Simon Property(US:SPG)2023-08-02 23:58Financial Data and Key Metrics Changes - Funds from operations (FFO) for Q2 2023 were $1.08 billion or $2.88 per share, showing an increase from $1.06 billion or $2.78 per share in Q2 2022 [5][6] - FFO from the real estate business was $2.81 per share in Q2 2023 compared to $2.78 per share in the prior year period [6] - Year-to-date FFO comparison shows $5.65 per share in 2023 versus $5.58 in 2022 [6] - The company generated $1.2 billion in free cash flow in Q2 and $2.1 billion year-to-date [6] - The dividend for Q3 2023 was announced at $1.90 per share, an increase of 8.6% year-over-year [9] Business Line Data and Key Metrics Changes - Domestic property net operating income (NOI) increased by 3.3% quarter-over-quarter and 3.6% for the first half of the year [6] - Portfolio NOI, including international properties at constant currency, grew by 3.7% for the quarter and 3.8% for the first half of the year [6] - Mall and outlet occupancy at the end of Q2 was 94.7%, an increase of 80 basis points year-over-year [7] - Average base minimum rent for malls and outlets was $56.27 per foot, a 3.1% increase year-over-year, while mills rent increased by 4.3% to $36.02 per foot [7] Market Data and Key Metrics Changes - Reported retail sales per square foot in Q2 were $747 for malls and outlets, and $677 for mills [8] - The company signed over 1,300 leases for more than 5 million square feet in Q2, totaling 11 million square feet year-to-date [7] Company Strategy and Development Direction - The company is focused on asset rotation to improve portfolio quality and maintain strong tenant relationships [10][17] - The management expressed confidence in achieving over 95% occupancy by year-end [13] - The company is actively looking to recycle assets to generate liquidity and improve portfolio quality [17][48] Management's Comments on Operating Environment and Future Outlook - Management is optimistic about retail sales in the second half of 2023, expecting easier comparisons due to prior deceleration in sales [69] - The company anticipates a 3% plus growth in 2024, driven by lease-up, renewal spreads, and new business [37][71] - Management noted that the luxury retail sector remains strong and is a significant part of their tenant landscape [22][24] Other Important Information - The company completed refinancing of nine property mortgages totaling $820 million at an average rate of 6% [9] - The market value of the OPI platform is estimated at approximately $3.5 billion or roughly $10 per share [6] Q&A Session Summary Question: What is the expected occupancy level for the mall portfolio? - Management expects occupancy to be north of 95% by year-end, with positive trends in pricing power due to strong tenant demand [13][14] Question: Is the company looking to be more active in asset recycling? - Management confirmed ongoing asset recycling efforts to improve portfolio quality and generate liquidity, indicating a consistent strategy [17] Question: How does the company view the luxury retail sector? - Management sees luxury retail as a growing and important segment, with strong relationships with top brands like LVMH [22][24] Question: What is the outlook for retail sales in the second half of the year? - Management is optimistic about retail sales, expecting easier comparisons and stable economic conditions to support growth [69] Question: Can you provide insights on the impact of new leases and tenant demand? - Management noted that 30% of lease activity in the first half was new deal volume, indicating strong interest from new concepts and a positive sign for the business [55]