Simon Property Group Q3 2022 Earnings Call Transcript

Participants

Corporate Executives

• Thomas Ward, Senior Vice President - Investor Relations
• David Simon, Chairman of the Board, Chief Executive Officer and President
• Brian J. McDade, Executive Vice President and Chief Financial Officer

Analysts

• Steve Sakwa, Evercore ISI
• Alexander Goldfarb, Piper Sandler Companies
• Derek Johnston, Deutsche Bank Aktiengesellschaft
• Ronald Kamdem, Morgan Stanley
• Vince Tibone, Green Street
• Floris van Dijkum, Compass Point
• Nick Joseph, Smith Barney Citigroup
• Mike Mueller, JPMorgan Chase & Co.
• Craig Schmidt, Bank of America Co.
• Juan Sanabria, BMO Capital Markets
• Greg McGinniss, Scotia Bank
• Michael Goldsmith, UBS Group AG
• Linda Tsai, Jefferies Financial Group Inc.
• Ki Bin Kim, Truist Securities
• Haendel St. Juste, Mizuho

Presentation

[Operator]

Greetings and welcome to the Simon Property Group Third Quarter 2022 Earnings Conference Call. [Operator Instructions] It is now my pleasure to introduce your host, Tom Ward. Thank you.

Mr. Ward. You may begin.

[Thomas Ward, Senior Vice President - Investor Relations at Simon Property Group]

Thank you Irene and thank you all for joining us this morning. 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 maybe 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 morning will be limited to one-hour. For those who would like to participate in the question-and-answer session, we ask that you please respect our request to limit yourself to one question.

I'm pleased to introduce, David Simon.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Good morning and I'm pleased to report our third quarter results. Third quarter funds from operations were $1.1 billion or $2.97 per share prior to a non-cash unrealized loss of $0.04 from a mark-to-market and fair-value of publicly-held securities. Let me walk you through some of the variances for the quarter. Compared to Q3 2021, our domestic operations had a very good quarter and contributed $0.05 of growth, driven by higher rental income. Our international operations posted strong results in the quarter and increased $0.05 despite the negative currency impact of $0.05, given the strength in the dollar.

These positive contributions were partially offset by an $0.11 lower contribution from our other platform investments which reflects costs associated with the JCPenney, launch of new beauty brands, Reebok integration cost and some softening of sales compared to 2021 from our two value-oriented brands. Domestic property, net operating income increased 2.3% for the quarter and 4.4% for the first-nine months of the year. NOI growth for the quarter was negatively impacted by approximately 100 basis-points due to the write-off of outstanding receivables from Regal theaters upon its bankruptcy filing. Portfolio NOI which includes our international properties at constant currency grew 3.2% for the quarter and 5.5% for the first-nine months of the year. Occupancy ended third quarter and 94.5% an increase of 170 basis-points compared to the prior year and an increase of 60 basis-points compared to the second-quarter.

TRG was 94.5%, average base minimum rent increased for the fourth quarter in a row and was $54.80, an increase of 1.7% year-over-year, leasing momentum continued. We signed nearly 900 leases for more than 3 million square feet in the quarter and have signed over 3100 leases for more than 10 million square feet through the first-nine months of the year and we continue to have a significant number of leases in our pipeline, the opening rate on our new leases has increased 10% since last year, roughly $6 per lease.

Reported retail sales momentum continued, our shopper remains resilient, we reported another record in the third quarter of $749 per square-foot for the malls and outlets which was an increase of 14% year-over-year. Mills ended-up at $677 per square-foot a 15% increase, TRG was $1080 per foot 25% increase, our occupancy cost is at 12% which is a level not seen since early-2015. We opened our 10th Premium Outlet in Japan and started construction on a significant expansion at Busan in South Korea, our redevelopment pipeline is moving forward with more accretive projects.

Turning to our other platform or investments. The third quarter contributed $0.17 in FFO per share as compared to $0.28 in the prior year period, after cash distributions received, we had approximately $475 million of net investment within our other platform investments primarily in ABG and RGG. We expect to generate approximately $300 million in FFO from OPI, that is for those of you like math [Phonetic], is a 60% return on investment, we believe the value of our investments in OPI is over $2 billion. We recently announced our strategic partnership with Jamestown, a global real-estate investment and management firm. We see great opportunity with this investment to capitalize on the growing asset and investment management businesses. The Jamestown team are experienced, mixed-use operators developers, property managers and asset managers.

We're pleased to expand our investment platform with this best-in class operator and we expect to grow their asset management business and accelerate our densification opportunities. We anticipate this accretive transaction to close prior to the end of this year. Turning to the balance sheet, we completed the refinancing; 16 property mortgages during the first-nine months of the year for a total of $1.8 billion and at average interest-rate of 4.78%. Our balance sheet is strong with approximately $8.6 billion of liquidity.

Net-debt to EBITDA is at 5.7 times and our fixed charge coverage is over 5 times. Today, we announced a 9.1% increase in our common stock dividend and we will pay $1.80 per share for the fourth quarter. The dividend is payable on December 30th. Since May, we have purchased 1.8 million shares of our common stock at an average price of $98.57 per share. Given our current view for the remainder of the year, we are increasing our full-year 2022 comparable FFO guidance from $11.70 to $11.77 per share to $11.83 to $11.88 per share compared to $11.44 last year. So, that's an increase of 13% at the bottom-end of the range and $0.12 at the midpoint and an increase of $0.26 at the mid midpoint compared to our initial guidance for the year. This guidance increase comes in the face of a strong US dollar, rising interest rates and inflationary pressures.

Now just let me conclude by saying, we had another impressive quarter and before we get to questions I would like to share some thoughts with you. For nearly 30 years, as a public company like many companies and industries, we have dealt with significant shifts within our industry. In our case, we embrace these challenges and are better operators and more thoughtful and astute capital allocators. Many of tried to kill off physical retail real-estate and in particular in close malls and I need not remind you when physical retail was closed in COVID, all the naysayers saying that physical retail was gone forever.

However brick and mortar is strong -- brick-and-mortar retail is strong and e-commerce is flat-lining and importantly, over this period of time, we have paid out $39 million in dividends to shareholders as we have become stronger and more profitable. And, why do I bring this up constantly? Well, because hopefully, this will put an end to the so-called negative mall-narrative as you can't pay those dividends without a strong underlying business.

Now, operator we're ready for questions.

Questions and Answers

[Operator]

Thank you. [Operator Instructions] Our first question is from Steve Sakwa of Evercore ISI, please go-ahead.

[Steve Sakwa, Analyst at Evercore ISI]

Thanks. Good morning David. It's nice to see the occupancy continue to climb and I know minimum base rents are up 1.7% and you did mention in your comments that new lease rates were up 6% or $6 sorry per-foot, can you just kind of provide any color on how leasing spreads are trending and do you envision bringing that metric back, perhaps early next year just any thoughts around that?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

They are -- when you do comparable space they're wildly positive.

[Steve Sakwa, Analyst at Evercore ISI]

Can you just provide any more color?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Well we don't report spreads, but they're wildly positive when you focus on comparable space.

[Operator]

Our next question is from Alexander Goldfarb of Piper Sandler please go-ahead.

[Alexander Goldfarb, Analyst at Piper Sandler Companies]

Good morning, good morning out there, David. Hey, so wanted to appreciate the continued disclosure of the different platforms, the core, the international Klepierre and the brands, but my question is just given you know continued inflation, obviously energy grown more of a concern. Can you just help us understand when we hear or see like retailer brand earning contribution is down or we read about different retailers having issues, how that translates if at all to their leasing? Because I think one of the questions that certainly comes up is hey retailers have a bad print oh that's negative for the landlords, but that doesn't seem to be the case except in maybe certain circumstances. So, is there a is there a general insight that you can help us understand that when the retailers have a bad quarter or bad print what the impact if at all that you see on the leasing side?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Sure. I would say, this is something we monitor every single day in good times, bad times, mediocre times. We have yet to see any pull back in opening new stores or renewals. So, there's has been absolutely no impact. I mean you're always going to have a deal here or there that falls apart for all sorts of different reasons, but nothing based upon the macro conditions and I would tell you Alex that where they're seeing most of the pressure is in the e-commerce business. So, the Flight toward bricks-and-mortar is real, it's going to be sustained and if they're in the retail business and they want to grow, they're going to open stores and it's that simple because the returns on e-commerce just aren't quite what everybody talks about, and so I think you've seen that and we've seen no slowdown whatsoever. There's always going to be a deal here or there but if they're a growing retailer they have to put the money in bricks -- highest-return on investment.

We understand it as well as anybody because we see the e-commerce business not just in the brands that we own with ABG but also at Penney and RGG and it's been a difficult year for e-commerce and bricks is where the action is.

[Alexander Goldfarb, Analyst at Piper Sandler Companies]

Thank you.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Sure.

[Operator]

Our next question is from Derek Johnston of Deutsche Bank. Please go-ahead.

[Derek Johnston, Analyst at Deutsche Bank Aktiengesellschaft]

Hi everybody, good morning. David you've been doing this a long-time.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

You're right about that.

[Derek Johnston, Analyst at Deutsche Bank Aktiengesellschaft]

Yes sir, but how do you and the team feel headed into holiday. The consumer seems okay, but certainly we're facing a slowdown, high inflation, it's hitting interest rates. So I mean what really keeps you optimistic on your retail investments and then also on the holiday overall and it being a solid season?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

You're always, as any kind of CEO you're always worried about the macro -- the macro-environment, but I will tell you what, it gives me unbelievable confidence going into the next few years is the realization that what we've been saying is that don't underestimate physical retail and it's kind of repetitive what, I said earlier, but I'll just reinforce, we feel really good because physical retail is where the action is, that's where the return on investment is.

And so even though we may slow-down next year or even into the holiday season I don't think the growth from our existing business is going to slow-down because the demand for new deals and space is there. On the retail side we're trying to -- one is I don't want to make a huge deal out of it. Two is, I want people to understand, we've made an unbelievable investment, so we're getting a 50% return on our net investment there, so if it goes to 70% or it goes to 50% it's -- we are going to have volatility but it's still a hell of an investment, still a great thing for us to do, to not only understand, but what it takes for retailers to be successful, but kind of where the future is.

So there'll be volatility in that, but our better brands in there like Brooks Brothers, Lucky Jeans, Nautica really doing well. I've said to you on the last call, the lower income consumer is tightening their belt and we do have a few brands that are affected by that, but even with that said, we have an unbelievable return on invested after tax from the earnings that those businesses throw off and we're also making investments in that, in those businesses so I expect those investments to pay for future earnings growth, but the macro is concerning, but look, rates will have an impact. It's probably the most direct impact that we'll have next year, but I still feel like demand in bricks and mortar is where the action is going to be.

[Derek Johnston, Analyst at Deutsche Bank Aktiengesellschaft]

Thank you.

[Operator]

Our next question is from Ronald Kamdem of Morgan Stanley. Please go-ahead.

[Ronald Kamdem, Analyst at Morgan Stanley]

Hey, quick ones if I could sneak them in. The first is just on the occupancy gains, pretty impressive this quarter. I think you talked about maybe getting a pre-COVID occupancy by 2023, just how are you thinking about sort of the upside on occupancy in this portfolio at this point? The second one was just on the new disclosure in the supplemental is really helpful on the fixed versus variable, just any color or any comments as you're converting these variable leases to fix -- how's that going, how much is left to go, what does the economics look like, would be helpful? Thank you.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Sure. I'll take the last one. We expect to garner a lot of the percentage and overage rent to minimum rent as these leases roll, but they take time to roll-over and our average lease term is probably 7 years. So it's not going to happen overnight, but it will happen over-time. And remind me your first question.

[Ronald Kamdem, Analyst at Morgan Stanley]

Occupancy.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Thank you. So I think we're still on-track to achieve our goal. I mean, I frankly I think we've done an unbelievable job in increasing our occupancy and increasing our cash-flow since the shutdowns. So hopefully in 2023, we'll get back to pre-COVID levels.

[Operator]

Our next question is from Vince Tibone of Green Street, please go-ahead.

[Vince Tibone, Analyst at Green Street]

Hi good morning. Could you elaborate on how you expect to grow Jamestown's Asset Management business and could you see that platform being an acquisition vehicle for US Malls or Simon as the operating partner and has a minority stake in the fund or investment?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Well it's really in the asset management business. So, I don't see buying malls in that platform under any circumstance. But, they have a lot of institutional relationships as do we and we take -- by working together -- we will be able to get separate account money to invest in the opportunities that exist in real-estate. They're great at place making real-estate, so there'll be some of those opportunities. They are also historically a big German fund operator. We expect them to continue that and they look for opportunities, both internationally and domestically. Not in our core business but in other forms of real-estate, so I think between essentially kind of the historical separate account business they have their premier fund plus their German fund business.

And then our adding to that platform in terms of only 50% of the business I think it will be attractive for institutional and retail investors at retail real-estate investors but retail investors to potentially want to have Jamestown invest in real estate form.

[Vince Tibone, Analyst at Green Street]

That's really helpful color thank you.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Sure.

[Operator]

Our next question is from Floris van Dijkum of Compass Point, please go-ahead.

[Floris van Dijkum, Analyst at Compass Point]

Thanks David. It was heartening to hear you talk about the benefits of physical real-estate over e-commerce, your perspective as always much valued on those -- you have better insight probably on that than anybody in the industry and obviously sales are at record -- tenant sales were at records, leasing remains strong. I guess the question I have for you is, last quarter I think you said your S&L pipeline was around 200 basis-points. Is that still the case because you're signing new leases as well as opening stores and then when do you think you're going to be able to achieve 2019 levels of NOI on a same-store basis?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Well. We're pushing the group to achieve that next year, okay. And Floris I would say to you, the biggest issue for us next year will be just getting our pipeline opened and a lot of these are really good retailers with really good stores and it takes time to build them and open them. So, that will be our challenge -- that will be our primary challenge to reach next year's -- to get back to 2019 levels, but I'm hopeful that we can do it and we are pushing very hard-to-do that which is I think pretty much ahead of schedule -- it's a very fair and good question to ask that because I ask that every single day, so you and I are in sync.

On the pipe..

[Brian J. McDade, Executive Vice President and Chief Financial Officer at Simon Property Group]

Yeah, Floris this is Brian. We're still running about 200 basis-points, we've added stuff and we've taken stuff out as we open, but we're running around 200 basis-points consistently.

[Floris van Dijkum, Analyst at Compass Point]

And the malls and the outlets relatively unchanged?

[Brian J. McDade, Executive Vice President and Chief Financial Officer at Simon Property Group]

Yes. Very consistent.

[Floris van Dijkum, Analyst at Compass Point]

Thanks.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Sure.

[Operator]

Next question is from Craig Mailman of Citi, please go-ahead.

[Nick Joseph, Analyst at Smith Barney Citigroup]

This is Nick Joseph here with Craig. Just on the Jamestown strategic partnership, what was the price and valuation for the deal and do you expect to move more into Asset Management and if so how large could that platform become?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

The first part was how big was the -- I'm not sure. You broke up there. Could you repeat your question. Hello?

[Nick Joseph, Analyst at Smith Barney Citigroup]

The Jamestown deal.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Yeah, we are not disclosing the private company and we both chose not to disclose it. So I think yes the size of the deal -- I'm sorry you're breaking up so, I'm guessing that's what you've asked. They manage roughly $13 billion of assets across their various funds and we are hopeful that over-time it's not just quantity but there is quality involved, but there's no reason why we can't turn that into one of the bigger asset management players. With their expertise and our expertise combined their reputation and our reputation combined, we think it will be an attractive platform to raise additional funds to invest in real-estate and I am hopeful that we can more than double it -- I'm not going to put a number out there but we didn't do it to be flat we did it because we expect to grow their assets under management and given the existing size, we think we can grow it with time, pretty significantly. Thank you.

[Operator]

Our next question is from Mike Mueller of JPMorgan. Please go-ahead.

[Mike Mueller, Analyst at JPMorgan Chase & Co.]

Yeah, hi David. On your comment about wildly positive leasing spreads I guess how recent of a dynamic is that where you would I guess describe them as being wildly positive?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

I would say, it really started at the beginning of this year. So look we -- again spreads -- ultimately you see it in our minimum base rent growth, right so that's everything so it takes time. But, if you -- and again we want you to focus on cash-flow growth as opposed to spreads, but if we were to track comparable space i.e. same-space, it would be wildly positive more than the $6 per-foot that I mentioned. But we don't -- we don't want to like be obsessed with that either, so we're trying just to focus everyone on occupancy -- minimum rent growth, we've outlined kind of where we get the variable income, where we get our contractual income it's all in the 8-K and it all manifests itself in the NOI and that's what we want you to focus on, but if you were to take the subset which is space per space it's pretty damn impressive.

And our renewals are positive overall, and so that's changed. You're right, over the last -- certainly in COVID we got -- those renewals were tough that happened to show-up during COVID but I am happy to report renewals generally and new deals with ending space and new space is wildly positive and that's manifesting itself in our comp NOI growth. Then you add that to the pipeline and that's why we feel good about next year. But unfortunately, the only negative next year will be getting stores opened and getting this 200 basis-point pipe open and operate and that takes time because the retailers that we're doing business with want to have a proper looking store.

But we are very pleased to see the spread story change.

[Mike Mueller, Analyst at JPMorgan Chase & Co.]

Okay, thanks David.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Sure.

[Operator]

Our next question is from Craig Schmidt of Bank of America, please go-ahead.

[Craig Schmidt, Analyst at Bank of America]

Great, thank you. Will Simon's total investment in redevelopment and developments grow in 2023 or might macro events like a potential recession cause a pause in new projects?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Yeah good question Craig. Right now, we think if we do run into a recession, actually from the standpoint of new projects -- actually we see a slight benefit and that may sound counter-intuitive but construction pricing for new projects is higher than what we want to see so I'm hopeful that any slowdown will demonstrate -- will reduce cost of new construction which we will then want to like move forward more aggressively.

So it's kind of counterintuitive but again I'm not looking forward, I don't want a recession, I hope it's not a recession but from the standpoint of redevelopment and new development we actually -- the counter-cyclicality of cost of construction may actually be one of the side benefits that we can take advantage of.

[Operator]

Our next question is from Juan Sanabria of BMO Capital Markets, please go-ahead.

[Juan Sanabria, Analyst at BMO Capital Markets]

Hi good morning. I was just looking at the leased income disclosed in the supplemental for the consolidated properties, that was up 60 basis points year-over-year but your domestic NOI was up to 2, 3 so I'm just -- and at the same time the leased income was down modestly, sequentially, so just hoping for a little bit more of an explanation I guess or tying the difference between the leased income and then the NOI reported and the cost controls or any other kind of unusual items that kind of drove that disparity between the leased income growth cash flows on NOI?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Yeah. I think you had less -- we had a reduction in overage rent, right would be one of the reasons.

[Brian J. McDade, Executive Vice President and Chief Financial Officer at Simon Property Group]

Reduction on rent, one, don't forget we mentioned that we took a charge for the Regal write-off which will reduce that line-item as well in the current quarter and then we do have -- certainly cost-containment as you can see-through the P&L, so all of that mixed together drove the levers to higher NOI growth.

[Juan Sanabria, Analyst at BMO Capital Markets]

Thank you.

[Operator]

The next question is from Greg McGinniss of Scotiabank, please go-ahead.

[Greg McGinniss, Analyst at Scotia Bank]

Hey good morning.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Good morning.

[Greg McGinniss, Analyst at Scotia Bank]

If you could just please touch on the reduction in overage rent again and how much of that is driven by, one reduced sales despite kind of tenant sales being up 14% year-over-year and then otherwise the conversion of pandemic leases back to fix and then maybe how much more of that kind of conversion we expect to see this year and into next year?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Well, look around strategy-wise we always try to convert our overage rent into minimum rent, so you certainly -- some reduction is associated with it. And then usually 21 obviously on sales was pretty strong. And in certain cases percent rent where we -- it's not so much overage, I'd say that percent rent -- we has some tenants that are just purely percent rent. They've had slower sales since 2021 and that's showing up in the numbers but we're still very pleased with the results so I think those are kind of the big-picture.

We'll continue to reduce percent and overage rent as leases rollover. On the other hand, our sales are rising and the retailer is focused on the higher income consumer continue to spend and that's good for us as it shows up in our cash-flow.

[Operator]

Our next question is from Michael Goldsmith, UBS, please go-ahead.

[Michael Goldsmith, Analyst at UBS Group]

Good morning, thanks a lot for taking my questions. The domestic property NOI increased 2.3% in the quarter, the portfolio increased 3.2% that's a deceleration from last quarter of about 130 basis-points, 140 basis-points but it sounds like there is a offset of 100 basis-points from the Regal write-off. So, maybe like 30 basis points to 40 basis-points slowdown so from the last quarter so I guess the question is, is this like the right rate of portfolio NOI growth that we should expect kind of going-forward or is there an expectation that things kind of continue to moderate from here?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Well again. I wouldn't focus too much on quarter-over quarter. There is volatility in our numbers because of overage rent and other factors, write-off like Regal which is highly unusual that it would manifest itself in a material number, but it's important to point out. So look I think you have to go back to the beginning of the year where we thought because 2021 was a really bannered year and we were very conservative in our comp NOI estimate of 2%. We're blowing through that number, we'll see what the fourth quarter brings, but it's -- our comp NOI growth is going to be really strong and we continue to expect it to grow next year as well.

So, you've got to look at this over a 2 year or 3-year period as opposed to quarter-over quarter or even year-over-year and we're making a tremendous amount of progress. Remember, we were one of the few industries that were literally mandated to shutdown and we're kind of back up and running producing results that are pre pandemic which is very good to see and we'll expect to see comp NOI growth next year even in the face of a potential recession.

[Michael Goldsmith, Analyst at UBS Group]

Thank you very much. Good luck in the fourth quarter.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Thank you.

[Operator]

Thank you. Our next question is from Linda Tsai of Jefferies, please go-ahead.

[Linda Tsai, Analyst at Jefferies Financial Group]

Hi good morning. In terms of the write-off from Regal, is this for all your Regals and are they rent reductions or rejected leases?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

This is all of our Regal. We took a reserve against outstanding receivables.

[Linda Tsai, Analyst at Jefferies Financial Group]

So, what would happen with -- it's still going to operate as Regals or?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Well, we don't know. I mean they're in bankruptcy -- we've -- my guess is they'll come out of bankruptcy -- it's an ongoing business but we have to wait and see I'm sure they're going to restructure their debt. We're experts in understanding bankruptcies but I would imagine they'll reorg and some of this come back -- pre petition, so in order for them to assume a lease, they have to clear up their pre-petition rent so it gets very technical and complicated, there is trade-offs. We'll just have to see how it goes through bankruptcy at this point.

But I expect them to continue to operate. There could be a couple of theater closures in our portfolio, some of that will be fine but we have yet to have a -- their debtor and financing is I think -- just about approved or was approved. So it's going to go through a process we have seen hundreds of times.

[Linda Tsai, Analyst at Jefferies Financial Group]

Thanks.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Sure.

[Operator]

The next question is from Ki Bin Kim of Truist Securities, please go-ahead.

[Ki Bin Kim, Analyst at Truist Securities]

Thanks, good morning. So, just wanted to go back to your comments about the lease spreads looking pretty positive this quarter. If you take a step back and look at it from a net economic basis, meaning regardless of minimum rent or income from percentage deals. As you're signing new deals how does the net economic benefit look like versus the comments you made about the lease spread looking positive? And what do you think that looks like going-forward?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Ki Bin, can you repeat your question you were breaking up a little bit?

[Ki Bin Kim, Analyst at Truist Securities]

Sure. Yeah is it better.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Thank you, yes.

[Ki Bin Kim, Analyst at Truist Securities]

So, just talking about the lease spreads, you guys mentioned that the spreads were pretty positive this quarter, I'm just curious about the net economic impact of the renewals or new leases, meaning as you convert some of the percentage deals into fixed, is the net economic benefit you're getting as good as the comments you made about spreads looking pretty positive?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Well sure. I mean, because we obviously take into account our existing income stream from that space which includes if we have overage percent rent. And we look at it in totality but we expect the total income stream to go up and could include -- it tends to be minimum rent increase and some assumption on overage. That's why rent spreads are kind of -- whatever you -- whatever you want it to be, okay that's why we chose not to do it. So, as an example when we disclosed it historically we included everything. We had minimum rent against minimum rent, we did not factor in overage which. Well, Taubman as an example. When they did their rent spreads, they included some assumption on overage. Well, when they disclosed it to their rent spreads, is that beneficial or not beneficial. I mean -- to me, it's like, hey it all shows up in cash-flow and so you see the cash-flow, see the NOI.

So that's why you have to be very careful with rent spreads that's why they're more manufactured than they should be. They, in some cases take assumptions and whether you want assumptions or not we'd rather not have assumptions, so we just say here's the math. Minimum rent and see our overage, see the NOI. Next question -- so but when we look at our -- when we go lease by lease, space by space we're looking at the total income stream before and after the renewal or in the case of a new tenant to see whether we are going up or down or it's flat. And what I'm telling you is the trend is up pretty straightforward way.

[Ki Bin Kim, Analyst at Truist Securities]

Okay, great and you guys mentioned that the lease percentage for your portfolio is about 200 basis-points higher than the 94.5%. I'm just curious if you look at the forward leasing pipeline of new deals that you're looking as we head into next year. What does that picture look like compared to maybe a couple of quarters ago and tied to that I also noticed your 2023 lease expirations didn't really budge all that much quarter-over quarter. Just like any preliminary thoughts on that role?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Yeah that's stuff out there we're very close to with some of the larger accounts just takes time to do renewals, paper and then all that stuff, so that's all moving no real concerns there. Go ahead Brian.

[Brian J. McDade, Executive Vice President and Chief Financial Officer at Simon Property Group]

And Ki Bin, you said the 200 basis-points, let me just clarify, that is included within the current occupancy level. It is space -- it is leasing that has been done but hasn't commenced paying rent, so that is next year or effectively will be partially next year.

[Ki Bin Kim, Analyst at Truist Securities]

Thank you.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Thank you.

[Operator]

Thank you. Our last question is from Haendel St. Juste of Mizuho, please go-ahead.

[Haendel St. Juste, Analyst at Mizuho]

Hey there, good morning. I have a question -- a follow-up on the leasing. The occupancy is up 170 basis-points year-over-year but your leasing comes only up about 60 basis-points. My question is, when are we going to see the impact of that occupancy gain? Is that part of your optimism embedded in your thinking for next year and your hopes for getting back to 2019 FY levels or that'd be more for full-year 2024 impact? Thanks

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Well, I think you've seen it and you'll continue to see it. So our comp NOI growth first-nine months is 4.4%, so you've seen it. For the first-nine months 4% growth. And then as Brian mentioned earlier and I had mentioned throughout the call, is we had this other pipeline that's basically leases that will open and start paying -- commencing rent in 2023. And that's why we're positive about the feeling that we'll continue to have future comp NOI growth for next year, even in the face of potential recessionary environment, okay.

[Haendel St. Juste, Analyst at Mizuho]

Fair enough. And I guess as a follow-on to that, the accrued expenses have to go up given what's going on with inflation in operating expenses, personnel. Is it your expectation that you can grow NOI between the fourth quarter here and middle of next year?

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

Absolutely. Yes, we said, we expect comp NOI growth next year and obviously that includes the expense side as well.

[Haendel St. Juste, Analyst at Mizuho]

Right, right. I was thinking more than six months, but nevertheless one more if I could squeeze it in for Brian. Maybe it's a bit far off, but the $600 million of unsecured maturing next June bearing interest of 2.75% what's the early thinking there and where do you think you could issue 10-year unsecured today?

[Brian J. McDade, Executive Vice President and Chief Financial Officer at Simon Property Group]

Sure. Look, we actively monitor market with all times and you've seen us numerous times react ahead of maturities or at maturity, so we would expect to continue to just keep our pulse on the finger of the market. Unsecured today is approximately 6% for us.

[Haendel St. Juste, Analyst at Mizuho]

Great, thank you.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

All right. Thanks and have you asked your questions there?

[Haendel St. Juste, Analyst at Mizuho]

Yes.

[David Simon, Chairman of the Board, Chief Executive Officer and President at Simon Property Group]

I think that was it on the question side. So thank you. It's a change of pace to do it in the morning, but we did in hopes that you got home early not to trick or treat and hopefully you had a great Halloween. So, thank you and we'll talk to you soon.

[Operator]

[Operator Closing Remarks]