Earnings Call Transcript - SPG Q4 2022

Operator, Operator

Greetings. Welcome to the Simon Property Group Fourth Quarter 2022 Earnings Conference Call. Please note that this conference is being recorded. I will now turn the conference over to your host, Tom Ward. You may begin.

Tom Ward, Host

Thank you, Sammy. Good evening from Atlanta. 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 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 afternoon will be limited to 1 hour. For those who would like to participate in the question-and-answer session, we ask that you please respect our request to limit yourself to 1 question. I'm pleased to introduce David Simon.

David Simon, CEO

Good evening from Phipps Plaza, where we recently completed our transformation, including a new office building, a new Nobu Hotel and a Life Time resort. I'm pleased to report our fourth quarter and full year results. We generated approximately $4.5 billion in FFO in 2022 or $11.95 per share. On a comparable basis, full year FFO per share was $11.87, an increase of 3.8% year-over-year. We returned approximately $2.8 billion to shareholders in dividends and shares. Total dividends today paid since our IPO now total approximately $39 billion. We invested approximately $1 billion, including accretive development projects and expanding our other investment platform into the growing asset and investment management businesses with our Jamestown partnership. These consistent strong results are a testament to the quality of our portfolio, a relentless focus on operational and cost structure, disciplined capital allocation and our team's commitment to our shoppers and communities. Fourth quarter funds from operations were $1.27 billion or $3.40 per share. Included in the fourth quarter results was a net gain of $0.25 per share, principally from the sale of our interest in the Eddie Bauer licensing JV in exchange for additional equity ownership in Authentic Brands Group, Authentic. We now own 12% of Authentic valued at approximately $1.5 billion. Let me walk through some variances for this quarter compared to Q4 of 2021. Our domestic operations had a very good quarter, contributing $0.23 of growth, driven primarily by higher rental income with some lower operating expenses. These positive contributions were partially offset by higher interest expense of $0.03 and a $0.15 lower contribution from our other platform investments. 2021 was a great year for our retailers. However, in 2022, Forever 21 and JCPenney were affected by inflationary pressures and consumers reducing their spending. Despite not achieving the same profitability that we did in 2021, we are pleased with how we and the management teams dealt with the unanticipated external environment. Turning to domestic property NOI, we increased 5.8% year-over-year for the quarter and 4.8% for the year. Portfolio NOI, which includes our international properties at constant currency, grew 6.3% for the quarter and 5.7% for the year. Occupancy for malls and outlets at the end of the fourth quarter was 94.9%, an increase of 150 basis points compared to the prior year and an increase of 40 basis points sequentially. Renewals occupancy was 98.2%, and TRG was 94.5%. Average base minimum rent was $55.13 per foot, an increase of 2.3% year-over-year. For the year, we signed 4,100 leases for more than 14 million square feet. Over 2 years, we've now signed 8,000 leases for more than 29 million square feet, and we have a significant number of leases in our pipeline that will open in late 2023 and 2024. Reported retailer sales momentum continued. We reached another record in the fourth quarter at $753 per square foot with the malls and outlets combined, an increase of 6% year-over-year. All platforms achieved record sales levels, including the mills at $679 per square foot, which was a 5% increase. TRG reached $1,095 per square foot, an 11% increase, and our occupancy at the end of the fourth quarter was 12%. We opened a new development in 2022, our 10th premium outlet in Japan. Construction continues on our new outlet in Normandy, France, west of Paris. This will be our second outlet in France and our 35th international outlet. Our international outlet platform is a hidden jewel for SPG. As a frame of reference, it is bigger and much more profitable with much higher sales per square foot than another public company's portfolio. We completed 14 redevelopments, and we will complete another major redevelopment project this year at some of our most productive properties. In addition, we expect to begin construction this year on 6 to 8 mixed-use projects. All of this will be funded with our internally generated cash flow. Now turning to other platform investments in the fourth quarter, it contributed $0.23 per share in FFO compared to $0.38 in the prior year period. For the year, OPI contributed $0.64 in FFO compared to $1.07 in the prior year. We are pleased with the contribution from our OPI investments, especially given our minimal cash investment in these companies. Turning to the balance sheet, we completed refinancing on 20 property mortgages for a total of $2.3 billion at an average interest rate of 5.33%. Our A-rated balance sheet is as strong as ever. Our fixed coverage ratio is 4.8x, and we ended the year with approximately $7.8 billion of liquidity. In 2022, we paid approximately $2.6 billion of common stock dividends in cash. We announced $1.80 per share this quarter, which is a 9% increase over the same period last year. The dividend is payable at the end of this quarter, on March 31. We also repurchased 1.8 million shares of our common stock at an average purchase price of $98.57 in 2022. Moving on to '23, our comparable FFO guidance is $11.70 to $11.95 per share. Our guidance reflects the following assumptions: domestic property NOI growth of at least 2%; increased interest expense compared to 2022 of approximately $0.30 to $0.35 per share, reflecting current market interest rates on both fixed and variable debt assumptions; similar OPI investment contribution compared to 2022; the continuing impact of the strong U.S. dollar versus the euro and the yen; no significant acquisition or disposition activity; and a diluted share count of approximately 374 million shares. To conclude, we had another excellent year, effectively navigating external headwinds that included rising interest rates, a strong U.S. dollar, inflation and a somewhat softening economy. We have consistently posted industry-leading results through our hard work, innovation, great people and great assets, and we continue to be excited about our plans for 2023. If you come to Atlanta, you will see what we're doing, and it's a great example of the future growth prospects of our company. And we will now allow for Q&A. Thank you.

Operator, Operator

Our first question comes from Ronald Kamdem with Morgan Stanley.

Ronald Kamdem, Analyst

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

David Simon, CEO

I believe it's a combination of several factors. We have rent increases and occupancy gains. It's important to highlight that we have many openings planned for the latter half of 2023 and the start of 2024. Therefore, we won't see the full impact from those tenants until they reach a steady state in 2024. The reason for this is that we have a strong group of retailers moving into these spaces, and it takes time for them to establish their high-quality stores. Additionally, we are seeing occupancy gains and increases in rental spreads, along with a decrease in our temporary tenant income as we fill spaces with long-term leases. Overall, these developments are based on fairly stable sales expectations. Last year, we projected up to 2% growth, but this year we exceeded that with a total growth of around 5% for our domestic properties. We are optimistic about future performance, but we still need to make some assumptions, particularly regarding sales, which remains a significant unknown.

Operator, Operator

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

Steve Sakwa, Analyst

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

David Simon, CEO

Well, we have a unique relationship with Authentic. That's a very important partnership, both as a big shareholder, but also we're 50% owners together, 50% for us, 50% for Authentic in SPARC. And we have a different ownership structure with JCPenney. We don't really have any plans for SPARC to buy additional retailers. We're very opportunistic on that. We had a very busy year last year with Reebok, where SPARC became the operating domestic partner for Reebok. It was a very complicated deal. As you remember, we've had depressed earnings. We mentioned that to you early last year, that it did depress earnings because we knew we had losses to occur this year. So hopefully, we'll be past that this year. But we really don't have any plans to acquire anything. If we do, it will be opportunistic. Most of our work has been with on the bankruptcy front or where somebody wanted to unload a business. But generally, there's not a lot of distress in retail right now. I'm not saying it won't develop in the year. But there are some brands out there that are in trouble that obviously people know about. But we don't see playing in any of those situations.

Operator, Operator

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

Derek Johnston, Analyst

Can we get a more granular update on Phipps Plaza? The repositioning has been open for, I'd say most, or at least part of Q4. So I guess how is it tracking versus plan? What changes in traffic are you seeing? Or any notable changes in in-line rents? Any dates would be appreciated. And then I guess lastly, the project seems to have increased your plan for accelerating some other mixed-use endeavors, I guess, with Jamestown. Any more information would be helpful.

David Simon, CEO

The hotel officially opened at the end of October and into November, and it’s still quite new. The first office tenant just moved in around mid-January. We still have a significant amount of leasing to accomplish. Prior to our investment, Phipps was generating low 20s in net operating income, and we anticipate it will stabilize around 60. We expect to have invested approximately $350 million throughout this process. We tend to avoid granular details since we’re a large company, but we have effectively increased the net operating income by about $35 million. This location used to be a Belk department store, which made it challenging to lease that part of the property. We’ve now developed an external plaza and announced the opening of Hermès in that area, which was difficult to lease when Belk was the anchor. Additionally, we have an exceptional Life Time resort; if you're not familiar with their offerings—like Life Time Work, the pool, restaurants, services, salon, and a variety of fitness activities—I encourage you to check it out. We also have a Class A plus office that just opened, which is among the best in Buckhead. To summarize the financials: low 20s to 60, with an investment of $350 million. Regarding Jamestown, their investment focus is on their investment and asset management business. The mixed-use developments I mentioned earlier—6 to 8 projects—are either being done independently or with our established partners. Our collaboration with Jamestown is more about future projects. We’re currently expanding our platform; for instance, we're starting development on a residence and hotel in Seattle, which has finally received approval, and construction will begin soon. All properties, including Simon Property Group, Phipps, Nobu, and the Life Time facility, are 100% owned. It’s important to note the distinction between these assets. The actual lease-up process at Phipps is ongoing, and the build-outs for luxury brands like Malone take considerable time—often 9 months to a year. We expect the full potential of Phipps to be realized in 2024, coinciding with the opening of various retailers, such as Christian Louboutin, Hermès, and AKRIS. Most of these stores will open either late in 2023 or in 2024, and that’s when Phipps will be truly complete. The process doesn’t happen overnight, so this gives you an overview. We believe the true financial performance will be fully evident in 2025 or even 2026.

Operator, Operator

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

Alexander Goldfarb, Analyst

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

David Simon, CEO

Alright. I'll guide you through a brief overview because I appreciate your interest, Alex. SPARC manages the domestic operations for brands such as Lucky, Aéropostale, Forever 21, Eddie Bauer, Brooks Brothers, and others. It holds licenses for these brands from Authentic and pays a royalty fee to Authentic. Alongside our partner Authentic, we also make rental payments to landlords, including Simon. For instance, Forever 21 is located in a Vornado property, specifically in Times Square, where it pays rent to Steve Roth and Vornado. This business generates operating profit, which we share equally with Authentic. We have recently altered our structure by converting our license into jointly owned stock with Authentic. Historically, we've operated the licensing business as a joint venture. Over time, we exchanged our interests in the licensing business for stock in Authentic, resulting in us becoming a 12% shareholder in Authentic rather than just a licensee. Authentic is a significant entity, generating close to $1 billion in revenue, and holds licenses for various brands beyond SPARC, including partnerships with David Beckham, Shaquille O'Neal, Elvis Presley, Juicy Couture, among others. You can look it up online for a complete list. SPARC functions as the retail operating company, much like any retailer, such as American Eagle, managing stores and e-commerce, as well as engaging in wholesale activities. The key distinction is that SPARC pays a royalty to Authentic but not to Simon Property Group. Therefore, the only uncertainties for Simon Property Group relate to SPARC's operating profits. Comparing the years '21 and '22, the significant change stemmed from Forever 21, as the teenage demographic reduced spending due to rising gas prices, inflation, and an uncertain economy. While I know we're not officially permitted to ask, I’d like to check with Tom Ward, overseeing the call, if we can see if Alex comprehends this. So, Alex, do you grasp what I've explained? Was that clear enough?

Alexander Goldfarb, Analyst

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

David Simon, CEO

Well, sales are important, but gross margin is also a factor. Brooks Brothers has wholesale accounts, which contribute to generating EBITDA through various channels, including stores, e-commerce, wholesale, and other ventures. Authentic, which we equity account, is a very profitable company with high gross margins and operates in an asset-light manner. We receive our share of earnings from them, including net income since they are taxable. Together, all these businesses, including SPARC and RGG, which is our partnership with Michael Rubin of Fanatics, are included in OPI. OPI contributed $0.64 out of $11.87. I hope that clarifies things. Do you understand?

Operator, Operator

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

Vince Tibone, Analyst

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

David Simon, CEO

Yes. Look, I would say we have positive spreads across the portfolio in renewals and in new leases compared to existing leases for new fixed terms. We also had operating spend increase because we're not immune to security cost increases, housekeeping, all of those normal operating expenses. To some extent, our fixed bumps don't cover that. We're also projecting flat sales. Obviously, to the extent that sales outperform that, we'll outperform as well. And we have these cases when we're adding great retailers and great restaurants to our portfolio. We have to take out the temporary tenants, and we have basically 9 months of downtime where we have no income for it. Now like we did last time, Vince, we said up to 2%. We did 4.8%. I'm hoping to do better. But those are basically the determinants. That's why we said better than 2%. But we have some operating expense increases, real estate taxes, unbelievably continue even though we're the goose that continues to lay the golden eggs for all of the communities in which we operate, our taxes continue to go up. While we have operating expenses that go up with inflationary pressures, we had downtime. We had flat sales, and we lose temporary income while we're retending and going to physical, whether we're going to permanent income. All of that is great news, but our rent spreads are positive. Renewals are positive. And that's been the difference. Obviously, we'll throw COVID out, but even the trend prior to COVID, renewals were under customers, you know, Vince. Demand continues to be very good.

Vince Tibone, Analyst

Just one follow-up. Regarding variable lease income, do you expect it to continue to trend down as you unwind some COVID lease modifications? How should we think about that aspect moving forward?

David Simon, CEO

We have slightly adjusted the budget primarily because when a tenant renews their lease, we're incorporating some of that excess into the base rent. As you may recall, Forever 21 pays percentage rent to all its landlords, including us, following its bankruptcy. They experienced a difficult year last year, as I mentioned earlier. We're anticipating a flat budget this year. It's important to distinguish between overage and percentage rent, which can be somewhat unpredictable. While there are always retailers that perform well and others that don't, we are quite adept at predicting who will excel and who may struggle. However, aside from Forever 21, we aren't directly responsible for the merchandise in the stores. You can attribute that to us with Forever 21. I hope this clarifies things.

Operator, Operator

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

Craig Mailman, Analyst

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

David Simon, CEO

Right now, we feel very positive about our retailers. They have focused on starting 2023 with well-managed inventories, and we believe most have succeeded in this. I frequently check with my leasing team about any potential decline in demand, but that hasn't occurred. So we are optimistic about that. Demand remains generally robust. Many retailers have taken advantage of the post-COVID recovery to improve their operations. On the credit front, we are feeling quite secure.

Brian McDade, CFO

Yes. Watch list has been lower in years. The tenant community rebuilt its financial position during COVID and is coming out of it in a much better place.

David Simon, CEO

So nothing yet. You've got a couple of big names out there, but we have very little exposure to them. In some cases, like most of them, we are boxed and also in strip centers. The ones we have and like the box at, we believe we can improve. Generally, I think the credit side is in a good position, and demand is strong. December was quite inconsistent for many retailers, but most had a strong January after Christmas. I think the mistake we made, and Simon Property Group made, is that we budgeted for flat performance compared to 2021, which was extraordinarily profitable for several brands. We made some tactical errors with Forever 21, but we brought in a new CEO to address those issues, and she is doing a terrific job. We are also very happy with JCPenney, which has shown incredible profitability in EBITDA. While it didn't match the performance of 2021, we are pleased with the company's current positioning and the management team's efforts to revitalize the brand, which is significant for consumers in those communities. Unlike past management, we are reinvesting in the company to strengthen its importance in those areas. JCPenney had strong EBITDA, and though I can't disclose specifics, it was profitable. Our partner, Brookfield, will announce their financials if they choose to. Overall, we are satisfied with the brands, but we did underestimate how 2021 would not repeat itself. There was considerable volatility from a macro perspective in 2022, with significant increases in interest rates and food and energy costs affecting consumers, and we felt that impact. However, we believe things have stabilized now.

Operator, Operator

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

Craig Schmidt, Analyst

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

David Simon, CEO

We haven't yet seen the benefits. I don’t want to delve into the geopolitical issues, but we believe there is potential for our key assets that have historically attracted Chinese and other Asian consumers. We are beginning to notice some progress in this area, but we do not expect significant acceleration in 2023, though we remain optimistic about it.

Operator, Operator

Our next question comes from the line of Floris Gerbrand Dijkum with Compass Point.

Floris Gerbrand Dijkum, Analyst

David, last quarter you mentioned the goal of recovering to 2019 levels of same-property NOI, estimated at around $6.2 billion. However, this figure does not account for some of your retailer investments. Depending on how you analyze the data, it appears you're at least $200 million short even when including those investments. If you could explain, this suggests you would need approximately 3.7% NOI growth to reach those levels, yet your guidance indicates 2%. What challenges are you facing?

David Simon, CEO

Floris, I think you should concentrate on the domestic market. Including the retailers adds too much uncertainty. Our priority is to return domestic property NOI to 2019 levels, prior to the pandemic shutdown. In short, we expect to achieve that run rate by the end of this year. You should exclude retailer NOI from your calculations. Keep in mind, we have minimal cash investment in SPARC. When you think about Simon Property Group, consider those investments related to acquisitions. We have a strong property company that owns and is redeveloping all that real estate, backed by a solid balance sheet, which allows us to make smart investments with exceptional returns outside of our core business. This is what comes from having a seasoned team that has navigated recessions, credit crises, and pandemic shutdowns effectively. In summary, our domestic property NOI will align with same-property metrics, despite delays in some openings. We have properties that change, so we can't directly compare to 2019; however, if we look at the same portfolio we own now against the one from 2019, we may be there by the end of this year.

Floris Gerbrand Dijkum, Analyst

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

David Simon, CEO

No. We're not including Taubman in it. This is just the domestic property NOI. So we're not even including our international NOI. If you combine the mills, outlets and malls, domestic portfolio that we owned in '19 and that we still own in '22, we will get there on a run rate by the end of this year. It's as simple as that. We're not that far off, but we have delayed openings. Depending on where sales come in, it's even possible we make it this year, and that's the way to look at it. That's the only way to look at it, really.

Floris Gerbrand Dijkum, Analyst

And the S&L pipeline, has that changed from the last quarter as well? You mentioned some of your spaces opening later in '23 and then '24. Obviously, that has the potential to impact your NOI growth going forward by 5% to 7% depending on the rent that you signed, plus your fixed rent bumps. The math that we have suggests that 2% is the extreme low side of what's probably going to happen over the next 2 to 3 years.

David Simon, CEO

Yes, if you examine the situation over that timeframe, it has significantly outperformed. Reflecting on last year, we have been mindful in our approach, although there are variables involved with overage rent being the most significant. Additionally, we face certain inflationary pressures as landlords and property owners, as I mentioned earlier. Downtime is another consideration. However, I am optimistic that we will surpass our target, just as we did last year and as we have historically.

Operator, Operator

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

Michael Goldsmith, Analyst

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

David Simon, CEO

Well, I don't think anyone has the percent.

Brian McDade, CFO

Yes. Michael, that's the whole group. Our top 100 assets generate roughly 80% of our domestic NOI.

David Simon, CEO

Yes. So it's more than 50%. Demand across the board is good. Obviously, the higher end property probably has more demand. Our leases still, to this day, occupancy cost is low and our rent spreads across the board are generally positive regardless of the sales front.

Operator, Operator

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

Mike Mueller, Analyst

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

David Simon, CEO

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

Operator, Operator

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

Haendel St. Juste, Analyst

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

David Simon, CEO

We are generally pleased to see some activity in our sector. It's encouraging that other real estate companies are looking to grow externally. The announcements made today were positive and highlight that we are not alone in pursuing external opportunities. Our strategy has been validated by other players in the industry, showing that size and economies of scale provide benefits. We have observed this in the warehousing sector, and we may see it in storage as well. From the perspective of stock buybacks, our primary focus is on growing our dividend, which amounted to $39 billion—an impressive figure that reflects our commitment, excluding any stock buyback. This remains our priority; however, if our stock faces pressure, we can address that as needed. We have numerous mixed-use properties but have been relatively quiet on the acquisition front. We formed a partnership with Jamestown that we plan to expand in the coming years. We have various initiatives underway and the capital to pursue external opportunities. While we haven't achieved perfection, our investments have been profitable and generated excellent returns in real estate. One of our most notable successes was the acquisition of premium outlets, which, despite initial criticism, has proven to be one of the best deals in the public company sector.

Haendel St. Juste, Analyst

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

David Simon, CEO

Yes, it's really straightforward. It's the interest rates. We're losing about $0.30 to $0.35 per share due to either increased floating rate debt or our expectations regarding refinancing costs. The positive side is that we are in the process of refinancing all of our debt. The market is present, but borrowing costs are higher. So, if you look at the situation, very few analysts updated their forecasts for increased interest rates, which have indeed surged over the past year.

Haendel St. Juste, Analyst

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

David Simon, CEO

Yes. I think we got to open it up a little higher. We have a little higher bad debt expense budgeted this year than last year.

Operator, Operator

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

Juan Sanabria, Analyst

Just hoping for a little color on expected CapEx spend just in general for maintenance and then the development spend that we should be budgeting, and what kind of returns or NOI contributions we should be thinking about on the development readouts that would flow through into '23 as we model.

David Simon, CEO

I will look at our 8-K because the development spend will add to that. But obviously, when you start a real estate project, it's over a 2-year, sometimes 3-year process. So all that's disclosed in the 8-K. The CapEx, including TA, will probably be roughly the same as what it was in '22, if not a little bit less.

Operator, Operator

Our next question comes from the line of Greg McGinniss with Scotiabank.

Greg McGinniss, Analyst

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

David Simon, CEO

At least $100 million.

Greg McGinniss, Analyst

On NOI. Is there any expected contribution from the Jamestown investment? Also, can you discuss Klépierre, as that is included in the guidance? That would be appreciated.

David Simon, CEO

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

Operator, Operator

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

Ki Bin Kim, Analyst

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

David Simon, CEO

We are currently in negotiations that serve the interests of our shareholders, just as the other party is looking out for theirs. Many aspects are nearing finalization, and there is no cause for concern; everything is on track. Renewals are progressing well, and we are ahead of our 2023 renewals compared to the previous year. In some instances, we've combined renewals from 2022 and 2023 due to the extended nature of last year's negotiations. Overall, the process is moving positively, and relationships are developing as expected.

Ki Bin Kim, Analyst

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

David Simon, CEO

'23, slightly up, slightly up. I don't have the number, but Brian will have it for you later. Okay, last one, I guess. We're over 6:00, but we have one more question and one to finish the Q&A.

Operator, Operator

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

Linda Tsai, Analyst

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

David Simon, CEO

Yes, regarding our mark-to-market equity investments, we will provide a clear outline. We'll present both comparable and real numbers, and we expect to see improvements. Last year, we reported FFO; do you have that number? What was it?

Tom Ward, Host

$0.08.

David Simon, CEO

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

Operator, Operator

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

David Simon, CEO

Thank you. Again, I'm sure there are a lot more detailed questions. Please call Brian and Tom, and we'll be happy to walk you through more details. Thank you.

Operator, Operator

And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.