Simon Property Group Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 6, 2024

Key Takeaways

  • Funds from operations reached $1.33 billion ($3.56/share) in Q1, up from $1.03 billion ($2.74/share) last year, driven by higher rental income and investment gains that exceeded the company’s plan.
  • Portfolio occupancy improved to 95.5% (up 110 basis points year-over-year), with average base rent rising 3.0% at malls and 3.8% at outlets, contributing to 3.9% overall NOI growth.
  • The company sold its remaining stake in Authentic Brands Group for roughly $1.2 billion in proceeds and recorded a $311 million after-tax gain, generating a 7x multiple on invested capital.
  • After factoring in this quarter’s gains and one-time restructuring charges at Spark and JCPenney, OPI (other platform investments) is now expected to be approximately breakeven for the full year versus prior guidance of $0.10–$0.15 per share.
  • Full-year FFO guidance was raised to a range of $11.85 to $12.90 per share, up $0.90 at the low end and $0.85 at the midpoint compared to prior outlook.
AI Generated. May Contain Errors.
Earnings Conference Call
Simon Property Group Q1 2024
00:00 / 00:00

There are 12 speakers on the call.

Operator

Greetings, and welcome to the Simon Property Group First Quarter 2024 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 of Investor Relations. Thank you, Mr. Ward.

Operator

You may begin.

Speaker 1

Thank you, Camilla, 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 Roy, 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.

Speaker 1

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 ks 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 1 hour. For those who would like to participate in the question and answer session,

Speaker 2

off to a good start with results that exceeded our plan. 1st quarter funds from operation were $1,330,000,000 or $3.56 per share compared to $1,030,000,000 or $2.74 per share last year. Let me walk you through some highlights for this quarter compared to Q1 of 2023. Domestic operations had a very good quarter and contributed $0.09 of growth, driven by higher rental income. Gains from investment activity in the Q1 were approximately $0.75 higher year over year.

Speaker 2

OPI had a $0.02 after tax lower contribution compared to last year. Funds from operation from our real estate business was $2.91 per share in the Q1 compared to $2.82 in the prior year period, 3.2 percent growth rate. Domestic property NOI increased 3.7% year over year. We have continued leasing momentum, resilient consumer spending and operational excellence delivered these results that were above our plan for the Q1. Portfolio NOI, which includes our international properties at constant currency, grew 3.9% for the quarter.

Speaker 2

NOI from OPI in the Q1 includes a $33,000,000 charge in one time restructuring charges at Spark and JCPenney. Excluding these one time charges and a bargain purchase gain from Reebok transaction last year, NOI from OPI improved $5,000,000 year over year and was on plan for the quarter. Remember, these retailers are on a fiscal year end of January 31st and the charges were part of the year end closing process. They were not budgeted. Mall and occupancy at the end of the Q1 was 95.5%, an increase of 110 basis points compared to the prior year.

Speaker 2

Mills was 97.7. Percent. Average base minimum rent for our malls and outlets increased 3% year over year and at the mills 3.8% increase. Leasing momentum continued. As I mentioned, we signed more than 1300 leases for approximately 6,300,000 square feet.

Speaker 2

Approximately 25% of our leasing activity in the Q1 was new deal volume. We are approximately 65% complete with our 24 lease expirations and we continue to strong broad based demand from the retail community. Retail sales volume across the portfolio increased 2.3% for the Q1 compared to last year. Our tourist oriented properties outperformed the portfolio average in the quarter with a 6% increase in sales. Reported retail sales per square foot in the first was flat year over year excluding 2 retailers.

Speaker 2

Retail sales per square foot from our premium outlet platform reached an all time high this quarter. Occupancy cost at the end of the Q1 was 12.6%. Now let me talk about other platform investments affectionately known as OPI. We sold our remaining interest in Authentic Brands Group during the Q1 for gross proceeds of close to $1,200,000,000 and recorded a pre tax and after tax gain of $415,000,000 $311,000,000 respectively. The sale in the first quarter combined with the sale in the 4th quarter yielded gross proceeds of $1,450,000,000 We generated substantial value from the ABG investment and a 7x multiple on our net invested capital during our short ownership period.

Speaker 2

As a result of the sale of ABG and the restructuring charges that I mentioned earlier, one time in nature at Spark and Penny in the first quarter, we now expect FFO contribution from OPI to be around breakeven this year compared to the initial guidance of $0.10 to $0.15 For your reference, we budgeted at OPI, the FFO from ABG around $0.08 per share. So roughly half of that was associated with ABG. Now moving on to new development and redevelopment. We opened an AC Hotel at St. John's Center.

Speaker 2

We are opening Tulsa Premium Outlets this summer. Leasing is going great. And we have a significant expansion at Busan Premium Outlets in South Korea this fall. At the end of the quarter, new development and redevelopment projects were underway across our platforms in the U. S.

Speaker 2

And international and nationally as well with our share of net cost of $930,000,000 at a blended yield of 8%. We expect to start construction on additional projects in the next few months, including just shortly our residential project at Northgate Station in Seattle. What's interesting for us is we're able to build when others need to rely on construction lending market, which is, as you might imagine, very difficult right now. We expect our starts to be around $500,000,000 this year. Now on our balance sheet, we retired $600,000,000 of senior notes in the quarter.

Speaker 2

We ended the quarter with approximately $11,200,000,000 of liquidity. Today, we announced our dividend of $2 per share for the Q2, a year over year increase of 8.1%. The dividend is payable on June 28. And given the transactions for this quarter and our results for this quarter, our current view for the remainder of the year, we're increasing the full range of our full year guidance of 20.24 in the guidance range of $11.85 to 12 I'm sorry, let me restate that. We're increasing our range to $12.75 to 12 $0.90 per share compared to $12.51 last year.

Speaker 2

This is an increase of $0.90 at the bottom end of the range and $0.85 at the midpoint. Needless to say, I'm very pleased with our Q1 results and our business and tenant demand continues to remain strong. Despite a cloudy macro environment, occupancy is increasing, property NOI is growing. We made a significant profit on our ABG investment and everything is kind of moving in all the right

Operator

Our first question comes from the line of Caitlin Burrows with Goldman Sachs. Please proceed with your question.

Speaker 3

Hi, good evening everyone. Congrats on the solid quarter operationally and execution on the ABG sale. I guess there have been news reports that you could get involved in Express. So whether it's related to Express or the Simon's strategy going forward, Can you give some insight to your current thinking on having ownership in brands? What type of terms are attractive to you?

Speaker 3

And how you balance that with the potential earnings volatility?

Speaker 2

Well, no one likes earnings volatility unless it's volatility in the right direction. Okay. So Caitlin, thank you for the comments to start, but that's I don't like volatility either. Listen, on Express, we were approached by the IP owner. I think it's not overly complicated in the sense that they saw what we had done historically both with ABG and Spark and offered us to participate with no capital, but also add our expertise and our knowledge in what we've been what we've done in the past with Spark.

Speaker 2

And because we have always valued Express as a retailer and as a client, we jumped at the opportunity. So we don't expect it we expect to be it's got to go through bankruptcy process and that's out of our control. But if WHP does end up getting it, we'd be pleased to participate in the turnaround of Express. And again, we don't expect any capital as part of that participation. So when we get opportunities like that, we evaluate it, we look at the brand and the value of the brand.

Speaker 2

In this case, we're comfortable that Express is a good company and is a great brand and we can add value to it. And given the fact that we were able to hopefully turn around the retailer, save jobs, create value from our investment. We see it as a win win situation with no capital from our standpoint.

Speaker 3

Great. Thanks for that.

Speaker 2

Thank you.

Operator

Our next question comes from the line of Jeff Spector with Bank of America. Please proceed with your question.

Speaker 4

Hi, this is Lizzie Duikin on for Jeff. I was curious if you could talk a little bit more about the key drivers of retailer sales as we started the year. And it seems like there's been some good outperformance from driven by especially your tourism driven centers. So I'm just wondering how much that has been a factor into the Q1 of this year and how much upside there is remaining from tourism? Thanks.

Speaker 2

Sure. We feel very bullish on our portfolio in general. And then obviously, our tourist centers, in California and in the Northeast are starting to finally see the improvement that we have been seeing for quite some time in Florida. And Florida continues to be an unbelievably strong market as well. So we're finally seeing California, Northeast pickup.

Speaker 2

Obviously, the strong dollar visavis certain currency does have an effect kind of an inhibitor effect. But even with that said, domestic tourism continues to excel. And I think people at the end of the day, they as part of when they go on holiday, they love shopping as part of that experience, dining, shopping, being with their families. And as I said earlier, I mean, we feel like the malls made a big comeback, Physical stores are where it's happening. We're seeing a resurgence and reinvigoration of that whole product.

Speaker 2

So we're pleased it's kind of where we're seeing things. So certainly the lower income consumer has been under pressure now for quite some time. We're very focused on that. Obviously, inflation has taken its toll. And even though inflation is moderating, the prices that the lower income consumers dealing with are quite daunting.

Speaker 2

So we'll continue to see volatility in that area we anticipate. We're hoping that their cost of living moderates and to some extent their wages go up or their cost of living goes down. So we can see more discretionary income there. The higher income consumer continues to spend and visits our properties and it's good. And as a good example of that is our traffic for the Q1, I think was up around 2% for the year, right guys?

Speaker 2

Yes. So that's also a very good sign. Okay.

Operator

And our next question comes from the line of Samir Khanal with Evercore. Please proceed with your question.

Speaker 5

Good afternoon, everyone. David or Brian, you provided a same store guide of at least 3% last quarter. I guess, how do you feel about that guide today? You're doing 3.7% in the Q1. Clearly, leasing has been strong, but we've also seen some announcements from Express Route 21.

Speaker 5

I guess, how do you feel about that guide today? Thanks.

Speaker 2

Yes. Look, we don't update that. As you probably know, I think you know, we don't that's our goal for the year. We don't update it every quarter as some others might, but we still feel like that's even though we've got some unanticipated to some extent. I mean, we do create bogeys on our rental income kind of kind of adjustments in our budgeting process dealing with those.

Speaker 2

We still feel like our initial guidance on that is very achievable. So we don't update it every quarter, but if we didn't feel like we could achieve it, I think we would highlight that, but we don't see that even with some of the I mean, we might not overachieve as we always want to, but I think we can still deliver the initial guidance.

Speaker 5

Thank you, David. Thank you.

Operator

And our next question comes from the line of Ronald Kanda with Morgan Stanley. Please proceed with your question.

Speaker 5

Great. Just a quick one on the $500,000,000 development starts. If you could just talk about sort of the opportunities there? And do you sort of still see opportunities to go on offense on sort of the mall space given that fundamentals are coming back and that there is going to be peers looking to sell assets. Are there opportunities and appetite to go on offense on sort of buying more assets?

Speaker 5

Thanks.

Speaker 2

Sure.

Speaker 3

I think

Speaker 2

we've seen rates more or less stabilize now. There was a volatility prior to that where it was hard to predict. Now we're not anticipating a reduction in rates, but at least we feel like we're in a more or less a stable rate environment that makes it easier to make investment decisions. So I would break it up into 2 buckets. The first bucket being our redevelopment effort And most of that, frankly, is mixed use in our properties and we feel very bullish on that.

Speaker 2

Remember, you're talking about bringing on, if it's a 2 to 3 year process, you're talking about bringing on product in 2 to 3 years. Not going to be any supply. We do a very good job of understanding supply and demand. The new better product always wins. So we are unabated in our mixed use and we'll be doing some multifamily development both in Bray and Orange County.

Speaker 2

And as I mentioned, we just signed our GMP at Northgate Station to build about 300 units as part of that whole redevelopment. So that really goes unabated. That when you get to the external new deal environment, I would say We have a lot of opportunities ahead of us and I think our job is just to prioritize, make sure we're valuing the opportunities right and we don't take our eye off the ball with what we're doing with our existing portfolio. So long story short, I probably would venture to say that there could be more external opportunities for us. But again, it's got to be great quality at a fair price and assets where we think our expertise can add cash flow growth to them.

Speaker 5

Thank you.

Speaker 2

Thank you.

Operator

And our next question comes from the line of Michael Goldsmith with UBS. Please proceed with your question.

Speaker 6

Good evening. Thanks a lot for taking my question. David, you highlighted the health of the consumer seems like doing all right or managing through the environment. Just given your positioning, the occupancy gains and the pricing power that you have, If there was some sort of macro slowdown, do you think how do you think you would be able to navigate it? Or maybe said another way, do you think the business has become a little bit less macro sensitive as you as there's been consolidation and you've kind of become the place where you've reached consumers in that luxury space?

Speaker 6

Thanks.

Speaker 2

Sure. Look, we are make no mistake about it, we are not immune to macro the macro environment. So we would have to deal with it both from if it ultimately led to less consumer spending and more retail client stress. We're not immune to it. However, and this is a big the big underlying from my standpoint.

Speaker 2

I have always felt like we've done our best work when others are dealing with the macro environment. So, and as I mentioned to you, we have $11,000,000,000 of that liquidity in our comments earlier. So, I think when and if and frankly, I mean, it's realistic to assume we may go through a reasonable slowdown here coming up. I think that's when we do our best work. That's when others get tired and throw in the towel.

Speaker 2

That's where we get rejuvenated. Hopefully, we're rejuvenated now, but this is when we really get motivated. And as I think back and I've had the luxury of being in the spot for 30 years, I think we do our very best work when the times get tough. So not wishing that on us or anyone, but it's a realistic probability. We won't be immune for it, but I think will further separate this company from our peers.

Speaker 2

So that I know, that I have 100% confidence in that. If that does happen, we'll have further separation.

Speaker 6

Thank you very much.

Speaker 2

Thank you.

Operator

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

Speaker 7

Hey, good afternoon out there. David, just want to go back to Caitlin's question. In response to the retailers, you said that it brings a lot of volatility. Obviously, we all like volatility the right way, but you can't deny that you guys have made a ton. I guess I could use a French word to describe the ton, but you guys have made a ton of money, billions from these retailer investments.

Speaker 7

Yes, they are volatile, but they've been lucrative. So just want to get a better sense, is the Express model sort of a future where you guys will participate if you put in no capital? Or just trying to understand how you weigh the money that you've made versus the short term or the quarterly earnings volatility because clearly it's been a source of success for you.

Speaker 2

Yes. That's a it's interesting, Alex. It's a very good question. And I think honestly we really focus on to the extent we do put in fresh capital. We in addition to understanding what it means for our overall business and the totality of our company.

Speaker 2

It's also absolutely driven by return on investment just like building a new shopping center. So and again, yes, we have volatility, but in the scheme of things, again, and the fact that we've made money, I hope most folks are understanding that the volatility is really on the margin.

Speaker 5

And I'll just give you

Speaker 2

a good example of and again, we take FFO as you know is net income plus depreciation. Well, the contribution we get from our retail is net income, which is fully burdened by depreciation. So there's no add back. But to give you a simple analysis on just ABG as an example. So we cleared $1,450,000,000 of cash and that produced about $0.08 of earnings because we just picked up our share of net income.

Speaker 2

We only got we only as a shareholder, we only would get tax distribution. It's a subchapter S essentially. So we'd only get our tax distributions, which amounted to $2,000,000 a quarter. So that's $8,000,000 And if you take the 1,400,000,000 dollars and you invest it in the bank at 5.5 percent, that's $70,000,000 So we went from $1,000,000 of cash flow to $70,000,000 just selling that. So we look at every aspect of it, pre tax, after tax, what does it mean to the portfolio?

Speaker 2

What is we don't want volatility, but we'll have we'll certainly accept it if we think it's going to be a good investment. And it all kind of goes into the analysis. We understand the market is not thrilled with it. So we try to also do it in a way that really, really does not make it the store, it is on the margin and it will always be on the margin. But we do think we can add value to the enterprise by some of these investments.

Speaker 2

And each investment is so idiosyncratic that it's hard to say again if Express happens, it's hard to say that that's the new model because I don't know that I can say that. I think every one of these things is somewhat idiosyncratic. But we do have the opportunity to do more than lease space in Alabama someplace or That's what this company is all about. We do more we're in South Korea. We're in Jakarta.

Speaker 2

We're building in Tulsa. We're building apartments in Seattle. So, I mean, I'm waxing a little bit here, but I we think of ourselves broader than I think the market thinks of us. That's a comment upon us and I think our disclosures have gotten better over time. I hope you agree, Alex, on OPI.

Speaker 2

So you could see it not detract from real estate, but at the same time, we're somewhat different than when you line us up to others that do some of what we do.

Speaker 7

And that was the point that you guys have this special thing. It's sort of like Kimco has their retailer unique thing and it'd be a shame to do away with it if it was just volatility because clearly it's made you a lot of cash. So thank you for the answer.

Speaker 2

Thank you, Alex.

Operator

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

Speaker 5

Thanks. It's Nikesh Rasupir with Craig. David, I just wanted to ask on kind of the opportunity and to roll out additional luxury, either VIP suites or retailers. We saw what you did at Woodbury, and I'm just curious on the opportunity for the remainder of the portfolio and what kind of demand do you think that will drive from some of these higher income clientele that you're seeking?

Speaker 2

Listen, I think we've got a great portfolio of real estate that is focused on the very high income consumer. And I think we need to step up our game in all the services that need to be provided to that consumer. And I think Woodbury, Sawgrass are just the beginning of an effort to really I can't think of the right word, but really entertain that consumer to make it really special. And it's all the services that they're accustomed to. It's the fine dining.

Speaker 2

It's the ease of access. It's right having the right retailer mix. So we probably have around 20 to 25 properties that are that have this high our centers are really big. So they obviously appeal to a broader range of consumers, which is the way we like it because that's also you diversify the ebbs and flows. But that but those 20, 25 centers really need special attention.

Speaker 2

We got a great team that's dedicated to them. And in many cases where the preferred or certainly a meaningful landlord to the best retailers in the world. And we want to we definitely want to stay in that spot. So a big push for us to step up our game when it's dealing with the very high end consumer on all sorts of levels. And so I think what happens at Sawgrass with the Oasis and the Colonnade and what already happens at what already happens at Woodbury, but we're just stepping up our game, will happen at Houston and King of Prussia.

Speaker 2

And if you saw what we did at Phipps and Atlanta and what's going on at Boca Raton in Florida, just to name a few that jump out at me, is really, really a high priority for the company.

Operator

And our next question comes from the line of florist Van Dykem with Compass Point. Please proceed with your question.

Speaker 8

Hey, thanks. David, I was going to ask you about luxury, but I was pipped. So instead, I'm going to ask you about capital recycling. Presumably your guidance, I mean you just you've cleared $1,200,000,000 on the ABG sale, sitting there in cash. And obviously, you do have some ongoing developments, but those are essentially funded from your retained cash flow, if you will.

Speaker 8

So the guidance assumes that cash sits there uninvested essentially for the rest of the year? Or is there further upside, I guess, is what I'm getting at, if you were to do something else with that cash to redeploy that into higher yielding investments?

Speaker 2

Yes. Very good question. We cleared in 2 months $1,450,000,000 as you know, Florence. So I just wanted to mention that. But yes, right now, our guidance just assume it sits in the bank and or pays down debt.

Speaker 2

But that's basically it. So no really no real redeployment is contemplated in our numbers at this point. Brian, if you want to add anything?

Speaker 9

Yes. No, that's right. We just assumed that we would hold the cash for the time being and we have debt maturities coming due here in September October. And so we could use the cash on hand to fund that. We also are carrying cash from our activities our capital markets activities last year.

Speaker 9

So the combination of it will address our upcoming maturities.

Speaker 5

Thanks.

Speaker 2

Thank you.

Operator

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

Speaker 10

Hi, good evening. Could you elaborate on the charges taken in the Q1 related to Spark and JCPenney? And then possibly related to that, kind of what is your near term outlook in terms of JCPenney store closures, just given foot traffic trends in recent years have not been great. So just curious how long you think the current store count and fleet is sustainable?

Speaker 2

Yes. The charges pretax were $33,000,000 so not most it's kind of funny, Vince, because most charges are in the 100 of 1,000,000 of dollars. So I think you have to put it in perspective. But with that said, it really dealt with personnel and inventory. So that were the 2 primary factors and more really on the inventory side because we had some clearance inventory that in Spark, it was really focused on F-twenty one and Pennie just on basically clearing out some inventory.

Speaker 2

So, Pennie, we're pleased with Penny. I'll just talk a moment about the store closings. They're very interesting. They don't Penny is able to produce positive EBITDA even if there's not high sales. I think they do out of the box.

Speaker 2

So I don't really in fact, I think Penny almost can be a beneficiary opening new stores as opposed to closing stores. I'm sure there'll be a few here and there, but most all of their stores are positive EBITDA. And so they have a very good way of having positive EBITDA out of what I call low volume stores. And again, this is what's interesting to us. Penny is not public.

Speaker 2

So you know what matters to me, Vince? Cash flow, EBITDA and obviously sale comp sales are important, right? But as long as we're profitable out of the stores, there's no Wall Street pressure that we've got to narrow the store count. I don't necessarily believe shrink to grow. It's very hard to achieve.

Speaker 2

Maybe you can achieve it. My history, not overly long, but long enough, it's I don't care what industry, it's very hard to do. Some have done it, but to me, if it's got positive EBITDA, there's nothing wrong with maintaining that store for the community. You certainly don't want to lower standards of how you operate it. But if you can create cash flow, doesn't necessarily mean you have to reinvest that much in it and you can use that cash flow to reinvest in other elements of your business.

Speaker 2

So I don't anticipate long story short, I really don't anticipate much portfolio real estate activity at the JCP level.

Speaker 10

That's really helpful color. Maybe just a quick follow-up on that. I'm just curious given the ownership structure, I mean, are you guys able to pursue recapturing some of these boxes at your best properties to unlock mixed use development opportunities? Or how would that work given your split ownership with Brookfield?

Speaker 2

Yes. Well, look, I think as part of the deal originally, first of all, our relationship with Brookfield is excellent and our we both basically and ABG is an investor in there as well. But we very much see eye to eye on JCPenney and how it operates, how we should operate it. And I would say both of us and now my memory is a little bit cloudy, but when we did the restructuring, we did get both of us got the opportunity to reclaim or reclaim certain space from JCPenney that we could redevelop. So it's a good question.

Speaker 2

And the fact is we are about to embark upon 1 that you'll see an announcement in the near future where we are going to ultimately redevelop a JCPenney at one of our centers. So I don't remember the exact count. I don't remember exactly how much Brookfield, but as part of the bankruptcy process and negotiation with each other, we did give each other the right to do that. And so what happens there is we get notice to the company. It's already documented that we get the we and we can in this case, it's a lease.

Speaker 2

So there's nothing to pay. We just cancel the lease. Now, obviously, stores are a little bit profitable, very profitable for J. C. Penney.

Speaker 2

So we're going to have to find them some new opportunities to make up for it. But that's all part of the deal. So I think there'll be a handful like that both from us and Brookfield that we'll be able to do. But and again, that was all pre negotiated. To the extent that there is one that wasn't part of that negotiation, that's pretty given our relationship with Brookfield pretty straightforward.

Speaker 2

We come up with a value or they come up with a value. Obviously, the JCPenney management team would have to be part of that and they would get the appropriate value to redevelop that project.

Speaker 10

Thank you. All great color.

Speaker 2

Thank you.

Operator

And our next question comes from the line of Juan Sanabria with BMO Capital Markets. Please proceed with your question.

Speaker 5

Hi, good afternoon. Just hoping to ask about the watch list or bad debt. I believe you said you'd assume 25 basis points last quarter. Has that changed now at all? And if so, maybe if you could break out the Express impact.

Speaker 5

And in your prepared comments, you talked about sales on a per square basis being flat, shipping out 2 tenants. Just curious on the color of why those 2 tenants were stripped out, if there's any

Speaker 2

interesting Yes. Let me answer that. I think the 2 tenants I mean, even if we didn't I think it's just color for you to know that generally the portfolio was flat. We don't like to name tenants, so we don't focus on it. I'd also, I think point out to you the most important thing we look is total volume and we were up quarter over quarter.

Speaker 2

What was the number again? 2.3%. That's really the number we look at. And again, remember, these are reported sales. We can get into this whole diatribe about some of the retailers credit their sales with Internet returns.

Speaker 2

So it's just information, okay. Do what you want with it, but it's just information. But our sales, if you include the 2 retailers, the last 12 months was down 1.8% on a rolling 12%. But total, because not all those are comp, total was up 2.3%, which is the more important number. Now, we'd also just to and Brian can add in here, now that I'm talking, I might as well just finish.

Speaker 2

We don't as part of our discussion, we don't we'll never get into a retailer specific response. But obviously bankruptcy for tenants has a lot of a lot goes on leases have to be rejected and depending on where they were on that and what happened. So we in our comp NOI, we have our bad debt expense. I think I gave you some color. We still feel like it's achievable.

Speaker 2

So, but again, I don't think and then Brian can add, we're not going to really give you a color too much on Express, but we do put in when we model our business for the year, we do put in unforeseen circumstances and we try to budget appropriately for retailers that are under pressure. In this case, we kind of knew Express was in that spot, but a lot remains to be seen how Express comes out of bankruptcy and the ultimate financial impact.

Speaker 5

Thank you.

Speaker 2

Thank you.

Operator

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

Speaker 5

Hey, good evening. Thanks for taking the question. A quick two part here. First, I wanted to follow-up on Floris' question on the uses for the cash from the retail monetization. The stock's $35 or so higher than what you lost back.

Speaker 5

So I assume it's fair to assume that buying back stock is less likely here. And are there any special dividends that need to be paid on that gain? And then my second part of the question is, we noticed that the TRG property count dropped to 18 properties versus 20 last quarter. What happened there? Thanks.

Speaker 2

I'll let Brian, you can I hope you can answer all these? I expect you to.

Speaker 9

I can. With respect to TRG, there were 2 properties. 1 was a partner buying out our interest. So the property count went down by 2 in the quarter. With respect to Fair Oaks and Country Club are the two assets that when the partner is buying us out or bought us out.

Speaker 9

With respect to capital on the balance sheet, certainly, it's a capital allocation decision relative to stock buyback. But with the amount of capital that we are generating, both free cash flow and what's on our balance sheet, it is still an appropriate use of capital throughout the balance of the year and would expect that we would have interest in buying back our stock at certain levels.

Speaker 2

Yes. And I would just add to that, the ABG sale happened, I don't remember exactly, but near quarter end and we were blacked out from that because of Q1 earnings. So I wouldn't read that the fact that it's sitting on the balance sheet to read too much into that.

Speaker 5

Got it. Appreciate that. And the special dividend, anything on that front?

Speaker 9

There is no required special dividend. These were these this interest was owned in our taxable REIT subsidiaries. So there will be a tax actual payment due, not actually a special dividend.

Speaker 5

Got it. Got it. Thank you.

Operator

Our next question comes from the line of Linda Tsai with Jefferies. Please proceed with your question.

Speaker 11

Hi. Thanks for taking my question. A 2 parter. Sure. Appreciate the fact that you won't provide capital to Express, but could you just give more color on how you would be providing assistance to the brand?

Speaker 2

Well, I think, obviously there is a couple of elements. The first the most important one is that we have the history of running a retailer coming out of bankruptcy. So I think for better or worse, I think it's better, but others may not agree with me. There's a certain expertise in doing that and we've we have. And I think what our potential partner sees on that is that we can bring to the table.

Speaker 2

So I wouldn't underestimate that. That's 1. Number 2 is, as part of any bankruptcy, we're going to have a lease negotiation. Some leases will get restructured, some won't, some will pay what the existing rent is and so on. So but that happens regardless of whether or not we're involved or not.

Speaker 2

So that's just part of the bankruptcy process. We go space by space and find out we kind of find out what we'd like to do, maybe short term leases, so on and so forth. But that but we're not alone in that. Any other landlord will have to come to their own conclusion on what they want to do. If part of rent adjustment is necessary to get the brand on solid financial footing.

Speaker 11

And do you have any clarity on the store closures at all because one of your much smaller peers expects to close 65% of its stores in 2Q?

Speaker 2

We are not involved in that process. That's really management. So I have no point of view or no opinion on that at all. That whole process is part of that. We really won't get involved until we're approved as the stocking horse bidder.

Speaker 2

So all that's going on today with the depth and everything else is all part of it's all the existing management team. We have no involvement in that whatsoever.

Operator

Thank you.

Speaker 2

Sure.

Operator

And our next question comes from the line of Mike Mueller with JPMorgan. Please proceed with your question.

Speaker 5

Yeah. Hey, guys. It's Hong on for Mike. I guess I was wondering, can you give us an idea of where of what tank categories you're seeing most of the demand from in your malls? Is it I'm just wondering if it's broad based and or how much of it is apparel versus the other categories?

Speaker 2

Honestly, it's across the board, restaurants, entertainment, leisure, sports related, it's the bigger boxes, the unit close, Primark's of the world, Zara, it is this is where I give a shout out to Rick as he used to go through it. But we're seeing it Abercrombie we're doing a lot of new opportunities with Mango, Golden Goose just to name a few, Nitwell, JD Sports, Aloe. Lululemon is growing with us, upsizing a lot of properties. Our house is a great company that we're doing business with. Pinstripes, number of restaurants, restaurant tours.

Speaker 2

It's very, very, very encouraging because it's so diverse.

Speaker 5

Got it. If I could sneak one other question. And I guess the $7.45 Square Foot sales, is that portfolio weighted or NOI weighted?

Speaker 2

Portfolio weighted. I'm sorry, just portfolio pure. If it was NOI weighted, we used to do that. It's like 950,000 9.50,000 Higher? 9.50,000

Speaker 9

plus or minus.

Speaker 2

Yes. Okay. Dollars 9.50,000,000 thereabouts.

Speaker 5

Perfect. Thanks.

Speaker 2

Sure.

Operator

Our next question comes from the line of Greg McGinnis with Scotiabank. Please proceed with your question.

Speaker 5

Hey, David. Good afternoon. Just on looking at the volatility of the retail investments, what are the drivers to keep Spark and JCPenney on balance sheet as opposed to the ABG investment? And would you look to sell those in the near future?

Speaker 2

Well, again, they're equity accounted. So they're really not on our balance sheet, just to make it clear. So there are investments in them. Listen, they are we build a company where everything is core and nothing is core. So we saw ABG.

Speaker 2

We got an offer. We hit the bid. I would view that for any and all assets that we have, whether it's JCPenney, Spark, XYZ Mall. Call Uncle David and not most people don't hit my bed, but the only thing that's core is the company and its people and its balance sheet, but every other assets for sale at the right price. So nothing is critical long term.

Speaker 2

And again, look guys, we're talking about volatility and the reality is the volatility has been mostly on the upside. And again, we're a company that earns $12 and we're talking about $0.10 or $0.01 here or there. So I just want to put everything more or less in perspective. But there's nothing that I wouldn't sell at the right price across the company and worldwide, period, end of story. And it's very simple.

Speaker 2

You know why? Because if we got the cash, I know we would find an appropriate investment that would replace the earnings lost. It's really that simple or we give it to the shareholders or we buy our stock back. So I am at the point of the highest level of indifference about monetizing an asset as you'll see.

Speaker 5

Great. Thanks for the color. Sure.

Operator

Thank you. We have reached the end of our question and answer session. And with that, I would like to turn the floor back over to Mr. David Simon for any closing comments.

Speaker 2

Okay. Thank you. I'm sorry, we I know it's the end of earnings season. We always had we're always late in the Q1 because we tied to our annual meeting next on Wednesday. But thank you for your interest and your questions.

Speaker 2

Very good questions. Appreciate it. Thank you.

Operator

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

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