getting because one is, I think from the retailer's point of view, there's a real appreciation for bricks and mortar, 1. 2 is they know we're a landlord that they can rely on and that we're going to do the right thing to maintain and Reinvest in these properties and we have the capability of doing so.

Speaker 2

And generally, it's more demand that we're seeing. And the retailers are in having survived COVID or in better shape and want to grow their business. No, that is all happening. And getting to your first point, will we beat it this year? It will be close.

Speaker 2

I'm not I can't guarantee it, but I am hopeful that we will beat that number And then that certainly within the next 12 months, assuming we can continue to maintain reasonably Decent economic conditions.

Speaker 4

All right. Thank you.

Speaker 2

Thank you.

Operator

The next question comes from florist van de Kamp from Compass Point. Please proceed with your question, florist.

Speaker 8

Thanks. Good evening, guys. David, so maybe if you can give us a little bit more of an update. I know in the past you've talked about your signed non open pipeline being around 200 basis points. Your leased occupancy just increased by 110 basis points.

Speaker 8

Is that S and O pipeline relatively similar? And then maybe, I mean, if I look at the base rent going up by 3.1% approximately. And if you get about 10% of your space back, I mean, it assumes Pretty healthy releasing spreads, if my math is correct. I mean, how should we be thinking? It appears that leasing spreads are accelerating in your core business.

Speaker 2

I think that's a fair statement. And I would say that the pipeline is similar to what it's been. You're right, Brian.

Speaker 1

Yes. Of course, we're

Speaker 6

still hanging around 200 basis points

Speaker 2

at this point in the year. So I do think As we've been saying over the last few couple of quarters, I mean, we have finally turned the corner on Lease spreads demand better properties, more commitments From retailers, more and more retailers wanting to open stores, All driving pretty good demand, which allows us to get the spreads that we were accustomed to, but We were flat lining pre COVID. Obviously, we got hurt during COVID and we've bounced back nicely. And so from that standpoint, it's good to see.

Speaker 8

And if I can maybe follow-up, David, on Jamestown and you mentioned external capital. How are you thinking about how is the Jamestown acquisition bedding in and is that potentially a source of external capital that you can bring into some of that The apartment or hotel investments and or how are the synergies between those two businesses working out? In particular, I'm thinking like Atlanta the street retail right near your 2 Fortress malls.

Speaker 2

Yes. Look, to separate, Just to be clear, so we bought into the asset management business We partnered with Jamestown for a couple of several reasons, but a couple to highlight here. One is they're really good asset managers. 2 is they have the development capability that's very interesting to us, And they have excellent institutional relationships. And we think with our partnership, we can grow that business.

Speaker 2

We did not other than there is a big Future development, master plan development that they're working on in Charleston, where we did partner with them directly. We did not buy any of your existing real estate that's owned by the various funds, whether it's the German funds Or the Premier Fund. Jamestown We are in the process of raising their, what, 32nd German fund. They have a lot of separate account interest. It's really good for us because we get to learn those institutional investors better Ann Moore, Ann, I just think we're early days there, but I think the thesis that we had going in continues To be very, very valid, this is a long term relationship that I think will grow.

Speaker 2

I see us partnering with institutional money that will be managed by Jamestown that will partner with us to build North Charleston. So yes, I think all of the elements of potential growth with Jamestown are out there. We do like the asset management business as a platform. We dipped our toe into it, but I think, again, just as we look at the landscape of real estate Owners and managers, we think when we look at Blackstone, when we look at Brookfield, Obviously, they own, they asset manage. For us to have some scale or some role in that business, I think ultimately will iner to the benefit of Simon Property Group, And that's what we're asking.

Speaker 8

Thanks, David.

Speaker 2

Thank you.

Operator

The next question comes from Craig Schmidt from Bank of America. Please proceed with your question, Craig.

Speaker 2

Thank you. Given the seasonality of the OPI business, which quarter do you expect that number to turn positive? I think it will be Craig, you know about retailers. So just to reinforce, The retail part of OPI, remember, the vast majority of the OPI value is in our ABG stock, but we still have a very profitable business with both Penny And Spark and then other investments that are in that, including RGG and so on. So just important to put it in context.

Speaker 2

So the retail part, the pure retailer part, Penny and Spark is seasonal. Last quarter, Q1 of 2022 was just stimulus, whatever, was a really tough comparison For the retail retailer part of OPI. With that said, It will we expect it to be profitable in Q2 and Q3. And But the vast majority of it will be Q4 like all the other retailers. So when you see retailers report this quarter that are public, I think generally you'll probably all have Tough comps against Q1 of last year, yet the comps get a lot easier.

Speaker 2

This is a lot more information for a business that's We have no cash investment, remember. And it does create a little volatility of our earnings For better or worse, in this case, this quarter it's worse, 4th quarter will be much better, does create a little volatility. But You'll see it map out part of that OPI map out, just like other retailers Where the loss will be in Q1, profitability in Q2 and Q3 and then 70%, 55%, 70% in Q4. Thank you. Thank you.

Operator

The next question comes from Juan Spannabria from BMO Capital Markets. Please proceed with your question, Juan.

Speaker 2

Hi, good afternoon. Good afternoon.

Speaker 1

Just hoping to get a

Speaker 2

little color on the month to month leases. They picked up from about 4.5% to 7.5% sequentially in the first quarter, While you did a fantastic job chopping wood and reducing the rest of the 'twenty three expirations, but just curious on why the increase In the month to month, this isn't what's going on behind that. Yes. One of the comments I made was we expect to be Basically 75% by the end of Q2. It's just a process.

Speaker 2

It's just We're negotiating, the retailers are negotiating. The stores are open and operating, but we It's just a typical drawn out process that is the, So to speak, the art of the negotiation, but a lot of that's already handshake committed to that we're just going through and processing now.

Speaker 7

If you look historically at

Speaker 6

what it's normal seasonality of that line item at this point in time in the year.

Speaker 2

Great. That was my follow-up. Thank you.

Operator

Time, please proceed with your question, Mike.

Speaker 2

Thanks. I was wondering, has there been any notable change in lease duration for what you're signing So far in 2023 compared to last year? Not really. Not at all.

Speaker 7

Okay. That was it. Thank you.

Speaker 2

Thank you.

Operator

Thank you. The next question comes from Haendel Juste from Mizuho.

Speaker 4

Dave, I think earlier you mentioned that new leases were 25% of deal volume in the Q1. I guess I'm curious if that's why CapEx ticked up, it was up 8% in the quarter and if this is also a new level of new versus renewal leasing that you should expect in near term? Thanks.

Speaker 2

We have a tough connection. Did you guys hear that?

Speaker 7

And now can you repeat

Speaker 6

your question, please? You kind of broke up a bit.

Speaker 2

Sure thing.

Speaker 4

Sorry about that. So my question was on David I think you mentioned earlier in the call that new leases were 25% of the deal volume in the Q1. So I'm curious if that's why CapEx was up, I think, 8% in the Q1 and also if this level of new leases, 25% or so, would be kind of the right way to think about new versus renewal leasing going forward? Thanks.

Speaker 2

Yes. I think I guess On the TA line, there is some we are doing more deals, so there is probably more TA associated with it. So I'm not sure the CapEx line or you're looking at the TA line, but generally, the answer is yes, we're doing a lot more new business and in some cases that does mean a little bit more TA. And I still had a hard time on the last part. Did anybody hear it?

Speaker 2

No, we didn't hear it. Unfortunately, we didn't hear it. But Do you want to call back with we're happy to answer that.

Operator

Thank you. Moving on to the next question. The next question comes from Ki Bin Kim from Tuohist. Please proceed with your question.

Speaker 6

Thanks. Good afternoon. Going back to your comments on international tourism, David, Can you remind us where international tourism levels are for your portfolio today versus, let's say, pre COVID? And if it should return to that normal level, what does that mean for Simon's NOI or earnings, however you want to look at it?

Speaker 2

Well, I would say generally speaking, we just to give you a sense, our sales for our tourist So the bottom line is it's really going to result in overage rent That we've probably flat lined more or less on those properties. So and that will manifest Once we reach the breakpoint, so later in the year. But we're seeing we're starting to see I mean, like Vegas, Where are our tourist properties? Florida, which has been pretty strong, but we're seeing more and more international tourism there. Woodberry Here in the New York area, I say here, I'm in Indianapolis, but in the New York area is really starting to see a lot more International Tourism, California has been kind of the weak link, but we're starting to see more and more Sales there and then Vegas is just going crazy.

Speaker 2

Vegas, we and we have really important closure in Vegas between Forum, Crystal, our 2 outlet centers, Vegas is as good as it gets. It's The casinos, what's going on with the city, the movement from California to Nevada, all of the Football, baseball, sporting activity, Formula 1, it's just it's a great place to have A lot of retail real estate, and we're seeing real benefits in that. So this will manifest itself in the 4th quarter As we're seeing that, but as we reach the break points, but we're finally seeing the international Tourists come back to the States.

Speaker 1

A

Speaker 2

little weaker dollar helps. And obviously, all the I think finally, you don't have a vaccine card or whatever is required to come here. All of that's kind of Yesterday's news as of today or yesterday, I think we're finally starting to see that come back like it was pre pandemic.

Speaker 6

Okay. And a quick question for Brian. You guys have a pretty healthy cash balance of over $1,000,000,000 Yes, you still carry a balance on the revolver. I'm sure there's a pretty logical simple answer to this, but it's curious. Yes, that's exactly right.

Speaker 6

The outstandings on our revolver are denominated in euros and they serve as a net investment hedge against our asset base in Europe. We do have a heavy sizable cash balance as we did our offering earlier in this year and pre funded the balance of our unsecured maturities for this year. So we're carrying Cash and we'll pay off the June maturities at par at maturity. Okay. Thank you.

Speaker 6

Sure.

Operator

Thank you. The next question comes from Michael Goldsmith from UBS. Please proceed with your question, Michael.

Speaker 2

Good afternoon. Thanks a lot for taking my question. David, your base minimum rent growth is accelerating, you have a nice S and O pipeline. You're talking about blowing past your 2% NOI growth guidance for the year. All sounds great.

Speaker 2

I guess the question is, how sustainable is this algorithm? How long can it continue? And what are the factors that are ultimately going to Weigh on this momentum that you have. Well, look, I mean, I think I see it continuing. We see good demand.

Speaker 2

We are tied to the general economic condition, but Supply demand is in our favor. I think our spot in our industry is Well established. We have the confidence with our retail partners. We know what we want to do with our properties. We're not we don't bad a 1,000.

Speaker 2

We make mistakes all the time, but we know where we want to position them. And So I hate using kind of this, but it's really going to be the external environment that could slow this down, meaning What happens? Do we do a recession or that? And I honestly think some of these markets are When people ask me that, I actually think if we do go into a recession, it will be, quote, this kind of regional recession. I just don't Texas, Nevadas of the world, Georgias, I just don't see them slowing.

Speaker 2

I don't see them going into a recession. So if there is 1, we've always heard, well, it's going to be a regional one. This one might be 1, You know who lined it? I really don't know, but I think that's what slows us down. Obviously, we do have some headwinds with higher interest rates.

Speaker 2

We do have debt maturity at low rates that a rollover will cost us some growth. But we just have to kind of go through that and deal with. Thank you very much. Thank you.

Operator

The next question comes from Linda Tsai from Jefferies. Please proceed with your question, Linda.

Speaker 9

Hi. How do you think about the longer term growth profile of the OPI business versus growth in overall portfolio Do you think the OPI business requires more consistent investment before it generates more stable returns?

Speaker 2

Well, I think you have to look at it, the individual investments and Like for instance, Authentic Brands Group is a growth machine. They're buying brands left and right. They're buying Billabong, they're buying Vince. They've got a huge pipeline. So I really see that company growing, growing, growing.

Speaker 2

Spark and Penny are Spark is opening new stores, getting better at e commerce, Getting better operating. I'm sure over they added Reebok to its portfolio last year that still hasn't been fully integrated. So I expect EBITDA growth to accelerate In the latter half of twenty twenty three and twenty twenty four, RGG, which includes Rue La La, Gilt and importantly, SHOP Premium Outlets, Remember, we contributed that to that joint venture. SHOP Premium Outlets is on fire. We're growing our GMV by leaps and bounds, I really think this was an idea we had years ago.

Speaker 2

We Kind of got it off the ground, maybe not quite as good as Wilbur. Well, we're right, but we got it off the ground. We merged it into RGG, and it's really rocking and rolling. We've got we're signing up Good retailers all the time. That's got a great story to it.

Speaker 2

And we have some smaller investments in that. So I think I see a real growth pattern in all of those. Penny is reinvesting. I think Penny has found its mojo. It's getting better brands in the store.

Speaker 2

We're making the stores look better. It's got growth in beauty that's investing. So The retailer side of OPI has a little more exposure to the economy because retail just does. But I think they all in their own right have their own growth story. And but you know what, We're economic animals to the extent that we think we get fair value.

Speaker 2

We've got lots of Opportunities to invest in our company or other transactions that will add value. We look at these very clinically. And I just remember, we've created a lot of value here With very little capital. And what's amazing, it's in our earnings now and which is a good sign Because it means it's earning money. And given the small investment, it's been if you just want to look at Return on earnings and return on investment, it's been outstanding.

Speaker 2

So very proud of it, very profitable, Not our core focus yet. I'll use the executive team here to leverage our Capabilities, intellectual firepower, etcetera, to make those companies better. And I think we've done A pretty darn good job and we've had good partners across the board. So we've done it in a very prudent way. And it's been very beneficial for us, and I expect growth to continue I'll have more ups and downs, won't be a straight line, but I have I expect more growth from that category.

Speaker 2

Same time, 10 years from now or 5 years from now, we don't have to own any of these companies.

Speaker 9

Thanks for that. And then just a follow-up. Do you have a sense of how much mixed use development could become as a percentage of portfolio NOI? Time, could you give us a sense of what that might represent today?

Speaker 2

It's not very big today. It's like 3%, 4%. About 3%. 3%. So we're a big company.

Speaker 2

So to do a lot to get to like 8% to 10% would take a lot, would be a few years down the road, but I don't see any reason why we certainly Should try to strive to get up there if we can do it accretively in the kind of the 7%, 8% range. But that would be roughly $500 plus 1,000,000 of NOI. So it's not It's going to take time.

Speaker 4

Yes.

Operator

Thank you.

Speaker 2

Thank you.

Operator

Thank you. The next question, the final question comes from Haendel Juste from Mizuho. Please proceed with your question.

Speaker 4

Hey there. Thanks for letting me back in. I wanted to get to the second part of my question and then I have one more. So the second part of my earlier question was, if you're expecting new lease volume To be about 25% of the overall leasing volume as they were in the Q1 over the near term.

Speaker 2

Yes, I think that's a reasonable number, yes, In that range.

Speaker 4

Okay, and then the second question I had was on foot traffic. We saw some recent placer foot traffic data from March Indicating that year over year foot traffic at enclosed retail malls is down 8% year over year in March. I'm curious if you're seeing similar trends at your properties and if you think that's a reflection of the consumer, and if that's coming up in lease negotiations in the current environment? Thanks.

Speaker 2

Well, yes, that's I'm glad you asked that Because I have we keep track of that ourselves. And just to give you March over March 23 over March of 2022, we are 105.5 And 8% above last year this time. In January February, we're actually much higher Month over month. So we for our portfolio, we're above traffic is above Where it was this time last year, year to date, month to month. Okay.

Speaker 7

Thank you.

Speaker 2

Thank you.

Operator

Thank you very much. There are no further questions at this time. I would like I turn the floor back over to David Simon for closing remarks. Thank you, sir.

Speaker 2

Okay. Thank you and appreciate

Operator

This does conclude today's teleconference. You may disconnect your lines at this time and thank you very much for your participation.

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