Greetings and welcome to the Simon Property Group Fourth Quarter and Full Year 2023 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tom Ward, Senior Vice President, Investor Relations. Thank you, Tom. You may begin.

Thank you, Paul. And thank you everyone for joining us this evening. Presenting on today's call are David Simon, Chairman, Chief Executive Officer and President; and Brian McDade, Chief Financial 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 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. 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 evening will be limited to one hour. For those who would like to participate in the question-and-answer session, we ask that you please respect the request to limit yourself to one question. I'm pleased to introduce David Simon.

Good evening. Thanks, Tom. Before turning to the results, I would like to provide some perspective on our company as we celebrated our 30th anniversary as a public company in mid-December of last year. We have grown our company into a global leader of premier shopping, dining, entertainment and mixed-use destinations managing through, and in some cases, very turbulent times. Over the last three decades from our base of 115 properties in 1993, we have acquired approximately 300 properties, developed more than 50, and disposed of approximately 250 resulting in our current domestic portfolio of about 215 assets. We expanded globally, and today have 35 international outlets, including world-renowned outlets in Asia, and our portfolio is differentiated by product type, geography enclosed and open-air centers located in large and dense catchment areas. Our portfolio is supported by the industry's strongest balance sheet and a top management team. We are the largest landlords, the world's most important retailers, and not by accident, our diversified tenant base has solid credit; our mix is always changing and adapting, best illustrated by the fact that compared to 30 years ago, only one retailer is still in our current top 10 tenants. Our team’s hard work has resulted in industry-leading results including some of the following; our annual revenue increased from $424 million to nearly $5.7 billion, our annual FFO generation increased 30 times from approximately $150 million to nearly $4.7 billion, a 12% CAGR. Total market capitalization has increased from $3 billion to $90 billion. We have paid over $42 billion in dividends to shareholders. We have assets in our portfolio that have been in business for more than 60 years. Those assets are still growing today with many generating $100 million in NOI. These assets are in great locations, have a loyal and large customer base that is where the retailers want to be. No other asset type has longevity including the NOI generation and embedded future growth that these assets have; yes, they change. Yes, they evolve, yes they adapt, but yes, they also grow. Our collection of assets cannot be replicated. And there are always hidden opportunities within that. I want to thank the entire Simon team, who have contributed to 30 years of success as a public company. And now let me turn to our fourth quarter '23 results. We generated approximately $4.7 billion in funds from operation in 2023 or $12.51 per share and returned $2.9 billion to shareholders in dividends and share repurchases. For the quarter, FFO was $1.38 billion or $3.69 per share compared to $1.27 billion or $3.40 per share. Let me walk you through some of the highlights for this quarter compared to Q4 of 2022. Domestic operations had a terrific performance this quarter and contributed $0.28 of growth primarily driven by higher rental income with lower operating expenses. Gains from investment activity in the fourth quarter were approximately $0.07 higher in a year-over-year comparison, other platform investments at $0.03 lower contribution compared to last year. FFO from our real estate business was $3.23 per share in the fourth quarter compared to $2.97 from last year. That's 8.7% growth and $11.78 per share for '23 compared to $11.39 last year. Domestic property NOI increased 7.3% year-over-year for the quarter and 4.8% for the year; continued leasing momentum, resilient consumer spending operational excellence delivered results for the year, exceeding our initial expectations. Our NOI ended the year higher than 2019 pre-pandemic levels. Portfolio NOI, which includes our international properties at constant currency grew 7.2% for the quarter and 4.9% for the year. Mall and outlet occupancy at the end of the quarter, fourth quarter was 95.8%, an increase of 90 basis points compared to last year. The Mills occupancy was 97.8%, and occupancy is above year-end 2019 levels for all of our platforms. Average base minimum rent for malls and outlets increased 3.1% year-over-year and The Mills rents increased 4.3%, we signed more than 960 leases for approximately 3.4 million square feet in the fourth quarter. For the year, we signed over 4,500 leases, representing more than 18 million square feet approximately 30% of our leasing activity for the year were new deals, with going-in rents of approximately $74 per square foot and renewals had going-in rents of approximately $65 per square foot. Leasing momentum for the last couple of years continues into 2024. Reported retailer sales per square foot in the quarter was $743 for malls and outlets combined and $677 through The Mills. During the quarter, we sold a portion of our interest in ABG for gross proceeds of $300 million in cash and reported pretax and after-tax gains of $157 million and $118 million respectively. We opened our 11th outlet in Europe last year; construction continues on two outlets, one in Tulsa, Oklahoma, and one in Jakarta, Indonesia. We completed 13 significant redevelopments and we'll complete other major development projects this year. In addition, we expect to begin construction this year on five to six mixed-use projects representing around $800 million of spend from Orange County to Ann Arbor, to Boston, to Seattle, to Roosevelt Field; they are some of the ones that are planning to start this year. And we expect to fund these redevelopments to mixed-use projects with our internally generated cash flow of over $1.5 billion after dividend payments. During 2023, we completed $12 billion in financing activities, including three senior note offerings for approximately $3.1 billion including the Klépierre exchangeable offering. We recast and upsized our primary revolver credit facility to $5 billion and completed $4 billion of secured loan refinancings and extensions. Our A-rated balance sheet is as strong as ever; we have approximately $11 billion of liquidity. During 2023, we paid, as I mentioned earlier, $2.8 billion in common stock dividends. We repurchased 1.3 million shares of our common stock at an average price of just over $110 per share in 2023, and today we announced our dividend of $1.95 per share for the first quarter, a year-over-year increase of 8.3%. The dividend is payable on March 29 of 2024. Now moving onto 2024; our FFO guidance is $11.85 to $12.10 per share. Our guidance reflects the following assumptions; domestic property NOI growth of at least 3%, increased net interest expense compared to 2023 of approximately $0.25 to $0.30 per share reflecting current market interest rates on both fixed and variable debt assumptions and cash balances. Contribution from other property, other platform investments of approximately $0.10 to $0.15 per share; no significant acquisition or disposition activity, and our current diluted share count of approximately 374 million shares. So, with that said, it's safe to say we're excited to enter year 31 as a public company. Thank you for your time, and we're ready for Q&A.

Our first question is from Steve Sakwa with Evercore ISI. Please proceed with your question.

Thanks. Good evening, David. I was just wondering if you could maybe talk a little bit about the leasing pipeline and where things stand today versus maybe the year ago and what sort of conversations are you having with the tenants and maybe how the pricing dynamic changed there, given that you're now kind of 95% leased and pretty full in the portfolio.

Well, I mean, Steve, we're always adjusting our mix. We're always trying to improve our retailer mix and obviously, that's been beneficial to our NOI growth. I would say, just generically, obviously, I spend a lot of time myself on leasing and with my team on leasing. Demand remains very strong. And there is a real interest by all sorts of retailers and people that populate our shopping centers to be part of what we're doing. It’s evident that our new deals are around $74 a foot, our renewals are $65 a foot, our expiring leases this year in the $56 - $57 range. So we're seeing generally positive spreads; supply-and-demand is in our favor. Historically low supply in big properties across the country means there used to be 40 million square feet of retail real estate built every year, now there is essentially less than a few million here and there. There's been obsolescence too which reduces supply. Then there's just great new retailers that we're very excited to do business with. I was on the West Coast seeing some of them. The importance of bricks-and-mortar has never been higher. And the cost of e-commerce, including customer acquisition, returns, stickiness, et cetera, continues to be a challenge. If you looked at the marketplaces, that are purely online, they run into problems. They really need to be connected to bricks-and-mortar for survivability. All of these factors point to a positive picture; it's a function of execution, being first, and continuing to enhance our properties, which we're very focused on. Even though we've bounced back and had a couple of really good years in terms of lease-up from the depths of the pandemic, we’re not finished, and retail demand continues, and it is strong and broad-based, not limited to one category or retailer.

Thanks, that's it.

Thank you, Steve.

Thank you. Our next question is from Caitlin Burrows with Goldman Sachs. Please proceed with your question.

Hi, good evening, everyone. David, could you give some more detail on the ABG sale that you referenced, maybe how much you still own, how much you think your remaining OPI could be worth, and whether you plan to monetize more in '24 or maybe what could influence that decision?

Sure, well let me just say that we sold about 2% of our ABG stock. So, we essentially went from just under 12 to just under 10. We'll continue to look to monetize these investments; they've been by and large, very good investments across the board, not just the big ones, but the smaller ones as well. Obviously, there’s a number of them that are synergistic to us. But we have a strict adherence to creating value, and we think we can deploy that capital into what I'd call the mothership and can achieve better growth from that, so that's where our number one priority will be. It wouldn't surprise me, Caitlin, for us to continue to monetize, obviously, as some of these are larger investments, it's not easy to do it in one big swoop, but we're very focused on portfolio management of those assets. If we can monetize and are we going to get a better return by plowing it back into our core business.

Got it, thanks.

Yes, thank you.

Our next question is from Jeff Spector with Bank of America. Please proceed with your question.

Great. Thank you. And first, congratulations on the anniversary. David, there are a lot of initiatives. So as you think about the next five years, I know it's probably a difficult question, but is there one or two key initiatives that you're most excited about as you think about the next five years?

Well, look, I'd say a couple of things. On the property level, there's no question that all of the mixed-use projects that we're bringing in, plus the redevelopment of our department store boxes are probably the most interesting and exciting things that we're doing on the ground level. And so that would certainly be number one; number two is we're very excited about growing our outlet business in Southeast Asia. It's an incredibly robust market with a young population, and I'm not just talking about Jakarta, but places like Japan and Korea where we see great potential for our outlet side. Jeff you probably know that better than anybody based on your previous history. So, that's very exciting. I'd also say, we are still pursuing bringing technology to our loyal consumers that allow them to enhance their shopping experience with us. We've got a lot of initiatives on the marketing and loyalty front. You know, Simon search is a great example where our consumer can search our tenant base for what they're looking for in advance of their visit. It ties into the marketplace we're building with premium outlets; there'll be some news on that front this year. This whole system about customer interaction, reinforcing shopping behavior, rewarding loyalty, and expediting their trips to make it more seamless is a big focus. And equally important is the need to continue to evolve our retail mix. The exciting thing is there are more entrepreneurs, more exciting retailers with great concepts, proving them out, and realizing that our centers are a good place for them to do business. So, those are the ones that come to mind, and I'm sure there'll be more that I haven't even thought of.

Very helpful. Thank you.

Thank you, Jeff.

Our next question is from Alexander Goldfarb with Piper Sandler. Please proceed with your question.

Hi, good evening. Good evening out there, David. So, I think at the opening you mentioned that NOI is now exceeding pre-pandemic; the dividend is within less than 10% of pre-pandemic and moving onto Jeff's and Steve's questions on reinvestment, as you think about getting the dividend back to pre-pandemic, given the investment opportunities, especially the lack of supply, growing demand, people are once again really engaged in physical retail. Does that change your trajectory as you think about getting the dividend back to pre-pandemic? Is there really better investment opportunities with that capital, or is the delta really a function of rising interest rates?

Well, I mean, Alex, look, our yield is extraordinarily high right now. So, we could financially pay $2.10 tomorrow without a blink. We have $1.5 billion of free cash flow after dividends. It has nothing to do with financial wherewithal. We don't like trading at this high yield. So, I think that's how we see it. As we have these additional capital events, we want to continue buying back our stock. When I look at either the S&P 500, the REIT peer group, or the strip center REITs, our yield is too high. So, to tell all my investors, I could pay $2.10 tomorrow evening, without hesitation. Our yield is too high at the moment. We would like to trade at a lower yield because we certainly think our yield is higher than it should be.

Yes, unfortunately, I'm a non-paying customer; the real customers are the ones listening to the call. We're just asking the questions.

No, I'm kidding. By the way, just so you know, we like you. You're welcome out there; we are west of the Hudson, but we're not going to tell you exactly where we are, okay? Somewhere in Indiana tonight, but we may not be in Indiana tonight. But we are west of the Hudson.

I assume you'll be in Las Vegas this Sunday.

Well, I can't disclose my schedule.

Thank you.

Our next question is from Michael Goldsmith with UBS. Please proceed with your question.

Good afternoon, and thanks a lot for taking my question. David, base minimum rents are up healthily in a low single-digit range year-over-year, while your tenant sales per square foot are down slightly. Can you just talk about these dynamics? Is that a function of your range, kind of catching up to some of the street, the tenants have experienced before their sales have started to come down and just how long are these dynamics kind of sustainable like this? Thank you.

Sure. Good question. The going-in rents and renewals for new leases are very much sustainable. If you look at our occupancy costs, we're still at the low end of our historical range, at 12.6%, and we've run up to over 14% before. I would also caution that these are the sales that our tenants are reporting to us, but they are somewhat affected by returns. We actually think our sales per square foot are higher than this. In many cases, they have the ability to offset our returns; in most cases, they don't. So, I just put that out there. We feel like supply and demand, low occupancy costs, high retail sales, and just overall demand will generate the new leasing renewal spreads that we've seen over the last couple of years.

Thank you very much.

Thank you. Our next question is from Floris van Dijkum with Compass Point. Please proceed with your question. Floris, is your line on mute?

Floris. It looks like we lost Floris.

Our next question is from Craig Mailman with Citigroup. Please proceed with your question.

Hi guys. Just going back to maybe the reinvestments here. You guys have plenty of cash after the dividend. I'm just trying to be curious at this point. What is the level of anchor box reinvestment you guys think you need to do just considering what may be vacant today and after you guys were spared some of the recent Macy's closings? As you look at the portfolio today, what do you think over the next two to three years, you could ultimately get back and have to retenant and just talked a lot about how the leasing environment is. What's the outlook for retenanting those boxes today? What's the targeted kind of make-up there, and is luxury still doing enough to be the primary kind of backfill option?

Well, on the department store boxes, I don't have a precise number off the top of my head, but we actually don't have a ton of work to do. We have a handful of boxes that we own that are in process. For instance, we had a former Sears store that we tore down in the Brea project, which is now under construction. So, the actual stores we own are probably under 10 at this point that are either currently under construction or in process. Very small amounts, less than might be expected. The ones that we felt Transformco still owns and so does Seritage. We haven't negotiated any deals yet because the bid and ask have been too great. I don't think luxury is going to be the dominant theme for most of these mixed-use boxes. I think a lot of it will be a continuation of mixed-use development; if it's in a closed mall, opening with restaurants and entertainment has worked well for us. We have several projects under construction or about to be under construction, but we don't have that existing pipe until we make more deals to buy some of the boxes back. It's not as big as you might think.

Great, thank you.

Craig, I hope you recover before the Citi Conference. I appreciate it.

Yes, hoping to be on the mend by then. Thanks, David.

You will.

Our next question is from Vince Tibone with Green Street. Please proceed with your question.

Hi, good evening. Could you help me better understand how much incremental FFO we should expect in '24 from development and redevelopment projects that stabilized either later in '23 or are slated to be finished in '24? Any color to help us better understand the timing of incremental NOI and FFO from all the development activities would be helpful.

Yes. In fact, it’s interesting that you mention this; I think in '24 we're taking a step back. For example, we have a wing connected to the former Sears department store that we're redeveloping. We'll have some outdoor shops, Dick's Sporting Goods, and a Lifetime Fitness resort, plus roughly 350 apartments or so, but that wing leading to Sears will not open until the end of '24, at the best. Most of this redevelopment will impact '25 - '26. The one that will see a benefit this year is probably the six developments we opened in '23. That's the one that would have the most meaningful impact. But most of the redevelopment is more of a '25 - '26 story.

No, that's really helpful. I mean, in terms of the $1.3 billion that's active today, plus the $800 million you're going to start, what's the fair assumption for '25 - '26 in terms of stabilization? Is $500 million stabilizing annually at 7% - 8% yield a fair assumption, or something to consider?

No, I appreciate that. If you don’t include the ground-up new development, I would say probably about $600 million to $800 million a year. Our goal would be to bring that in above eight. Obviously, if it is multifamily, you can still create value at a lower yield than that, and in some cases, we're building at less than that, like for instance in Brea and the ones at the former Northgate Mall where we're about to start construction, which will be at sub-eight. So, it may come in around eight, but if you're targeting everything else, we would hope to be above that.

Thank you. That's all really helpful color. I appreciate it.

Thank you.

Our next question is from Ron Kamdem with Morgan Stanley. Please proceed with your question.

Great. Just a two-parter really quickly. Starting with the core NOI, just in '24, can you just touch on the tourist centers and how much recovery there is and how much upside for volume in '24, as well as the variable to fixed conversion? Just trying to get a sense of how much of a tailwind that is to the core. And then on the sort of other platform investments, maybe could you just touch on what seasonality should we be thinking about between the first part of the year and Q4? Thanks so much.

Sure, Brian will join in here. I'll just give you some thoughts, and then hopefully, Brian will agree or correct. I would say we saw in '23 a decent bounce-back from the tourist centers. A great example: in Q4, the Woodbury Q4 sales were around $350 million. To me, that’s a significant indicator of bounce-back and obviously the highest fourth-quarter sales we've had in quite some time. So, I would say generally we’re seeing a really good bounce-back at the tourist centers. I don't think we will see the Chinese market return the same way it did pre-pandemic. Our tourist centers did outperform our overall sales for the portfolio in '23 on average, so good bounce-back all around. As for your variable rent, we're still seeing that as a lower percent of revenue; the majority is increasing our way. Our domestic operations saw $0.28 of improvement Q-over-Q, which gives you a leading barometer; we're still working it down and getting it into our base rent. Your final question on OPI: losses are flat in Q1, increasing in Q2 and Q3 will be similar but slightly better; Q2 generally sees a little better results than Q3.

All right, got it.

Thanks so much.

Thanks, Ron.

Thank you. Our next question is from Greg McGinniss with Scotiabank. Please proceed with your question.

Hi, good evening, David. I just wanted to dig into the guidance a bit and the OPI that you cited in particular. Is it fair to assume that the $0.10 to $0.15 includes gains or monetization similar to last year, or is it just operations expected to improve from the minus $0.02 contribution to FFO in 2023?

Yes, thank you for that question, and the answer is no; that's pure operations. No one-timers or sale gains or any of that are included. We had a tough '23 in our OPI. We didn't meet our budgeted expectations, and we did not meet them mid-year when we re-calibrated. The team in OPI is making significant efforts within their business to improve performance. The overriding theme we should look at is that the lower-income consumers are still dealing with higher costs even though inflation has subsided. Their income is increasing, but it’s not where they need it to be, and we need to address that as a country.

So just to clarify.

Yes, hopefully I answered well. So no one-time gains are in there, and we are conservative. We're kind of getting OPI to a level where it was before the extraordinary years of '21 and '22. This is more stabilized.

So, just to clarify, so there's going to be some improvements in operations that are driving this year-over-year growth. What does that imply from an operational standpoint for your other tenants? How are those retailers performing, and are they going to be able to make the same sort of operational changes to benefit income?

Well, you're just emphasizing our tenant base now. I think our retailers generally and the credit is in good shape. There are always one, two, or three tenants we’re somewhat concerned about. They understand bricks-and-mortar is important, and they're reinvesting in their stores and spending less on technology; this is beneficial for us. They're also focused on return on investment in stores. In summary, I'm very comfortable with the retailers with whom we are doing business, though a few will have to work through their issues.

Great, thanks for the color, David.

Sure, thank you.

Our next question is from Hong Zhang with JPMorgan. Please proceed with your question.

Yes, hi guys. I guess I was wondering if you could quantify the magnitude of the development drag this year. It seems like you saw a very strong rent and occupancy growth in the Taubman portfolio in the fourth quarter. Could you measure what drove that and what are your expectations for that portfolio this year as well?

Just on Taubman, our expectations on comp NOI are roughly in excess of 3%. Both portfolios drove strong performance due to supply and demand, multi-retail sales, and operational excellence. We experienced some drag from redevelopment, but it’s not a material concern. The better the tenant, the better their build-out tends to be. Rents can take six to nine months for the build-out, and for restaurants, it may take even close to a year. We have at least 100 new restaurants coming over the next year. It is a lengthy process getting permits. For example, we had a project in the Bay Area where getting gas utilities took time due to a new ordinance. Lastly, I would estimate that downtime costs us approximately $0.10 to $0.20 a year.

Got it, thank you.

Thank you.

Our next question is from Ki Bin Kim with Truist Securities. Please proceed with your question.

Thank you. Just a couple of questions. First, your operating expenses were down in 4Q. I'm curious what drove that and if that's sustainable.

Yes, we did see some savings year-over-year. There was some seasonality to it; the weather was a bit lighter. But yes, we do expect it's sustainable.

Okay, and on the ABG partial sale, was it down around valuation versus the $18 billion mark previously?

Down.

Remember, that was the enterprise value; we added some debt to that. So, just when you say $18 billion, that’s enterprise value as opposed to equity value.

Okay, thank you.

Sure, no problem.

Our next question is from Haendel St. Juste with Mizuho Securities. Please proceed with your question.

Hi, good evening out there.

How are you?

I'm doing great, sir. Hope you're well too. Question I have is on your side, but not yet opened pipeline. I think last quarter you previously outlined is about 200 basis points of embedded occupancy from that side but not yet open pipeline. So maybe you can give us an update on where that stands today. And then also, what’s embedded in the guide for bad debt and lease term fees this year? Thank you.

So, Simon opens a little bit north of 200 basis points. We've been kind of holding that; we open stores and find new leases. So, we're holding steady around 200 basis points. We are assuming a normal level of bad debt, which is about 25 basis points to total revenue would be our expectation on that.

Lease term fees?

A normal rate of lease term fees. I think the answer for the year is about $30 million.

Thank you.

Okay, thank you. Operator.

Our next question is from Juan Sanabria with BMO Capital Markets. Please proceed with your question.

Hi, good evening. Just a quick one for me; I’m curious on the current state of affairs with Jamestown, and how that relationship is progressing. There’s more talk about mixed-use, so just curious if there’s anything in the works or in the planning stages that you’re doing with them, and how you’re thinking about that particular relationship. Thank you.

Yes, thank you. We haven't quite had the year under our belt, but I'm very pleased with the relationship and partnership. We continue to look at opportunities both within our pipeline and obviously what they do on behalf of investors. A lot of good feedback is going both ways, and we have one development project we’re working on together, and other than that, it's mostly a strategic discussion.

Thank you.

Sure.

There are no further questions at this time. I'd like to hand the floor back over to the management for closing comments.

Okay. Thank you, and obviously, Tom and Brian, are available. We really appreciate everybody's participation. Talk to you soon.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.