Simon Property Group Inc (NYSE: SPG) Q1 2020 Earnings Call Transcript

Simon Property Group Inc (SPG) Q1 2020 earnings call dated May. 11, 2020

Corporate Participants:

Thomas Ward — Vice President Of Investor Relations

David Simon — Chairman of the Board, Chief Executive Officer and President

Brian J. McDade — Executive Vice President, Chief Financial Officer and Treasurer

Analysts:

Alexander David Goldfarb — Piper Sandler & Co — Analyst

Christine Mary McElroy Tulloch — Citigroup Inc — Analyst

Richard Hill — Morgan Stanley — Analyst

Michael William Mueller — JP Morgan Chase — Analyst

Linda Tsai — Jefferies LLC — Analyst

Derek Charles Johnston — Deutsche Bank — Analyst

Vince Tibone — Green Street Advisors — Analyst

Craig Richard Schmidt — BofA Merrill Lynch — Analyst

Robert Jeremy Metz — BMO Capital Markets — Analyst

Ki Bin Kim — SunTrust Robinson Humphrey — Analyst

Nicholas Philip Yulico — Scotiabank Global Banking — Analyst

Wesley Keith Golladay — RBC Capital Markets — Analyst

Michael Jason Bilerman — Christy — Analyst

Michael Jason Bilerman — Citigroup Inc — Analyst

Haendel Emmanuel St — Mizuho Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Simon Property Group, Inc. First Quarter 2020 Earnings Conference Call. [Operator Instructions].

I would now like to hand the conference to your speaker today, Tom Ward, Senior Vice President of Investor Relations. Please go ahead, sir.

Thomas Ward — Vice President Of Investor Relations

Thank you, Julie. Good evening, everyone, and thank you for joining us today. 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.

Before we begin, 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 related 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. [Operator Instructions] For our prepared remarks, I’m pleased to introduce David Simon.

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Good evening, and thank you for joining us today. I wish everyone listening today the best in these challenging times. Before I turn over to our first quarter results, I want to express my sincere gratitude to the entire Simon team for the work they have done and continue to do since the COVID-19 crisis began. The team has adapted to a constantly changing environment. We made difficult decisions and successfully transitioned to a remote work environment in our corporate and regional offices. We implemented new protocols to adapt how we operate our properties for the safety of our shoppers, employees and tenants, and I’m frankly very proud of the entire team, Simon team.

Now turning to our first quarter results. They were largely in line with our expectations. Reported FFO, funds from operation, was $980.6 million or $2.78 per share. As a reminder, the prior year period included $0.24 per diluted share from insurance settlement proceeds and a gain on a sale of our interest in a multifamily residential property. In the current period, the operations of our investment in retailers were negatively impacted by approximately $0.06 per share pretax due to store closures as a result of the COVID-19 government shutdown. Adjusting the current period for the COVID-19 impact, our investment in retailers in the prior year period for the insurance proceeds and the residential asset sale gain that I mentioned above, comparable funds from operation for the current year period is $2.83 compared to last year of $2.80.

Comp NOI was flat in the quarter and portfolio NOI decreased 20 basis points year-over-year. Occupancy is at for our premium and mall portfolio at quarter end was 94%. Average base minimum rent was $55.76, and our mall and outlet portfolio recorded leasing spreads of $2.80 per square foot or an increase of 4.6%. Reported retailer sales per square foot for our malls and outlets were $703 for the trailing 12 months ended February 29 compared to $660 in the prior year period, an increase of 6.5%. When you include March, even though we were shut down since March 18, reported retailer sales still increased 2.1%.

Our portfolio is performing well. We saw solid trends in shopper traffic, tenant demand, retail sales and our results, including our retail investments until the COVID-19 stay-at-home recommendations and orders began to be issued in the middle of March.

Now let’s talk about some of the actions we’ve taken. We were the first large retail owner and operator to close our property system-wide to address the spread of the pandemic. We’re the first to reopen our properties, of course, subject to government stay-at-home orders and restrictions. We took immediate and decisive actions to aggressively reduce our operating cost and increase our financial resources, including but not limited to, some of the following: suspended or eliminated more than $1 billion of capital for redevelopment and new development projects in the U.S. and internationally. Our current investment focus is on projects nearing completion. We will reevaluate all suspended projects over time. Importantly, our share of remaining net cash funding required to complete the new development and redevelopment projects under construction is approximately $160 million.

We significantly reduced property operating expenses and all nonessential corporate spending. We also made some very, very difficult decisions regarding our employees, including a reduction in force and furloughed a certain of our field and corporate personnel due to closures of our properties as a result of government stay-at-home orders. We implemented a freeze on all hiring efforts. We lowered base salaries across the senior executive team; implemented a shared salary reduction plan for higher compensated employees and deferred certain executive bonuses. Our Board also played their part by agreeing to temporarily reducing their cash retainer fees. And we drew down $3.75 billion under our revolving credit facility, which increased our cash position, including our share of joint venture cash to over $4 billion at the end of March.

Now some positive news on reopening. The health and safety of our communities, of course, will always be our highest priority. Last week, we started reopening our properties and markets where local and state closures orders have been lifted and will and where retail restrictions have been eased. As part of the ongoing reopening process, we published our comprehensive COVID-19 exposure control policy that was developed in connection with the leading experts in the field of epidemiology and environmental health and safety experts in order to ensure the highest possible safety standards at our properties.

You can see these on online but let me just name a few. Our safety protocols include preemptive employee health screening, employee safety protections, promotion and enforcement of social distancing practices, enhanced sanitizing and disinfecting and, of course, shopper safeguards. These protocols meet or exceed the guidelines published by the CDC and are more robust than many of the measures deployed by essential businesses and online fulfillment centers that have remained open during this pandemic. We implemented the temporary closures of our centers to protect our shoppers and the communities in which we serve from the spread of the coronavirus, and we are now leading the effort for these local economies to get back to business while delivering a new elevated standard of safety for all.

Now we have opened. As of today, 77 of our properties and are planning to have approximately half of our U.S. portfolio opened within the next week. We are, of course, working in conjunction with state and local governments and our reopening plans. Shopper response to our reopenings has been positive, and sales as many tenants have been better than their initial expectations. Additionally, we have opened 12 of our designer and international Premium Outlets.

Now let me turn to our tenant update. Of course, we’re in the midst of discussions with our tenants regarding their individual situation. And as such, it is not appropriate to comment on specific details or terms at this point due to the confidential nature of those discussion. Each situation is analyzed individually based upon our tenant’s market position, their financial status and the history and depth of our relationship. I am sure you can respect this. These discussions are ongoing. And as we complete them, we are more than prepared to share the appropriate information. Our tenants are eager to reopen their stores and we are working with them to do so. We are also very focused on helping local entrepreneurs reopen and are also supporting our restaurant operators, both nationally and locally.

Now let me turn to the balance sheet. We have always maintained a strong balance sheet in order to capitalize on opportunities but also to withstand economic downturns. On March 16, two days before we shut down our portfolio, we amended and extended our $4 billion credit facility with a $6 billion facility that includes a $2 billion delayed draw term loan. At quarter end, our total liquidity was $8.7 billion, consisting of $4.6 billion of available credit facility borrowing capacity and the $4.1 billion of cash mentioned earlier. As a reminder, the $8.7 billion is net of $1 billion of U.S. and euro commercial paper that was outstanding at quarter end. Commercial paper market is open and continues to find stability. Investment demand for our paper has increased, allowing us to successfully issue over $375 million during the last couple of weeks. We currently have approximately $500 million outstanding between our U.S. and euro CP programs. For the remainder of the year, we have $900 million of unsecured notes maturing and a limited number of maturing, nonrecourse secured loans to single-purpose entity borrowers. Our debt covenants remain well above, well above the required levels with significant headroom.

Now given the evolving nature of COVID-19 and the global economic disruption it has caused, it is not currently possible to predict with certainty the pandemic’s impact on the rest of our year’s financial results. As a result, we are withdrawing our full year 2020 guidance for estimated net income attributable to common stockholders per diluted share, estimated FFO per diluted share and comparable property NOI growth, which we provided on February 4, 2020. As of today, over 700 public companies have withdrawn their full year guidance.

Let me turn to the dividend. The Board will declare a second quarter dividend before the end of June and that dividend will be paid in cash. We expect to pay out at least 100% of our taxable income in 2020 in cash. As a point of reference, there have been over 175 public companies who have either suspended or reduced their common stock dividend by 50% or more. We will not be one of those companies.

Let me turn to the Taubman transaction. As you know, we announced a transaction with Taubman on February 10, 2020, and we will not make any comments or provide any updates on this call about the status of the Taubman transaction. We will provide information as and when appropriate.

Finally, concluding, before we turn it over to Q&A. Most importantly, I want to thank all of my colleagues for busting their a. I also reflect on the last few weeks and how our company has responded. two words come to mind, resilience and innovation. We have managed through many severe crises over the decades, whether natural disasters, bubble bursts, numerous recessions, etc. Each crisis had its own unique circumstances just as we face today with this pandemic. But one thing I know is certain, the Simon team will be focused on the long-term needs of our stakeholders, and once again, will come out ahead. And we’re now ready for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Alexander Goldfarb with Piper Sandler. Your line is now open.

Alexander David Goldfarb — Piper Sandler & Co — Analyst

Good evening, good evening. David out there. So two questions from us. And first, David, on the dividend, good to hear you talk about cash, given what we’ve heard from others on the whole offset between accrued rents still mandating taxable income versus cash. So good to hear that you guys are going to pay cash. Just a question as you guys have seen reopenings in Asia and your overseas centers. What lessons have you learned there? And what have you seen as far as shopper rebound? Has it been more of the core shopper coming back? Have people been pretty open to accepting all the accommodations and getting back to sort of normalcy? Or your view is from what you’ve seen overseas, it may take longer for the shopper and the tenants to rebound?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, I think in it’s actually we’ve been pleasantly surprised. We would like I think the retail community in Europe was a little bit more prepared to open so they’ve had a higher percentage of retailers open, Alex. And I think the biggest reason has been the rules there have been a little clearer, and they don’t have different municipalities basically directing different rules, so to speak. So they were a little bit more prepared. Plus in a lot of cases, their employees were not on furlough so it was easier for them to get up. But I think our sales have been somewhat better than what we’re seeing in Europe.

And in Asia, we’ve been basically open except recently, Japan closed, but we were doing, believe it or not, reasonably well in Asia until kind of the last month when both Malaysia and Japan had a shutdown. South Korea’s been fine. So I think as I think the retail community didn’t anticipate we were going to open. We kept telling them we were going to open. We opened. But the consumer has actually been very supportive. Obviously, they want to see more stores open, as do we. But I think it’s a process and you got to get started and you go from there. So some of the sales have been much better than what we expected and, in some cases, comped higher than last year. But that I’m not I do think for the retailers that are opening, they’re gaining market share. They’re taking advantage of pent-up demand. And I think others that aren’t ready are missing that opportunity. But that’s up for them.

We are not forcing the issue at all. But in terms of whether retailers open or not, but we want to help these local communities because frankly, they depend on our sales tax and our real estate tax. I think the municipalities and the governments ultimately are going to appreciate what we’ve done over year after year, delivering sales and property tax payments, and they don’t have that at the rate that they’re used to. And I think finally, we’ll garner some respect that we deserve.

Alexander David Goldfarb — Piper Sandler & Co — Analyst

Okay. And then the second question is obviously, a lot of tenants, I guess, have not paid. You haven’t disclosed the level but I’ll let that be. But have you noticed your tenants reaching out to their banks, their lenders to get default waivers? So if they’re not paying you, the landlord, they’re not being a default of their own lending standards? Or have you seen most of your tenants not apply for those waivers from their end?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

I think they generally, what I hear for the financially solid retailers, there’s not an issue in terms of them getting the capital. And look, I will tell you, I mean, we’re not giving a percent of what we’ve collected. And let me just expand on it for a second, if I could. First of all, we’re much better than what the prognosticators I’ve read some things thinking, well, this is where we’re at. We’re doing better than that. But I also don’t think it’s appropriate to air our discussions in the public format. And also, you have to put in mind what percent we collect in April or May. It almost, in a sense, it’s not something overly to focus on because the reality is we have a lease and they have to pay. So we don’t have to get semantics.

And the way I also think about it, yes, obviously, if they decide they’re going to they are in bankruptcy, then that’s when they get the right to reject the lease. But here’s also how I think about it. I just want you to understand this, Alex. Say we got 50% and it’s a hypothetical, if I was a retailer and I paid the 50%, I’d be basically upset that there were 50% that didn’t pay on one hand. On the other hand, if I didn’t pay the 50%, I’d almost still justify in not paying because the reality is I’ve got another 50% of the retailers that didn’t pay.

So we know what we’re doing here. We will navigate this. This is not easy, but I just think it’s better to have our discussion directly with the retailers. And the bottom line is we do have a contract and we do expect to get paid. And that but I know somehow the market morphed into this number. But the reality is our business is a lot more complex than some of these others. And remember, our rent roll is a month of our rent roll is sometimes greater than these guys for the entire year. So we’re a little more complicated, a little bigger. And we’re I think we’re navigating it appropriately. So again, I wanted to give you context to that and I hope that was helpful.

Alexander David Goldfarb — Piper Sandler & Co — Analyst

It was, thank you, David.

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

I also want to say the only reason I’m yelling is because I’m far away from the speaker in the social distancing in our boardroom. For whatever reason, the guys put me away from the speaker. Okay, next question.

Operator

Our next question comes from Christine McElroy with Citi. Your line is now open.

Christine Mary McElroy Tulloch — Citigroup Inc — Analyst

Understanding that you have significant liquidity through your cash balance and your expanded credit facility. As you get closer to the expected closing date of the Taubman merger, can you talk about your desire to issue longer-term debt? We’ve seen the other higher-rated REITs access the unsecured bond market. Is that something that you would pursue near term? And where do you think that you could issue debt today in terms of accessing permanent capital in this market?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, again, I don’t know if you’ve heard my opening remarks, but I…

Christine Mary McElroy Tulloch — Citigroup Inc — Analyst

I did.

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Okay. So I have nothing to say on the further on Taubman. We’ll let you know when we have information to provide. So there’s not much more I can say on that front.

Christine Mary McElroy Tulloch — Citigroup Inc — Analyst

Well, I guess, just in terms of accessing debt capital in this market, have you looked at doing a bond deal?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, at some point, we’re going to do a bond deal because it’s natural for us to do one every year. So we’re in no rush to do one. We’re constantly marketing or manage reviewing the market. We can’t issue paper but we’re going to be smart about it. We’re certainly not under the gun to issue any paper. Our ratios are as strong as anybody that’s out there and we’ll just continue to monitor it. The good news is the market’s there. And that’s why in a company like ours to have access to both private capital, unsecured public debt market, mortgage market, having all of those available to us is a real advantage.

Christine Mary McElroy Tulloch — Citigroup Inc — Analyst

And then your contribution from straight-line rents, it looks like it was down from the recent quarterly run rate. To what extent was that impacted by a write-off of straight-line rent receivables? To what extent have you moved any of your tenants to cash basis accounting? And how are you thinking about that collectibility assessment in the current environment versus previously?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Yes. That’s essentially the new accounting rules that we enacted last year, and we don’t get into specifics about writing off straight-line rent receivables.

Brian J. McDade — Executive Vice President, Chief Financial Officer and Treasurer

There wasn’t any.

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

And there wasn’t any. Okay.

Operator

Our next question comes from Rich Hill with Morgan Stanley. Your line is now open.

Richard Hill — Morgan Stanley — Analyst

Two questions for me. First, I noticed in your supplement that you did not discuss occupancy costs, so I was hoping you could maybe update on what you saw in the first quarter.

Brian J. McDade — Executive Vice President, Chief Financial Officer and Treasurer

13%

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Brian?

Brian J. McDade — Executive Vice President, Chief Financial Officer and Treasurer

It was about 13%, consistent with prior years.

Richard Hill — Morgan Stanley — Analyst

Perfect. David, I wanted to maybe take a bigger picture question. Look, in the past, you’ve been active with retailers, both Aeropostale and Forever 21. there’s obviously some distress in the retail market right now. I can’t help but think that you see this as a medium- to long-term opportunity. Could you maybe update us on your thinking on retail investments at this point in time?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, look, I think our number one priority, if you saw or you listened to the early the call, I mean, our retail investments were significantly impacted because of the their having to close stores. And I mean, the companies Nautica, Aeropostale and F21 are in good shape. We have plenty of liquidity to manage this situation. But it’s not I mean, it’s our focus is to make sure that they’re doing what they need to do to position their business for profitability. They were not profitable in the first quarter. That’s why we pointed that out last year was basically breakeven. So we had basically a $0.06 change year-over-year, quarter-over-quarter.

I think our focus right now is on Rich, is on those operations. We’re not going to rule it out. We’re only taking inbound calls. So if people want us to think about something, we’re happy to do it. But we’re not out there running around soliciting investments. Priority is on what we got across the board. And but I’m sure there will be opportunities, and we’re in a position to be opportunistic if we think it helps our business.

Richard Hill — Morgan Stanley — Analyst

Got it. That’s helpful. And maybe just one more quick question, if I may. To pay do you have a sense to pay 100% of your taxable income? What percentage of your rent you need to collect in 2Q?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, I mean, frankly, we don’t have to collect a nickel. I mean but we are, but we don’t we obviously, it’s going to impact our taxable income over the year. It’s not a quarter-to-quarter issue. We’re going to make an estimate by basically June-ish, mid-June, what our taxable income looks, and we’ll be smarter a month from now and that’s basically why we’re doing what we’re doing. And we will I think we will have been through most of whatever discussions we’re doing with our retailers. We’ll know at that point how many properties are not open so we’ll be able to narrow that down. We have a decent handle on it now, but the fact of the matter is as long as we declare it in the second quarter, I’d rather be smarter on it. And we think another month of making sure we know what’s going to open when will give us a chance to really fine-tune that, and then we’ll go from there.

Well in our again and again, in my text, I gave you an indication of what it won’t be, okay? So I’m not really certain what it will be. But I told I gave you a really good hint of what it won’t be so I hope you understand that. And it’s the it’s there for people to consume, I guess. But put yourself in our shoes. I mean, we today, we still don’t have half of our portfolio up and running. So it’s a little unusual. But I think in another month or so, we’ll be able to fine-tune it.

Operator

Our next question comes from Mike Mueller with JP Morgan. Your line is now open.

Michael William Mueller — JP Morgan Chase — Analyst

I guess, first, what are the reopening expectations for the tenants that are on month-to-month leases and the carts and kiosks?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

I’m sorry, you weren’t you didn’t we got we didn’t get all of it, Mike. Can you something about low say it one more time.

Michael William Mueller — JP Morgan Chase — Analyst

Yes, I was going to say. Yes, what are your expectations for the tenants that are on month-to-month leases and them reopening?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, most of those are local and entrepreneurs and actually, I mean, that’s the great thing about America. They want to open. They don’t they want to go to work, they want to open. We’re very focused on helping them. I mean, obviously, we’ll screw somebody up somewhere just because we’re because of our we won’t do everything perfect but we’re going to help that group. They want to open. And I’ve been very pleased and our team has been very pleased by the amount of local and month-to-month people that want to open. So I think that’s their livelihood, and boy, do we appreciate that. And we want to now again, some are waiting for PPP and so on and so forth. But pretty good interest on that front.

Michael William Mueller — JP Morgan Chase — Analyst

Got it. And for the centers that you reopened about, what percentage of the tenants opened up as well?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

It varies all over the place. And every week, we’ll get better. Again, we it was very interesting. I don’t think the community, even though we were trying to keep them up to speed and even though some days, we had to change what we thought was going to happen because it changed and there was a very chaotic up and down, waiting for governors to order real actions. Some doing it, some not doing it, some deferring it to municipalities. I think we managed it as well. I can’t tell you how, across the board, the many states that really were impressed by our COVID response efforts across the board. And I talked to many governors, many chiefs of staff and I think it was universal praise. And frankly, our team worked very hard to do that. But I think our retail community just was waiting a little bit. And now it’s coming and I’m feeling good about it.

But every property is different. I don’t have a number that says of the 77, here it is, but it’ll get better each week. And the good news is our department stores I will tell you, our department stores, we’re actually Dillard department stores was ready with us. Macy’s is there with us. Belk is opening. Nordstrom is going to be opening in the next few weeks. Even Neiman Marcus is opening. So that whole group we saw really good reception, communication and wanting to get open. I think people want to get open. They want look, we have a job to do and how we operate differently than what it was a year ago. We understand that. We’ve got to monitor that. But people are ready to open and compete with the broad array of options that the consumer has. The biggest misnomer in this whole thing was that industry was shut down, not really just certain industries were shut down. And our I think our folks are ready to compete and we’ll see what happens.

Operator

Our next question comes from Linda Tsai with Jefferies. Your line is now open.

Linda Tsai — Jefferies LLC — Analyst

Given where your stock trades on an implied cap rate basis, what’s your willingness to buy back shares at the current levels?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, I think we’re going to be relatively conservative, just given kind of the nature of the pandemic and making sure we get the portfolio open. Look, we did buy shares back in Q1 early. So we believe in our business. We also will say that when we look at what we’re planning to earn, and again, this is subject to change, but what we’re looking to probably earn this year and next year, obviously subject to fine-tuning, we are tremendously undervalued. But we get it right now, we’re going to be conservative. And there’s just no reason why we should be trading at this multiple. But we get it and we’ll be conservative and it is what it is. That’s not our primary focus right now. Getting the portfolio open, taking care of our employees, dealing with the retailers and the communities. That’s the primary focus.

Linda Tsai — Jefferies LLC — Analyst

That makes sense. And then I realize you’re delaying the bulk of redevelopment spend, but how do you feel about 7% to 9% yields on redevelopments longer term?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, I still feel reasonably good that our pipeline that we had was something that would be beneficial to the company and its shareholders. I mean, obviously, we’ve got to see where we are. We’re still early in this, even though I think we’ve turned the corner because we’re almost half open, but we still got a lot of properties to open. We do think this pandemic will affect certain properties differently. Obviously, you’ve got the northeast where we don’t know when we’re going to open there. And some of those projects that we’re focused on will be might change. A property in Oklahoma, maybe all systems go. A property somewhere else, because of various factors, we may put on hold for a while. So it’s really going to be it’s really going to be like it always has been but even more today than ever, it’s going to be really focused on the nature of the particular property where it’s located, the consumer demographics, all of this stuff is changing, and we’ll just have to see. It’s also going to be impacted by is it in an indoor center or an outdoor center. So all of these things are, at least currently with the pandemic, all basically things that we’re going to have to take into account for the future. And things are different, we recognize that.

Linda Tsai — Jefferies LLC — Analyst

I just have one last 1. What are your expectations for remaining 2020 lease expirations?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, I mean, it’s going to be a retailer it’s going to be retail I’m sorry, retailer by retailer. I’m sure we’ll have some fall off, but generally, we have a prosperous portfolio for the retailer. I think the big issue is what they estimate their sales to be in this year. And obviously, the more they get comfort in that, I think the higher probability that we’ll have the success that we’ve had historically.

Linda Tsai — Jefferies LLC — Analyst

Thanks. Sure.

Operator

Our next question comes from Derek Johnston with Deutsche Bank. Your line is now open.

Derek Charles Johnston — Deutsche Bank — Analyst

So David, your subsector has endured a heavy toll and being at home for a while, I think people probably do want to get out and hopefully shop. So I mean, the question is, how does your cycle-tested team pull us out of this? And what are the plans to make customers and retailers comfortable and, I guess, more importantly, excited to get back to malls?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, I’m just, Derek, when you say subsector, what are you referring to?

Derek Charles Johnston — Deutsche Bank — Analyst

I just mean malls, in general, have really taken a heavy toll.

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, Derek, we are not a mall company. We are predominantly a retail real estate company, but we’re not I wouldn’t, by any stretch of the imagination, consider us a mall company. So that’s essentially how I would answer. I mean, we are focused on retail real estate but we are not a mall company, and I think we’ve been consistent on that for years.

Derek Charles Johnston — Deutsche Bank — Analyst

Okay. And second…

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

And then I think the other point on your answer is, I think it’s going to certain properties in certain areas are going to be just fine. And then others might take longer to get up to speed and indoor/outdoor centers in that are dependent on tourism could be different. I think every property, you cannot first of all, you got to understand we’re not a mall company. And number one, we’ve never said that for years and years and years. And number two, every property, it’s going to be somewhat affected differently. And the demographics and what happens in that local trade area. Does oil go back up to $50? Again, there’s no blanket statement. Everything really has to be looked at kind of regionally and so on.

Derek Charles Johnston — Deutsche Bank — Analyst

Okay, understood. So a lot of investors are going to glean negative assumptions and speculation from your lack of commentary on the Taubman merger. So without talking about Taubman at all, what would you say to those investors here and now directly?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

I’ve said what I have to say, Derek.

Derek Charles Johnston — Deutsche Bank — Analyst

Okay, thank you.

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Thank you.

Operator

Our next question comes from Vince Tibone with Green Street Advisors. Your line is now open.

Vince Tibone — Green Street Advisors — Analyst

What was the rationale for reducing the redevelopment pipeline so drastically? Was it primarily a balance sheet-related decision? And how do you think about the impact of taking a pause from redevelopment could have on the long-term positioning on some of these properties?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, Vince, believe it or not, I’m a grizzly veteran and I’ve seen I am proud that we’ve always been able to flip our toggle switch on and off, depending upon economic scenarios. And the reality is we have a great pipe. It will end up being dependent upon the particular property. And we can switch it on completely. Also remember that the fact is construction was, in a lot of places, forced to shut down and we felt it was appropriate to be conservative in the spend. And the reality is we can turn it off, we can turn it on. We’re never going to get over our skis on that front. And we’ll have, as I think about it, we’ll have two or three bigger decisions to make in Q3, Q4 on a couple of projects, one internationally, two domestically. And the rest of them, we’ll restart when we feel good about the environment.

Vince Tibone — Green Street Advisors — Analyst

That makes sense. So just staying on redevelopment for a second. I mean, how do you see anchor redevelopments changing post-COVID and when the economy starts to rebound? I mean, can you just discuss kind of some high-level backselling plan if there’s an acceleration of department store closures?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, I mean, Vince, you guys are smart. I’m not sure I agree with a lot of your research but I do appreciate you do a great job. Look, it’s variable that there will be some and it all depends on the opportunity, it all depends on property-specific information. We do think that department stores still play a meaningful role in a number of properties. They also, whether through lease or not, there’s some good real estate there, and we were, as you know, on the very focused on redeveloping those boxes. That will continue to be a long-term focus for us without question.

We have great real estate. We’re more than a mall company. And the ability to redevelop our great real estate is a hallmark of this company and something we will continue. There’s nothing wrong with taking a pause while we sort our way through a pandemic and we’ve dealt with a lot. I honestly say I haven’t dealt with this, but we’re back up and running almost half the portfolio. We’re feeling good about what we’ve done, feel good about the balance sheet, feel good about our people and what they’re trying to accomplish. And again, I think the ability to redevelop real estate that we get back will be an important component of what we do to add value going forward. So we’re not deterred by the current events but we are taking a pause as it sorts its way through.

Vince Tibone — Green Street Advisors — Analyst

Okay that makes sense. I appreciate the color. No worries.

Operator

Our next question comes from Craig Schmidt with Bank of America. Your line is now open.

Craig Richard Schmidt — BofA Merrill Lynch — Analyst

You’ve been open for two weekends. I wonder if you could comment on how the consumers are being received by the different formats, outlet malls, whatever and by the different geographies.

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, I would certainly say, outdoor folks, outdoor centers feel a little bit more comfortable. And I obviously would say that the states that we’re opening, that it is so dependent upon the kind of the state and where things are. And generally, the suburban outside of kind of the major dense area seem to be doing better. I do think there’s pent-up demand. I’d say the consumer is probably a little more moderate as opposed to high end. Yet in our outlets, we’re seeing some really good traction with some of the higher-end brands as they sell their goods. So I do think that may be from a moderate customer that’s having the ability to shop there. But it’s a little early to say but some of our good bread and butter states, we feel pretty encouraged by.

Craig Richard Schmidt — BofA Merrill Lynch — Analyst

Great. And then I just wondered if there are any plans to expand or extend curbside shopping, helping the consumers transition to shopping in-store again.

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, sure. I mean, in some cases, that’s all that you can do. And we’re there to help the retailer if they need our help. But in a lot of cases, they already have their own protocol. So look, I think it’s helpful and beneficial but it’s more important ultimately for us to get our properties open fully.

Operator

Our next question comes from Jeremy Metz with BMO Capital Markets. Your line is now open.

Robert Jeremy Metz — BMO Capital Markets — Analyst

David, I was hoping you can maybe discuss the reduction in the operating costs a little more in terms of what you’ve been able to do. And if you can quantify the actual savings that you expect here on the full year of operations versus maybe your initial budget. And along those same lines, with most of your tenants on fixed CAM reimbursement, is there any carry-through there or no? And maybe you can just also quantify the reduction in the corporate spending. Just help us get a better feel for what that actually looks like.

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Yes. Jeremy, as you know, we withdrew guidance so we really can’t do that. But obviously, when your property is not allowed to operate and open and we have the ability to reduce all sorts of costs and that’s really it on the one hand. On the other hand, if you take if you’ve seen our protocols and we do open, we’re going to have additional costs of running the centers. And it’s hard for me to give you a number because the reality is, I don’t know when we’re going to be able to open the entire portfolio. But as soon as we do that, we’re going to we’ll try to give you the new normal. But we are when we are opening, we are one shift so that does save us. I’m hopeful that at some point, we’ll come away with that because that’s a good sign but we’re not quite there yet. But when we do open, we have extra maintenance, cleaning, etc. So it’s there’s so many variables right now. It just I can’t really do it. And it’s hard to do it right now without knowing the entire when the entire system opens up and how it opens up and what our restrictions are going to be.

By the way, we don’t think they should be just to be go on the record, we do think we should be able to be open. We have terrific protocols. They’re as good as any of our other competitors, which are the online-only operators and the big boxes and so on that continue to operate. We have the same distancing. We’re limiting the amount of personnel. We have we’re handing out masks. We’re doing everything that all of the other competitors are doing, including the major online competitors. So we do think we should open. I mean, I want to go on record saying that. And we do think we should calibrate that, obviously. We’re prepared to operate clearly within any government protocols, but we do feel like we should open. And clearly, our outdoor centers should clearly open. But in any event, I just can’t give you the number because I don’t really know when we’re opening. We are saving some money. But as we get opened, a lot of that will go back into the property to maintain the protocols. But we’re helping we’re doing our share in those communities.

I hope the communities appreciate what we’re doing. I hope they appreciate what we do not only in sales tax but in property tax. My favorite obviously is in Long Island, where I won’t name the mall but we send probably, in total, over $60 million in property taxes for a couple of properties. My guess is with right protocols, we ought to get a chance to see what we can do, especially as our competitors are open and selling stuff that’s clearly more than nonessential clearly more than nonessential. A long-winded answer to your very straightforward question, which is, I can’t really give you that.

Robert Jeremy Metz — BMO Capital Markets — Analyst

No, I think that’s fair. And are you just are you willing to comment on the employee side as you reopen properties and taken employees on furlough? Have you seen any attrition or are employees simply not returning? Has that something that’s kind of percolated out there as a possible concern?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Yes. Listen, I think just the whole employee thing, even in the when I went back to Indianapolis was 1990. And obviously, retail real estate, that was a serious recession and we had to go through very painful downsizing. This is since that, basically, 30 years ago, we’ve never really had a reduction in force, even in the recession of the Great Recession in ’08, ’09, we didn’t have a reduction in force. So we went through that. I feel personally terrible for it. And then you couple that with the furlough that we had to do. So just a very painful scenario. And I do think we as soon as we get our system open, I’m hopeful that we’re going to call as many people back as we can from furlough. I hope they not that they should, but I hope they at least can understand why we did what we had to do. And I hope they do come back. I do think we’ve been pretty good so far on what we’ve opened.

And I think as our level of activity increases, we’re going to bring as many folks back as we can. We did have a permanent reduction in force. We do not plan on bringing those folks back. And obviously, that’s not something we wanted to do. I didn’t think I had to do that again. We built this company not to do that but we felt like we had to do that. And I apologize to the folks that were impacted by it. There’s no good excuse.

Robert Jeremy Metz — BMO Capital Markets — Analyst

Yes, no. And the second one for me, just a little more positive to go back to your opening comments about innovation coming into mind in the last few weeks. Maybe you can just expand a little bit more what that means, what you’re doing differently. And then just what else, maybe bigger picture, you’re looking to do as you start to think about potential changes to the modeling and how to adapt your centers or curate them possibly differently, including just you were going down the path of adding some mixed use. Does this change that aspect at all or just too early to make some of those calls?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

No. As I mentioned earlier, Jeremy, I do think the whole redevelopment of our properties will continue to be very important. I would look at what we’re doing now as a pause, making sure that we have a better feel for the landscape. And the fact is you can’t redevelop anything if you can’t open your property, okay? So please understand we’re still confronted with that dilemma. I think we’ve just been so innovative on how we opened the portfolio. I mean, we’ve been the ability to do what we did as fast as we did, as high level as we did, I don’t think anybody really could appreciate that in scale and scope. I think in what we’re trying to do with our retailers, again, I’m sure there will be a difference of opinion on that, but what we’re trying to do in terms of listening to what their issues are, maybe not a green but certainly trying to have a constructive dialogue, segmenting the retailers out in various categories, putting the right people involved. Again, we’re not going to bet 1,000 We’re going to have some conflicts because we do believe in our contracts. But we’re clearly trying to do that innovatively. We’re really focused on the local community, trying to be innovative there, and then just listening to consumer and what we could do and learn from there.

And then I think technology will be added to our properties to enhance their to enhance the consumer experience and certainly to keep them safe. So there’s a lot more to come, but we are basically eight weeks into this, right, almost eighth week?

Brian J. McDade — Executive Vice President, Chief Financial Officer and Treasurer

Yes.

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

And we’re learning a lot and doing a lot. I expect that to continue.

Operator

Our next question comes from Ki Bin Kim with SunTrust. Your line is now open.

Ki Bin Kim — SunTrust Robinson Humphrey — Analyst

So David, whether a mall or retail real estate center is open or not, one of the challenges that you face is just diminished capacity, right, just less traffic than normal. So I’m just curious just conceptually, I don’t really care about the April or May rent collection, but just conceptually, how are you thinking about what rent should be during this kind of transitional phase? And is your approach more along the lines of, A, if the city is open and the malls open safely, rent is due or something a little bit more accommodating?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, again, I think the short answer is I think I’ve addressed a lot of this, but the short answer is it’s very much a property-by-property and a retail-by-retail process that we go through. We used the judgment that we’ve had 60 years of experience. We will not always get it right but we try to rely on that. We also, from the retailer, what how they’re treating us. I mean, it’s a 2-way street. And we try to put it in a blender and find out a solution. I’m hopeful we can do that but there’s no guarantee that we can. And I think the receptivity from our properties is really going to be I mean, I do think it’s going to be a lot of it will depend on the consumer demographics and where that property is and what the psyche of that consumer really has been affected. I can assure you, at least based on what I’m seeing, that in certain properties that we opened, the psyche of that consumer hasn’t really been affected. It may be affected elsewhere.

Ki Bin Kim — SunTrust Robinson Humphrey — Analyst

Okay. And you’ve talked about the benefits of the Simon Platform and the scale that you have and how much of an advantage it is. Just broadly speaking, do you think in this type of environment where there’s going to be some economic challenges, companies that don’t have the same scale, maybe smaller, could be disproportionately impacted?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Yes, without question.

Operator

Our next question comes from Nick Yulico with Scotiabank. Your line is now open.

Nicholas Philip Yulico — Scotiabank Global Banking — Analyst

I just wanted to go back to this topic of rent deferrals. I mean, you do, in the 10-K, disclosed that you have given some rent deferrals. You’re not saying what they were or not. But I guess I’m just wondering what drove the decision to do rent deferrals, which you did do some so far versus conversations that you still have with tenants where you haven’t made a decision yet what the outcome is going to be?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, it’s a retailer by retailer discussion. I mean, we had we went out of our way, knowing the extraordinary changes that this pandemic has created. And given our financial wherewithal, we went out of the way to offer deferral for a lot of our retailers. And we felt that was we had the balance sheet and the cash flow and everything else to do it. And we just felt it was the right thing to do, even though there’s nothing in the contract that alleviates their contractual right to pay rent in the 90%, 95th percentile of our leases. So we just felt like we can help, simple as that.

Nicholas Philip Yulico — Scotiabank Global Banking — Analyst

And in terms of, just going back to the timing of, I think you said by the time June comes around, the Board is going to have more information on taxable income, other items, I guess, about ultimate collection of rents. What how much though is that going to depend on the reopening of your centers? And I guess as well, how much of your if you have already given some deferrals, I mean, how much of the portfolio is kind of in question right now in terms of where ultimate rent collection is going to be? And why is it that when you get to June, you think you’re going to have the Board is going to have more confidence in ultimately where your income may settle out this year?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, I mean, because the reality is we’re opening centers now, which was the first hurdle. We’ll know every week, we’re opening more centers. We’ll make further progress on where we are with our retailers. The amount of information that I had today versus what I had a month ago is exponentially higher. I would expect the same thing to occur. And it’s the most thoughtful thing to do since it will still be declared in our second quarter is to have another month of information or thereabouts on all the factors that go into our taxable income. And again, I mean, I indicated earlier, I don’t know if you listened to my opening remarks, where we think it is today, but another month or five weeks from now, I’ll know more. Not that complicated.

Nicholas Philip Yulico — Scotiabank Global Banking — Analyst

Okay, thank you.

Operator

Our next question comes from Wes Golladay with RBC Capital Markets. Your line is now open.

Wesley Keith Golladay — RBC Capital Markets — Analyst

I just have a few quick modeling questions. The first one is, do you have much exposure to hotels? I imagine it’s pretty small but with RevPAR down 90%, it might start to show up in the numbers.

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Very small, but we the ones that we do have are not open. I think one is actually. But yes, it’s very small, very small.

Wesley Keith Golladay — RBC Capital Markets — Analyst

Okay. And then going to lean into your accounting expertise here. Now that the pipeline is smaller, will you be capitalizing costs going forward? Or with the projects in a suspension mode, can you still capitalize the cost?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, you can’t capitalize the cost if it’s suspended. It’s not going to be a material change one way or another.

Brian J. McDade — Executive Vice President, Chief Financial Officer and Treasurer

Wes, we would keep capitalizing costs on those projects that are still active as of writedown.

Wesley Keith Golladay — RBC Capital Markets — Analyst

Okay, thank you very much. No worries.

Brian J. McDade — Executive Vice President, Chief Financial Officer and Treasurer

Thank you.

Operator

Our next question comes from Christine McElroy with Citi. Your line is now open.

Michael Jason Bilerman — Christy — Analyst

It’s Michael Bilerman with Christy. David, I think we all want to know how you do home schooling rather than what you’re doing on the business side.

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Home schooling?

Michael Jason Bilerman — Christy — Analyst

What you’re doing. How you are as a teacher rather than you are as a CEO?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

That’s very good. I’m not sure what I do well.

Michael Jason Bilerman — Christy — Analyst

So as you think about on the dividend and you talked about the June making decision, why not wait until the end of the year because it’s an annual election, not a quarterly election, and sort of figure out when all said and done? Because I don’t think any of us know the depth and length of this pandemic and things, we could get a resurgence in the fall. They get a resurgence from all the reopenings right now. So why not wait until there’s perfect clarity for annual taxable income?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, I think we’ll be in a pretty good spot. I mean, we have a we’re bucketing it now. We just want to reaffirm our buckets and get more information. I want to you did say something about our openings, unequivocally, you’re not going to increase, in my opinion, the potential spread of COVID. And communities may go up but don’t blame, don’t unless you have science, don’t blame our openings on an increase in that community’s COVID. I don’t I’m not sure that I would create that causation, okay?

Michael Jason Bilerman — Christy — Analyst

No, I’m not saying if your asset

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

I just you said something and I just wanted to make it clear.

Michael Jason Bilerman — Citigroup Inc — Analyst

No, I’m saying just generally, general remark.

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Look, I think it’s possible, right? I mean, there could be markets where there is a spike and it’s reduced. But I mean, common sense would indicate we’re just going to have to figure out how to live with this threat for a while. And again, I mean, I’m not in charge. But we’ll do what we need to do. And if there’s better technology or if there’s a better idea. There are protocols, and I said this to states, municipalities and we study what everybody is doing, but the reality is if there’s a better way to do what we’re doing, we’ll do it, that simple. And because it will change. I mean, there will be better protocols than what we initially set forth.

But Michael, I do like look, I think it’s important to the investment community to do the I mean, it goes back to your first part. I mean, I do think there’s good it’s good to have a quarterly cadence. We’re in a position financially to do that. And the reality is that we think it’s the right thing to do just to fine-tune it, get more data over the next four to five weeks and go from there.

Michael Jason Bilerman — Christy — Analyst

Right, and pay it in cash greater than 50% of where it was before, which was in your opening comments?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, I think we said we won’t be like the probably by the time it’s June, it will be over 200 I said it won’t be, at least 200 companies that will be less than 50% based on what we know today, on our modeling. So we’ll pay it in cash and we’re going to pay our taxable income, and we’re not going to do the weird stuff that you pay whatever they call that thing. What do they call that thing? It’s straddling of one tax year to the next, whatever…

Michael Jason Bilerman — Christy — Analyst

As you think about going into this pandemic, obviously, the retailers, a number of them were struggling. And I think one of the frustrations you had was on e-commerce businesses that a lot of these retailers were operating were generated a lot of the sales by your assets. And so while the sale didn’t take place at your mall or outlet or center, they were developed from that interaction. As you think about where we are today with most of the retailers on having access to their storefront, obviously, the e-com activities are growing pretty substantially and getting a lot bigger adoption by consumers. Is there an opportunity, as you go forward in these restructurings or deferrals or whatever you’re dealing with your tenants, to restructure all of the leases with the retailers to bring things to sort of the current marketplace relative to when those leases were first signed?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, look, I think that let’s just say this. The Internet for retail, whether it’s a marketplace or direct-to-consumer or any other method is a big competitor to our entire industry. It is part of our industry. And we always have to compete with it. And our greatest asset is the physical one and service and those kind of things. And we will have to see how that evolves. I do think a number of retailers are frankly shipping right now. Even if we’re in a place where we’re not allowed to operate, a lot of retailers are accessing their store and shipping directly from that store. So it’ll be interesting to see what happens with that, whether even though we were not able to operate, they’re in there operating. I’m sure there’s social distancing and all that stuff, but they’re in there operating, selling e-commerce.

So look, it is the Internet. Certainly, it would be hard to intellectually argue that it’s this scenario has increased adoption for it. And we’ll but we’re we compete, and we’ll figure out how to compete. And the stores are important to the retailers that have both. And I think that will remain the same. I do think perhaps, there is some thinking out there that they don’t need as big a storefront or store network. I think that to backfire on them in the long run because it’s kind of out of sight, out of mind. And but we’ll see. I am sure there will be some retailers that will get the sense that the fleet, the store network is not as important as it was three months ago. I think that we’ll see how that shakes out and what role we can play in that. I think they might be making the wrong decision, but that’s not for me to say. That’s just my own instinct.

Michael Jason Bilerman — Christy — Analyst

I mean, look, you hear about people saying, “Less office space. We never have to go back to the office. There’s not going to be any stores.” So I don’t see us being in our homes 100% of the time working and shopping. I do think we live in a society that craves some of that. But there’s going to be significant change as we come through this because a lot of your tenants unfortunately don’t have the wherewithal to get through. A lot of tenants just don’t have the wherewithal, whether they’re office tenants, living in an apartment. I mean, there’s it’s a real recession going on. And so it’s just getting from point A to point B.

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

We are clearly aware of that, for sure.

Michael Jason Bilerman — Christy — Analyst

Last question, and I get your comments, no comments, status updates on Taubman. And the question I have is why? So what is the rationale? You don’t have a shareholder vote so I didn’t think there would be anything restrictive on that. You talked a lot about the decisive actions you’re taking, immediate actions you’re taking, the aggressive actions that you’ve taken to protect your enterprise. Why not mention anything about a pretty sizable deal that you entered into, where there is a proxy outstanding? What’s the rationale for not providing any updates?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Look, Michael, the only reason why I let you get back on the call is because your you make me laugh and you’re a good guy, but the reality is I’ve already answered this question. And if you have anything else, let me know.

Michael Jason Bilerman — Christy — Analyst

Right. No, it was just more so I didn’t want to get but I didn’t know if there was a legal reason why. That’s the only thing. I didn’t know if it was a legality thing you can’t speak about it. That’s why I asked it in that way.

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

I appreciate the way you asked it. It was very gentlemanly but I’ve already said what I’m going to say on Taubman.

Operator

Our next question comes from Haendel St. Juste with Mizuho. Your line is now open.

Haendel Emmanuel St — Mizuho Securities — Analyst

David, what can you tell us what update can you provide us on Forever 21 specifically? I understand your earlier comments on liquidity and you’re not making any new retail level investments here, but I’m curious if you think investing capital today in the Forever 21 platform specifically for the long term is still worthwhile in this environment.

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

We actually capitalize it pretty reasonably well. So we’re in good shape right now and there’s no need for additional capital. So obviously, it’s important for them to get the stores up and running and operating. But it’s between us and our partners of Authentic Brands Group and Brookfield, we’re in pretty good shape to weather the storm.

Haendel Emmanuel St — Mizuho Securities — Analyst

Okay, helpful. What can you tell us about the Carson outlet joint venture project you have with Macerich? Understanding there’s a bit of a court battle with the city going on there and that the project seems to be at a standstill. But I’m curious if you think the project still has a future and if you’d still be willing to pursue this project once normalcy returns to the world, and if it might be a project you’d be willing to pursue on your own if need be?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, look, I will the only it’s since it’s in litigation, I really can’t comment, but I’d encourage you to read the complaint that we and Macerich filed against the agency. And it’s all I mean, it’s a lot but it’s all spelled out and plenty of time has passed. This was this has nothing to do with the pandemic. This was going on for several months but I’d encourage you to read the complaint. It’s all spelled out, black and white, lots of pictures, too.

Brian J. McDade — Executive Vice President, Chief Financial Officer and Treasurer

I think they’re colored, actually, I’m not even sure but some are colored.

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Okay.

Haendel Emmanuel St — Mizuho Securities — Analyst

Sure, sure. No, we’ve taken a look. Was just curious if it’s something that perhaps has a long-term future but understand what’s going on. So lastly, any how should we think I’m wondering, I guess, how your redevelopment approach overall might change your post COVID. Are you going to require more of a premium spread, the yield spread versus cap rates even matter? And any thoughts on what a more appropriate measure or how you would focus quantitatively in determining which projects to pursue versus others?

David Simon — Chairman of the Board, Chief Executive Officer and Presidents

Well, I mean, it’s a lot of it’s based on our years of experience and judgment. It’s interesting, do cap rates matter? That’s a very good question, okay, put that aside. We look at return on investment. Obviously, if it’s too low, you’re not creating any value for the shareholders. So cap rates are or not necessarily a science. We tend to look on return on equity, return on investment.

But look, I think right now, we’re just we’re focused on finishing what’s really almost ready to complete. We have and then we’re focused obviously on getting our portfolio up and running and those are the priorities right now.

Okay, thank you. I appreciate your allowing us to move the call. We’ve changed it up because we have our shareholder meeting tomorrow, and that was the only way we could pull everybody together in the remote offices. So thank you.

Operator

[Operator Closing Remarks]