Greetings and welcome to the Simon Property Group Fourth Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A 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, Tom Ward. Thank you. You may begin.

Thank you, Matt, and thank you all for joining us this evening. Presenting on today's call are David Simon, Chairman, Chief Executive Officer and President; 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 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 of you 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 am pleased to introduce David Simon.

Good evening. I'm pleased with our financial and operational results in the fourth quarter, concluding an exceptional year for our company. We reported record total funds from operation of $4.9 billion or $12.99 per share. We generated $4.6 billion in real estate FFO or $12.24 per share, which was growth of 3.9% year-over-year. We returned a record of more than $3 billion to shareholders in cash dividends, and now we have paid approximately $45 billion to shareholders in dividends over our history as a public company. We saw record leasing and retail sales volume and occupancy gains for the year. We completed last week the acquisition of the mall, two well-known luxury outlet centers in Italy from Kering. We look forward to adding these high-quality luxury assets into our global portfolio while continuing to build upon their success. We opened a new fully leased premium outlet in Tulsa, Oklahoma, and we completed 16 significant redevelopment projects during the year. Development and redevelopment opportunities are growing within our portfolio. We delevered our A-rated balance sheet, providing additional capacity and flexibility to fund future growth. I'm now going to turn it over to Brian, who will cover our fourth quarter results in more detail and provide our outlook for 2025.

Thank you, David. Real estate FFO was $3.35 per share in the fourth quarter compared to $3.23 in the prior year, representing 3.7% growth. Domestic and international operations had a very good quarter and contributed $0.18 of growth. During the quarter, we sold assets that resulted in a tax benefit, which partially offset a prior tax expense from our ABG sale and essentially offset a write-off of pre-development costs associated with a joint venture development project in California. Leasing momentum continued across the portfolio. We signed more than 1,500 leases for 6.1 million square feet in the quarter. For the year, we signed a record 5,500 leases for more than 21 million square feet. Approximately 25% of our leasing activity for the year were new deals. Malls and Outlet occupancy at the end of the fourth quarter was 96.5%, an increase of 70 basis points compared to the prior year. Our year-end occupancy is the highest level over the last eight years. The Mills occupancy was 98.8%, an increase of 1% and is at a record level. Average base minimum rent for the Malls and Outlets increased 2.5% year-over-year and the Mills increased 4.3%. Retailer sales per square foot was $739 for the year. Strong revenue growth across our businesses, combined with expense discipline resulted in a 100 basis point increase year-over-year in our industry-leading operating margin. Our occupancy cost at the end of the year was 13%. Domestic NOI increased 4.4% year-over-year for the quarter and 4.7% for the year. Portfolio NOI, which includes our international properties at a constant currency, grew 4.5% for the quarter and 4.6% for the year. Fourth quarter funds from operation were $1.39 billion or $3.68 per share compared to $1.38 billion or $3.69 per share last year. Fourth quarter results include $0.20 per share of non-cash after-tax gain from the combination of JCPenney and SPARC Group. The mark-to-market fair-value of Klepierre's exchangeable bonds increased year-over-year, which offset a lower contribution from OPI operations. As a reminder, the prior year's results included $0.33 per share in gain from the sale of part of our interest in ABG last year. Turning to new development and redevelopment. This year, we will open our first premium outlets in Jakarta, Indonesia in March and expect to begin construction on four to five mixed-use projects throughout the year. We expect to fund these redevelopments and mixed-use projects with our internally generated cash flow of over $1.5 billion after our dividend payments. Other platform investments, JCPenney and SPARC Group combined to form a portfolio of iconic retailer banners called Catalyst brands. Catalyst brings together SPARC's brands, Aeropostale, Brooks Brothers, Eddie Bauer, Lucky, and Nautica with JCPenney in its exclusive private brands. Catalyst sold Reebok in early January and is currently evaluating strategic options for Forever 21. We view the Catalyst transaction as a positive development that will create significant synergies with a solid balance sheet that will enable the company to drive EBITDA growth. Catalyst shareholders include Simon, Brookfield, Authentic Brands Groups, and Shein. Turning to the balance sheet. During 2024, we completed $11 billion in financing activities, including issuing $1 billion in senior notes with a 10-year term and a 4.75% interest rate. We recasted our $3.5 billion revolving credit facility with maturity extended to January of 2030 and no change in pricing or terms, and completed over $6 billion of secured loan refinancing and extensions. Lastly, we delevered our balance sheet by approximately $1.5 billion in the year and ended the year at 5.2 times net debt to EBITDA. Our A-rated balance sheet provides a distinct advantage with more than $10 billion of liquidity at year-end. Additionally, today, relative to our dividend, we announced a dividend of $2.10 per share for the first quarter, a year-over-year increase of 7.7%. The dividend is payable on March 31st. Now moving on to our 2025 guidance. Our real estate FFO guidance range is $12.40 to $12.65 per share. Our guidance reflects the following assumptions: domestic property NOI growth of at least 3%, increased net interest expense compared to 2024 of between $0.25 to $0.30 per share, reflecting current market interest rates and projected cash balances compared to 2024. Lastly, our diluted share count of approximately 377 million shares and units outstanding, due to the recent Catalyst brands transaction, we will not include Catalyst guidance at this time. We expect there will be significant savings and synergies from the combination that will be coupled with potential restructuring costs. We expect Catalyst will generate positive EBITDA in fiscal 2025 and roughly breakeven FFO as they work through the combination. With that, thank you. And David and I are now available for your questions.

Thank you. We will now begin the question-and-answer session. Our first question is from Jeff Spector from Bank of America. Please proceed.

Great. Thank you. I know you'll get through some of the numbers through some of the other questions. I wanted to focus on some of the initiatives you have to bring people to the mall. I know you have the Tomorrow Stars, the Meet Me @themall when your traffic was up at malls, premium outlets. Can you talk a little bit more about some of the programs initiatives that you're doing to again bring the shopper to the mall and how did those programs go for the holiday season? Thank you.

Well, listen, I think we're leaders in this area. Our national advertising campaign is all about talking about how it's fun to go to the mall and hang out, just like in the 80s and 90s we had a very good reception to it. We rebranded Simon Premium Outlets to ShopSimon. We're in the midst of creating our loyalty program. So and then obviously we've got events, thousands of events that drive traffic through the year, whether it's breast cancer awareness programs, Valentine's Day, basically every major event that occurs in the US we try to drive an event around that Easter down the road. So I couldn't be prouder of our marketing efforts. They're very digital, they're very fun, they use new media in a lot of ways. And I just expect more and more. More importantly, we're seeing a return on investment, and we've got the data to prove that. And not that our peer group is wide and deep, but to the extent that it is, there's nobody doing more when it comes to data, digital commerce with ShopSimon, marketing, and events. You put it all together where leaps and bounds compared to what else is out there.

Thank you.

Yes, thanks. Good evening. David, you guys obviously had a great year with 21 million square feet of leasing and occupancy up. Given where you're sitting on the occupancy side, I'm just curious how the discussions your leasing team are having with the retailers is kind of shifting and maybe talk about the pricing power and how that's kind of returned to the mall for the A's. And I guess to tie that into NOI growth, you've talked about greater than 3%, but you've certainly beaten 4% for the last three years in a row. So what are we missing on the 3% front and maybe just comment on pricing power. Thank you.

Let me discuss the 3% aspect. As we did last year, we budget for flat sales, although I'm not entirely sure why, but it’s our approach. This conservative estimate helps us in the event of any sales growth like we experienced this year, particularly among the retailers that are significant to us, which leads to increased overage rent and boosts our NOI growth. We aim to remain conservative. The US economy shows positive momentum, and we anticipate contributing to that. I prefer not to use the term pricing power; instead, we have strong relationships with our retailers that enable us to attract new business continuously. New retailers and applications are approaching us regularly, allowing us to adjust and improve our tenant mix. This year, around 25% of our leases were new. A significant factor in our performance is our ability to replace underperforming retailers with those that can generate better sales, which in turn drives rent growth. I consider this more about enhancing our mix rather than possessing pricing power. Moreover, as I mentioned in the last call, we see growth opportunities, particularly in the B segment where we are planning strategic investments for 2025 and 2026. To wrap up your question, while it’s challenging to predict due to fluctuations and potential tenant bankruptcies, we still believe there's potential for increased occupancy. We're not yet at our peak occupancy of 97.1% from 2014. I’ve communicated this to my leasing team: I would like us to reach a record high comparable to 2014, after which we can take a moment to reflect.

Good evening. Thanks a lot for taking my question. Maybe just following off the last one, right, the NOI expectation dropped from 4% last year and for the last several years down to 3%. So bridging the gap between those expectations, right, it sounds like some of that is retail sales, but it sounds like occupancy, there is still upside, but is there the same magnitude of upside? And then also are you taking into account any sort of tenant bankruptcies or credit reserve in that as well, which is driving that by 100 basis points? Thanks.

Hey, Michael, it's Brian. So I think first, we've historically put out at least 3% at the beginning of every year, including last year, and then have subsequently beat that, which we've repeated here. I think you just heard David talk about the overage component, we budgeted, assume sales were flat, so there is a negative component mathematically to overage in the subsequent year. You heard us just talk about mix. And so as we swap out tenants for new tenants, there is downtime specifically associated with our full-price business as we build out those stores. Last thing I would mention, you just mentioned bad debt. Our numbers in '25 take into consideration our historical approach to bad debt. We did slightly better than that in 2024, but we've taken an appropriate expectation into '25 relative to our standard approach. So those are the three major drivers that would get you back to a 3% number for, again, as a baseline starting in '25.

Thanks. It's Nick Joseph here with Craig. David, I just want to touch on the potential impact for tariffs. Obviously, the news keeps changing. But just broadly what are you hearing from your retailers? How is it impacting their business and kind of the uncertainty there and the potential impact of the de-minimis exemption going away?

It's interesting to note that we don’t know where all retailers source their goods. For instance, Catalyst sources only 20% of its products from China. Their perspective is that they might pass some costs onto consumers while hoping suppliers will manage their cost of goods sold more effectively. Many retailers have shifted production out of China in recent years. Fortunately, our biggest exposure was in shoes, particularly with Reebok, which we sold in January. This change hasn’t really impacted our daily decision-making, and the overall effect on retailers has been relatively minor. It would greatly benefit American and non-Chinese retailers to eliminate the de-minimis rule that currently exempts tariffs on packages over $800. This rule creates an uneven playing field, favoring those who ship in bulk while making it more costly for others. Congress and the President are looking into this issue, and if action is taken, it could significantly help retailers who do not intentionally aim to keep their shipments below the $800 limit. Additionally, this change would be more environmentally friendly, save on packaging costs, and ultimately be beneficial for the country. I hope Congress or the President takes steps to implement this, as its impact will be more significant than any discussions about tariffs.

That's very helpful. Thank you.

Hey, thanks for taking my question. Good to hear your voice, David. A couple of questions, but I guess I'm going to focus on your latest acquisition in Italy. I note that Kering just snuck into your top 10 list this past quarter prior to the acquisition. I'm curious if you can talk about that acquisition, the returns that you expect to achieve, and how you might be able to manage those assets going forward? And also what would Kering's percentage have been? Had they been included? I guess I know that your top 10 is domestic only, but how much of an impact would that have on the, if you were to include Kering's exposure in Europe as well?

You'll see in our next supplement that the figures will increase. We're under a confidentiality agreement regarding the details apart from the price. As you know, we have been very selective with our acquisitions, focusing only on top-tier opportunities at the right price, and this follows that strategy flawlessly. Kering will continue to be a long-term tenant; they have historically had a competent team managing this for them. We've taken over that team and will provide them with strategic guidance, believing there is potential for growth in the business. It will be beneficial for our net asset value and earnings as well. This is something we wanted to pursue years ago, but they weren't ready at the time. We're incredibly excited about this opportunity, especially given the renaissance in Italy, which is experiencing positive growth in the EU. We aim to make deals that are acquired at the right price, enhancing our net asset value and earnings, while ensuring we partner with high-quality retailers. We couldn't have chosen a better asset.

Thanks, David.

Thank you, Floris.

Hey, good evening. David, following up on your comment regarding the focus on B Mall investments in 2025, '26, are you able to talk about the types of investments that you make in those malls, whether it differs from how you would approach investing in an A Mall? And then any detail on the magnitude of those investments and expected return? Thanks.

I'll just be very generic. Brian can lay it out for you later. But to me, it's a whole combination of things. These are important assets in the communities. We've been focused on the bigger assets historically. So it's a combination of adding boxes, updating the look, feel of the place, restaurants, and tenants, everyone changes a little bit differently. But I'll just take Smith Haven as an example. We've got to be careful because I don't know if I can announce it even though the lease is signed. So I think an announcement is coming. The business in basically Eastern Long Island where we're going to update, renovate the property, add a great retailer in a huge box. We just added Primark. A hospital just opened up their one of their health facilities and that will probably be about a 12% return and over the next couple of years and it will be a renovated, rejuvenated asset that because of all the progress we've made in the bigger ones, we're able to kind of reenergize our focus on an asset like that. But there the list of those is long. So Brian can go through it, but that's just one kind of jumps to top of mind and to my team I'm supposed to see a press release on that, but I haven't seen it so please move that along.

Thank you.

Good evening, David. It's great to hear from you. I'm sure the team in Smithtown will appreciate the spending. I have a question regarding your guidance for 2025. It appears to be much better than expected, despite the challenges with interest expenses that Brian mentioned. My question is whether this reflects a return to the strong internal growth seen in the old Simon days before the pandemic, or if it’s primarily about eliminating future OPI drag. I'm trying to determine if this improvement is just due to factors outside of leases taking effect, or if the core portfolio is genuinely accelerating, bringing us back to pre-pandemic performance when the core portfolio was thriving.

The $12.40 to $12.65 figure does not include Catalyst. The other investments in OPI are minor. They may not be the best measure of Funds From Operations, but they still impact our numbers since one is an asset management company and the other is an e-commerce platform. While FFO isn't the most important metric for these investments, they still factor into our overall performance. Catalyst is outside of that range. I prefer not to use the term old, but yes, we are expanding the portfolio. We’ve mentioned at least a 3% growth target for the last couple of years, possibly even three years, and we hope to exceed that. This growth is driven by leasing, operational margins, events, and initiatives like Simon Brand Ventures and restaurant placements. Overall, we feel we’ve been performing well, especially after recovering from the shutdowns imposed by state governments, and we've continued to see over 4% growth despite guiding for 3%. As this year unfolds, we believe we have several positive factors, including a strong, leasing-focused team. We see potential for growth throughout the portfolio, especially in our core properties. We're committed to making smart deals and maintaining a strong balance sheet, focusing on leasing. Additionally, Catalyst is entering a crucial six-month period, and while it will surely achieve positive EBITDA, we’ll have more clarity on FFO as the year goes on. Just to clarify, Catalyst isn't included in our guided range of $12.40 to $12.65.

Hi. Great to hear your voice, David, as well. Just a question on the leasing. It looks like about 5% is still month-to-month. I think that's still kind of above where you were pre-COVID in 2019. So just curious on how you think that will evolve over time and is just like a second or part B of a question. How has the SNO pipeline changed if at all over time? And could you just give us where it is as of year-end please?

Hey, Juan, it's Brian. SNO at the year-end was about 250 basis points as we brought occupancy on in the fourth quarter and you saw that in the numbers. Month-to-month will as we move leases through our leasing process, ultimately, not everything gets signed at the same time. So we put that into that category. Nothing there. We're in the process of renewals in year-end leasing. And so ultimately, we would expect that number to come down throughout the year.

I just would say we're slightly for the life of me, I don't understand why it takes so long. But put that aside, we do get our leases signed up and we are slightly ahead of where we were last year on our renewals.

Hi. Good evening. I have a few questions related to the mixed-use projects you mentioned earlier. So what is the expected pro-rata spend on the four to five mixed-use projects to break ground in '25? And also like what's the common structure? Are you doing this primarily on your own balance sheet or using joint venture partners for the non-retail components? And then also is it mostly residential or like where are some of the other non-retail property types in there? Sorry for couple of questions.

Yes, I apologize for interrupting. The expected spend will be around $400 million to $500 million. Looking at the projects we anticipate starting this year, they are all joint ventures and will include a mix of residential, hotels, and office spaces. For instance, we plan to start a hotel in Roosevelt Field, a large residential project in Brea, an office at Clearfork, and we are expanding a hotel at The Domain in Austin, Texas. All of these projects are pretty much planned out. I expect to add to this list this year. Currently, we have Northgate under construction and we aim to accelerate any planning we have in California. However, I am quite concerned about construction costs there due to the recent events in Southern California. We are considering a couple of projects that we might expedite due to this situation, but the ones mentioned are largely confirmed. All these projects are joint ventures, although that may change.

No, that's really helpful. If I can maybe squeeze in one more clarification. When you say joint ventures like is Simon typically like a 10% or 20% partner in the non-retail portion or are you an 80% owner of the non-retail? Just trying to get a sense of appetite for non-retail?

Yes. That's usually 50-50.

Yes, hi. I know you can't talk about the carrying pricing, but what's your sense as to how pricing on comparable quality us assets would compare today? Do you think it would be similar, stronger, or weaker?

It's a good question and I'm trying to think if I can answer it. I'll try to be artful. I would say let me do a macro make a macro statement about is what usually macro or the even though properties are powerful and comparable. They'll tend to have higher cap rates than they would to the US and obviously that calculus is important as to how we think about things.

Got it. Okay.

Hi, everyone. Maybe just another question on kind of acquisitions or capital allocation generally, but it sounds like you were targeting the Kering acquisition for a while and I imagine there are many other deals that you've assessed over the past couple of years. So I was wondering if you could talk about the rest of the acquisition properties that might be out there that could be attractive to you and how you're balancing perhaps buying those versus your stock versus more redevelopment versus increasing the dividend, realizing that you're kind of doing a little bit of all of that.

Yes, listen, I would say, Caitlin that we're not, there's no big deal that is on the drawing board. So we're still interested in a few high-quality transactions, we're working on them. There's no guarantee. But I think since there's no big deal, we're going to do it all, and that's kind of my philosophy right now. So we may if there were a big deal to do, you can define big deal, but several billion dollars, billions of dollars, let's say, not then we might have to readjust our thinking. But I think we're going to, the mindset right now is we can do it all. Remember, we delevered, and so we're still working on a couple of high-quality transactions, but they're not like they're not going to tip the scales from a leverage or financial consequence or capacity point of view. And as you know, development, redevelopment is a three-year product, just you build a house, you buy a house, it's one thing you need to build it, you got three years to stroke the check every year. So for so or every month and unless you have a really nice contractor. So honestly, I think, we're going to do it all, redevelop. We don't mind buying our stock back. And obviously, subject to market conditions, we have the capacity to do so. And then I think redevelopment, development, we announced Nashville. We're really excited about that land. It's in the growth corridor, it's on the interstate. Great, great ingress, egress, visibility, terrific long-term 100-acre site. So we got stuff going on in Asia on development. Nothing really on new development in Europe. So just maybe a couple of things here and there, but we're also looking to expand some of our better assets like a Woodbury or a Toronto Premium Outlet or Desert Hills, etc. So that stuff is high priority. So right now, obviously, things change. But right now, we're planning to keep operating the same way we're operating. A little bit of everything.

Hey, there, good evening. Thanks for taking my question and good to hear you, David. My question, I guess, I wanted to go back a bit more to your plan on investing a bit more on your B assets here. I guess I'm curious how you're able to generate the 12% returns versus, I think the 8% to 9% we've seen in more of your A projects here the last couple of years? Is it the lower rent basis? Are you seeing, I guess, stronger any sense of stronger demand for space in any of those B Malls? And is 12% more of an anomaly or more than norm for these B Mall investments you're making? Thanks.

Right now, we have little to no income. When we provide a return figure, we typically exclude any existing income. In this situation, having an empty space means there's no existing income, which notably impacts the incremental return. This is the main factor. The 12% I mentioned relates to what we observe at Smith Haven, but it's not applicable to every case. In many instances, we are dealing with empty spaces or boxes, and without an existing retailer, there’s no offset against it. Then, it simply relates to the capital we need to invest to make it happen.

Yes, hi. Regarding the comment that you buy only really good stuff after Kering, do you see more opportunities abroad or domestically?

I would say mostly domestic, just because it's got to be really unique, which is what we saw the mall, which is rare. And again, as I mentioned earlier, I think I talked to them, hard to remember, but it was definitely a couple of years pre-COVID. So I just think there are very few jewels like that in Europe that make sense with what we do in Europe, if you understand what I'm saying. So we're not going to buy a mall in Europe, just to have one mall in Europe. So the outlet business, we view it a little differently. So I would say by, because of that, it's going to be really unique and more the domestic, let's say more domestic.

Thanks. And then how are you feeling about the consumer right now and high versus low-end US versus Europe?

I think they are very cautious in Europe. I am still nervous about the lower-end consumer in the US, but I feel pretty confident about the upper-income segment. There are a lot of fluctuations happening, so it's difficult to predict, but I remain concerned about the lower end while being optimistic about the upper to high-end consumer.

Great. Hey, if we could just go back to sort of the strong performance last year. Wondering if we could dig in a little bit between sort of the outlets and the mall business, any sort of call out what drove the performance? Is it traffic? Is it higher ticket prices so on and so forth? And the second part of the question is really, are you seeing any impact from the strong dollar on tourist centers? Thanks.

So, Ron, it's Brian. There wasn't a big bifurcation kind of between asset classes. I think all three platforms performed exceedingly well. You did see the outlet in the mills, which generally skew a little bit more value oriented to outperform a little bit into the fourth quarter. It wasn't really kind of an anomaly just kind of expected performance. I mean, we've not seen any real-time impact yet to the tourist-oriented centers, but we're February 4th. So still early in the year, but we would expect to see or if we continue to see dollar strength, we can see some impact over the course of the year, certainly in our translations of our foreign earnings.

And I would just say when we talk about reenergizing on the assets. Don't just think malls, think outlets, think a few of our mills. So it's a wide portfolio focus, not just when people talk B, they always think malls, but for us it's across our entire domestic portfolio. Okay. Thank you, everybody, and look forward to talking in the future. Thank you.

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