Simon Property Group Inc (SPG) Q1 2023 Earnings Call Transcript

Simon Property Group Inc (NYSE:SPG) Q1 2023 Earnings Call dated May. 02, 2023.

Corporate Participants:

Tom Ward — Senior Vice President Investor Relations

David Simon — Chairman, Chief Executive Officer and President

Brian McDade — Chief Financial Officer

Analylsts:

Caitlin Burrows — Goldman Sachs — Analyst

Steve Sakwa — Evercore ISI Group — Analyst

Ronald Kamdem — Morgan Stanley — Analyst

Alexander Goldfarb — Piper Sandler — Analyst

Vince Tibone — Green Street — Analyst

Nick Joseph — Citi Investment Research — Analyst

Greg McGinniss — Scotiabank — Analyst

Derek Johnston — Deutsche Bank — Analyst

Floris Gerbrand Dijkum — Compass Point — Analyst

Craig Schmidt — Bank of America — Analyst

Juan Sanabria — BMO Capital Markets — Analyst

Mike Mueller — JP Morgan — Analyst

Haendel St. Juste — Mizuho — Analyst

Ki Bin Kim — Truist — Analyst

Michael Goldsmith — UBS — Analyst

Linda Tsai — Jefferies & Co. — Analyst

Presentation:

Operator

Greetings and welcome to the Simon’s First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Tom Ward, the SVP of Investor Relations. Thank you, and. You may proceed, sir.

Tom Ward — Senior Vice President Investor Relations

Thank you, Claudia[Phonetic], and thank you for joining us this evening. Presenting on today’s call is David Simon, Chairman and 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 evening will be limited to 1 hour, for those who would like to participate in the question-and-answer session, we ask that you please respect our request to limit yourself to one question.

I’m pleased to introduce David Simon.

David Simon — Chairman, Chief Executive Officer and President

Thank you. Good afternoon. And I’m pleased to report our first quarter results. We are off to a good start with results that exceeded our plan. First quarter funds from operation were $1.03 billion or $2.74 per share. Let me walk you through some variances for this quarter, compared to Q1 of 2022. Domestic operations had a very good quarter and contributed $0.15 of growth, primarily driven by higher rental income.

Our international operations also performed well and contributed $0.02 of growth. These positive contributions were partially offset by declines from the headwind from a strong U.S. dollar of $0.02 higher interest-rate expense $0.05, lower lease settlement income of $0.06 compared to Q1 of 2022 and we had a mark-to-market gain on publicly held securities of $0.06 for the quarter. And A330s set lower contribution from our other platform investments compared to-Q1 2022, let me walk you through some of that, and remind everyone that for OPI results, we are generally on our plan.

Please keep in mind OPI was up against very tough comparisons from last year’s Q1. This quarter also includes one-time transaction cost from ABG’s recent acquisition activity, JC Penney’s deployment of their new beauty initiatives and investments related to physical stores, IT and one-time reorganization expenses all flowing through our FFO number. The retailer part of or OPI investments has seasonality associated with it, generally with losses in the first quarter and the majority of our profit in the fourth quarter and should be modeled accordingly.

Overall, we continue to expect OPI to meet our 2023 guidance we provided at the beginning of the year, which is similar — which will be a similar FFO contribution that was compared to 2022. Now domestic property NOI increased 4% year-over-year for the quarter. Portfolio NOI, which includes our international properties at constant currency, grew 3.9% for the quarter, our mills, malls and outlet occupancy at the end-of-the first quarter was 94.4%. an increase of 110 basis points compared to the prior year. Mills was 97.3% and TRG was 93.3%. Importantly, average base minimum rent was $55.84 per square foot, an increase of 3.1% year-over-year.

Leasing momentum continued across the portfolio, we signed more than 1,200 leases for more than 5.9 million square feet in the quarter. We have an additional. 1500 deals in our pipeline, including renewals for approximately $570 million in gross occupancy cost. More than 25% of our leasing activity in the first quarter was new deal volume. We’re seeing strong broad-based demand from the retail community, including continued strength for many categories. By the end-of-the second quarter, we expect to be approximately 75% complete, with our 2023 expiration.

Retail sales momentum continued, reported retail sales per square foot reached another record in the first quarter at $759 per square foot for malls and premium outlets combined, an increase of 3.3%. All platforms achieved record sales level, including the mills at 683 a foot and 2.2% and TRG was $1100 per square foot, a 6% increase.

Good news is, tourism is returning with our tourist oriented centers. Outperforming the portfolio average in terms of sales. Our occupancy cost at the end-of-the first quarter was 12%. We opened our West Paris designer outlet in Normandy, France last week, our 35th international outlet center. During the quarter, construction restarted on our upscale outlet center in Tulsa, Oklahoma, which will now open in the fall of 2024. We have several densification projects under-construction. And a pipeline of identified projects that includes approximately 2000 residential units and hotel rooms.

Now turning to the balance sheet, we completed a dual tranche U.S., senior notes offering that totaled $1.3 billion at a combined average term of 20 years at an average coupon of 5.67%. We closed on our new five billion dollar multi currency revolving credit facility with a maturity in 2028. Importantly, the pricing is unchanged from our prior facility. The traditional secured mortgage markets continue to support the refinancing of our assets across geographies and property types.

Our A-rated balance sheet is as strong as ever. We ended the quarter with $9.3 billion of liquidity. Today we announced our dividend of $1.85. Per share for the second quarter a year-over-year increase of 9%. The dividend is payable on June 30th of this quarter. Guidance for this quarter, given the results of this quarter and our current view as the remainder of the year. We are increasing our full-year 2023 guidance range from $11.70 to $11.95 per share to $11.80 to $11.95 per share can compared to last year of $11, 87. This is an increase of $0.10 at the bottom-end of the range and $0.05 at the midpoint. Excuse me — And I’m pleased with our first quarter results. Tenant demand is excellent and brick-and-mortar stores are where shoppers want to be and even with the economic uncertainty, we are running ahead of our internal plan.

Excuse me — here. I have some kind of clog in my throat, but we’re ready for questions.

Questions and Answers:

Operator

Thank you very much, sir. [Operator Instructions]. The first question comes from Caitlin Burrows from Goldman Sachs. Please proceed with your question. Caitlin.

Caitlin Burrows — Goldman Sachs — Analyst

Hi, good evening, everyone, maybe regarding upcoming lease maturities and what that means for potential cash-flow changes going-forward. The ABR for ’23 maturities is around $62 versus the portfolio overall at 56, so would you think it’s fair to say that the rest of the ’23 maturities may face a headwind. On renewal. But then the 24 maturities, which are 12% of rents and have an ABR of $54 have significant opportunity. I’m guessing it’s not that straightforward. So I’m wondering if you could discuss that rent maturity and mark-to-market outlook.

David Simon — Chairman, Chief Executive Officer and President

Yes, thank you for the question. One of the numbers I threw out there while I was coughing during my presentation, plus, our renewals and new leases. We’ll will add $570 million of basically, gross rental income. In that is included some renewals. Which is the roll-off of some of the numbers that you quoted, we are renewing above our overall — above our expiring rents. So even with that said, we expect to continue to have positive rental spreads even with the higher number for the balance of this year and certainly in ’24. So the outlook on that front is very positive and unchanged. Since our commentary at the — certainly at the at the beginning of this year and fourth quarter of last year as well.

Caitlin Burrows — Goldman Sachs — Analyst

Okay, thanks.

Operator

Thank you. The next question comes from Steve Sakwa from Evercore ISI. Please proceed with your question.

Steve Sakwa — Evercore ISI Group — Analyst

Yeah. Thanks, good evening. David.

David Simon — Chairman, Chief Executive Officer and President

How are you?

Steve Sakwa — Evercore ISI Group — Analyst

I was wondering if you could — good. I was wondering if you could just maybe shed a little more light on the leasing demand that you’re seeing, is there anything that you could discuss with us on kind of price point either luxury versus more moderate tenants anything by region, anything by-product type, whether it’s the mills, the outlets, the traditional malls. Just looking for a little color, given what we’re going through and kind of what your tenants are telling you. Just kind of curious where the strongest demand is and maybe to the extent that there any weak spots, what would you call out?

David Simon — Chairman, Chief Executive Officer and President

Well I mean. I know this is kind of in the phase of a lot of economic uncertainty, but demand really has not changed, one I owe that now. Let’s talk about the luxury side, clearly they’re running up against tough comps compared to Q1 of last year. But those brands and those companies think long-term and. I mean, the best example is, if. We were at the opening of Tiffany store on 57 street, you have to think for long-term view when you open stores like that and all of those brands whether LVMH group, Kering, Richemont etc, they are looking at ’23, ’24, ’25. We’re making commitments, nothing there is, is really abated. So all systems go on that front. even though they running up against tough comps compared to Q1. You look at the restaurant category, very strong demand. Lots of new deals across lots of price points from. PF Chang’s chief cake factory to some of the Chef driven brands. So all systems go there. You’ve got the box demand, lots of new business with Dick’s, Life Time Fitness, The best of the Best, Shields department store demand by [Indecipherable] is happening. Then you look at athleisure, Vuori, ALO, Lululemon, Brooks Brothers, all of that pretty much across the board, we’re seeing new stores. So I said this at the end of last year, early this year. Even though comps are going to be tougher this year in terms of sales compared to last year. The demand on leasing really has not changed. We are seeing the entertainment concepts come back, theater business is positive. So we feel it’s — we’re feeling very good. Obviously we’re cautious we don’t expect sales but they were over ’21 and ’22 and we planned accordingly, But demand, we check every day and there’s certainly a couple here or there that slowed down, but nothing of — nothing really noteworthy. VF, North Face, Timberland, Cotton On, they’re all growing and it’s all pretty healthy.

Steve Sakwa — Evercore ISI Group — Analyst

Great, thank you.

David Simon — Chairman, Chief Executive Officer and President

Thank you.

Operator

Thank you. The next question comes from Ronald Kamden from Morgan Stanley. Please proceed with your question. Ronald.

Ronald Kamdem — Morgan Stanley — Analyst

Great, thanks. I remember last quarter we talked about domestic property NOI growth of at least 2%. And you’re thinking about looking at 1Q already at four, just maybe can you give us an update how you’re thinking about that number for the rest of the year and looking at the guidance raise, how much is that property — core property NOI versus maybe other factors? Thanks.

David Simon — Chairman, Chief Executive Officer and President

Sure, yeah, we’re going to be 2% and I would hope we would do at least three plus. I mean, there is some — it’s very interesting in the first six months from a retail point-of-view comps will be tough. But we think the second half for the retailers will be more positive, lots of economic uncertainty out there with the big macro things, but assuming sales come in the way we initially budgeted, we should be hopefully, at least 3%, if we have an uptick in sales, we’ll do better.

Ronald Kamdem — Morgan Stanley — Analyst

Thank you.

David Simon — Chairman, Chief Executive Officer and President

Thank you.

Operator

Thank you. The next question comes from Alexander Goldfarb from Piper Sandler. Please proceed with your question, Alexander.

Alexander Goldfarb — Piper Sandler — Analyst

Thanks and good evening. David.

David Simon — Chairman, Chief Executive Officer and President

How are doing?

Alexander Goldfarb — Piper Sandler — Analyst

I’m doing well. So first, thank you for all the the detail on the retailer platform and the emphasis on the seasonality. That’s helpful. My question is bigger. You guys seem to have a lot of positive trends. With the redevelopment program coming back, retailer demand healthy, obviously some of your competitors are having trouble on the capital side, it strengthens your portfolio. So my question is as you look over the next few years to invest incremental capital is your focus still on the best returns are internal in your existing malls and adding more densification or are you starting to see some external opportunities where it may make sense to use capital, whether that’s domestically or abroad sort of curious?

David Simon — Chairman, Chief Executive Officer and President

Yeah. I don’t see, let me do it in pieces with, no particular order. I do see — I still do feel strongly that the best use of our capital is making our existing portfolio better and better. I think, that’s — we have spent $8 plus billion dollars over the last several years upgrading the portfolio and doing new development. So we continue to see that as our best use. I don’t see — and I mentioned in the call, we have a residential pipeline that looks really attractive and hotels. That are generating really good accretive values around 2000 units. Now that’s not going to happen overnight, but that’s going to happen over the next few years. So that for us is a real opportunity. I don’t see much of our external capital during any kind of acquisition opportunities internationally.

I still think we’ll grow our International Asia outlet portfolio with redevelopment and new development over-time. Essentially, recycling the capital, the cash-flow that we have there and accretive new development. And where we — we’re looking at everything domestically here. And nothing really has with — I think, I could say this wet our whistle here to make us — I can say that, right? Okay, so nothing here that would.

Alexander Goldfarb — Piper Sandler — Analyst

You said it.

David Simon — Chairman, Chief Executive Officer and President

Yeah. I’ve said it through good points. Nothing here that would really like we’re not just put up-and-down to do external transaction. So it’s mostly, the same stuff that we’ve been doing. And just keep plugging around that. And look. I do think we have to respect the capital markets. The capital markets are telling all companies to be more prudent to do more accretive. Investments and we are listening very closely to that.

Alexander Goldfarb — Piper Sandler — Analyst

Okay, thank you.

David Simon — Chairman, Chief Executive Officer and President

Thank you.

Operator

Thank you. The next question comes from Vince Tibone from Green Street. Please proceed with your question. Vince.

Vince Tibone — Green Street — Analyst

Hi, good afternoon. I wanted to follow-up on your comment regarding 2000 residential and hotel units and the upcoming pipeline. Just curious how quickly you could start these projects, how much spend this could potentially represent, and this is something that you’re going to maybe do through joint-ventures or will be wholly-owned on the balance sheet. And any color on some of these points would be helpful?

David Simon — Chairman, Chief Executive Officer and President

Sure. All right. So I think, we will do selective JVs. on certain of the residential development. So that’s it — that’s and it may — it also may be that we could potentially bring in third-party equity too. So that would — we’ll look at each deal. Individual, but that’s certainly a possibility. And then I think essentially, we’re looking at to reach all those 2000 units, it’s really probably a five-year build process. We expect to start several this year. But yet, we’re, frankly, being a little bit cautious. We’re still permitting some things in California and the Northwest. So we don’t — we’re going to just see how the world is, but we don’t have to make a decision yet and I would think at the end-of-the day off the top — I’d rather Brian give you more scientific number, because a lot of these are part of redevelopments to and so they really isolate a hotel, apartment or rental stuff. I want to give you a number, but I — with my instinct would be probably about $1.5 million. But I think Brian can give you more detailed number, but somewhere in that range and these go from Austin, Texas to Orange County, California to Seattle. Some hotels in Florida, some residential in Florida multifamily, So it’s kind of where you’d expect it to be where supply-and-demand is in our favor. But we’re considering, building a hotel in Cape Cod, because we think there’s a good supply demand and balance there. So it really is. Across in every, I’d say generally as we get that real estate through our redevelopment efforts. The big focus is on where we can — where we can add some. some mixed-uses because we do think, like what we did in Buckhead. It’s having tremendous impact on the overall value of that real-estate.

So not only does it is it accretive from a value point-of-view just on the cost to the return on to build versus what the value of that that is after it’s built, but also the residual benefits that we see from the mall.

Vince Tibone — Green Street — Analyst

Got it, No that’s all super helpful. And then somewhat related follow-up question. Just curious if you could share any updates on the Carson outlet project. And if you think you’ll be moving forward there in near term?

David Simon — Chairman, Chief Executive Officer and President

That’s a tough question v We are aware — that’s a complicated one but we’re — every day we make progress. So it’s terrific real-estate. Very complicated transaction, but we continue to make progress. But no final decision has been made to do it. But I expect one to be made over the next few months.

Vince Tibone — Green Street — Analyst

Great, thank you.

David Simon — Chairman, Chief Executive Officer and President

Thank you.

Operator

Thank you. The next question comes from Craig Mailman from Citi. Please proceed with your question. Craig.

Nick Joseph — Citi Investment Research — Analyst

Thanks. It’s actually Nick Joseph on here with Craig. David, just on executive comp and the $24 million one-time cash bonus related to OPI. I know at least one of the proxy analysis firms as read some concerns on it. So can you just get some more color on what was rationale behind it in terms of the amount and the structure of it ahead of the vote later this week?

David Simon — Chairman, Chief Executive Officer and President

Yeah, look I think. This was essentially paid ’23 — ’24 executives. Last February, so about 15 months ago fully disclosed in an 8-K. Our rationale and the reasoning by the comp committee was fully disclosed, in our proxy as well as supplemental letter to our shareholders. I think. If you look at the company in totality, which is important. I mean, we can always take a moment-in-time to say why this, why that but if you look at the history of the company. You look at the executive comp, you look at our stock program, you look at our burn rate, you look at our G&A as a function of our NOI or asset value, we are at the lowest of the low. Anybody can pick out one particular number they don’t like, but if you look at it in totality. We are absolutely proud of how we run this business. If you want to get more detail. I encourage you to talk to head of our comp committee, our Lead Independent Director any shareholder can do that, but. I would encourage everyone to look at the totality of our history and then come to whatever conclusion they think and we’re very happy to talk to anybody that would like to go through it from shareholder point-of-view.

Nick Joseph — Citi Investment Research — Analyst

Thank you.

David Simon — Chairman, Chief Executive Officer and President

Thank you.

Operator

Thank you. The next question comes from Greg McGinniss from Scotiabank. Please proceed with your question, Greg.

Greg McGinniss — Scotiabank — Analyst

Hey, good evening. David. I just want to make sure that I understand that 570 million gross rental income number that you mentioned is that new and renewal leases. Is it on a pro-rata basis inclusive of international and DRG. How much of that I guess is incremental to in place rents or is all of it? And then, what’s the timeframe? [Speech Overlap] contributed

David Simon — Chairman, Chief Executive Officer and President

Yeah. All terrific questions. And we highlighted that, just to give you a sense of that the scope of the business that’s going on here. So that’s a huge number. That’s just one lease. One level of activity in the year and it’s bigger than some companies that exist today. So let me try to unpack it. It does include renewals. It’s just SPG. It’s just domestic. And if you looked at the renewals and the new business, there is a really good uptick from kind of the in place income on that and that will come in not really, this year, but over ’24 and ’25 when those stores get open. And I think it just adds a sense of our future growth that we see in front of us from our existing. Portfolio. But I’m not in a position to break it out between renewals and new incremental business. But you’ll see that flow through in the NOI, in the upcoming quarters.

Greg McGinniss — Scotiabank — Analyst

Okay, So, it is both though because you mentioned $100 million of new income last quarter of new NOI.

David Simon — Chairman, Chief Executive Officer and President

Correct. Okay, it includes both. Correct.

Greg McGinniss — Scotiabank — Analyst

Thank you.

David Simon — Chairman, Chief Executive Officer and President

Thank you. Thank you. The next question comes from Derek Johnston from Deutsche Bank. Please go ahead with your question, Derek.

Derek Johnston — Deutsche Bank — Analyst

Hi, everyone. Good afternoon. Occupancy is now at 94.4% and that’s just 70 bps below pre pandemic levels. Do you expect to surpass 4Q ’19, 95.1 %occupancy this year and given the leasing demand we’ve discussed. How is the team weighing occupancy versus rates now that the gap is so narrow?

David Simon — Chairman, Chief Executive Officer and President

Well, let me take that part first. I do think. The good news is that when we’re — and again every lease is different, every relationship is different. Rollovers, some rollovers go down but. I would say, generally speaking we are finally seeing renewals that are overall, above the expiry rents. So that and part of that is just supply-demand is in our favor and we are getting because one is I think from the retailer’s point-of-view, there is a real appreciation for bricks-and-mortar. One – two is they know we’re a landlord as they can rely on and that we’re going to do the right thing to maintain and reinvest in these properties and we have the capability of doing so. And generally it’s more demand that we’re seeing, and the retailers are in, having survived COVID are in better shape and want to grow their business,. So, that is all happening, and getting to your first point, will we beat it this year, it will be close. I’m not — I can’t guarantee it, but. I am hopeful that we will beat that number. We’re not — certainly within the next 12 months, assuming we can continue to maintain reasonably decent economic. conditions.

Derek Johnston — Deutsche Bank — Analyst

All right. Thank you.

David Simon — Chairman, Chief Executive Officer and President

Thank you.

Operator

The next question comes from Floris Gerbrand Dijkum from Compass Point. Please proceed with your question Floris.

Floris Gerbrand Dijkum — Compass Point — Analyst

Thanks. Good evening, guys. David. So maybe if you can give us a little bit more of an update. I know in the past you’ve talked about your sign, non opened pipeline being around 200 basis-points. Your leased occupancy just increased by 110 basis-points. Is that ethanol pipeline relatively similar. And then maybe. I mean, if. I look at the base rent going up by 3.1% approximately, and if you get about 10% of your space back. I mean, it assumes pretty healthy re-leasing spreads, if my math is correct. I mean. How should — how should we be thinking, clearly it appears that leasing spreads are accelerating in in your core business?

David Simon — Chairman, Chief Executive Officer and President

I think that’s a fair statement and I would say that the pipeline is similar to what it’s been. [Speech Overlap]

Brian McDade — Chief Financial Officer

Yeah. Floris, we’re still hanging right around 200 basis-points at this point in the year.

David Simon — Chairman, Chief Executive Officer and President

So I do think it’s as we been saying over the last few couple of quarters. I mean, we have finally turned the corner on lease spreads demand. Better properties, more commitments from retailers, more the — more retailers wanting to open stores, all driving — all driving pretty good demand, which allows us to get the spreads that were that we were accustomed to, but we were flat-lining pre-COVID, obviously we got hurt during COVID and we’ve bounced back nicely and so from that standpoint it’s good to see.

Floris Gerbrand Dijkum — Compass Point — Analyst

And if I can maybe follow-up David on Jamestown and you mentioned external capital. How are you thinking about — how is the Jamestown acquisition bedding in and is that potentially a source of of external capital that you can bring into some of that, the apartment or a hotel. Investments and or how are the synergies between those two businesses working out and in particular I’m thinking like Atlanta with the street retail right near your two Fortress malls?

David Simon — Chairman, Chief Executive Officer and President

Yeah, look, I — to separate — just to just to be clear. So we bought into the asset management business and we bought it, we partnered with Jamestown for a couple of — we ‘re are now separated, but a couple to highlight here, one is they’re really good asset managers. Two is, they have a development capability that’s very interesting to us. And they have excellent institutional relationships. And we think with our partnership, we can grow that business. We did not other than there is a a big future development master plan development that they’re working on in Charleston, where we did — where we did partner with them directly. We did not buy any of their existing real-estate that’s owned by the various funds whether it’s the German funds or the or the premier fund.

Jamestown, is in the process of raising their — what 32nd German fund. They have a lot of separate account interest. It’s really good for us because we get to learn those institutional investors better and more, and I just think we’re early days there, but. I think the features that we had going-in continues to be very-very valid. This is a long-term relationship that I think will grow. We — eventually I see us partnering with institutional money that will be managed by Jamestown that will partner with us to build X, Y, Z or by X, Y, Z, build the those big community in Charleston — North Charleston.

So yeah. I think all of that elements are as potential growth with Jamestown are out there. We do like the asset management business. As a as a platform, we dipped our toe into it but I think — again, just as we look at the landscape for real-estate, owners and managers, we think when we look at of Blackstone, when we looked at Brookfield, obviously, they own the asset manage, for us to have some scale or some role in that business. I think ultimately we will annur to the benefit of the Simon Property Group. And that’s what we’re after.

Floris Gerbrand Dijkum — Compass Point — Analyst

Thanks, Dave.

David Simon — Chairman, Chief Executive Officer and President

Thank you.

Operator

The next question comes from Craig Schmidt from Bank of America. Please proceed with your question, Craig.

Craig Schmidt — Bank of America — Analyst

Thank you. Given the seasonality of the OPI business which quarter do you expect that number to turn positive.

David Simon — Chairman, Chief Executive Officer and President

I think that, will be — Craig you know about retail. So just to reinforce this — the retail part of the OPI. Remember that the vast majority of the OPI value is in our ABG stock. But we still have a very profitable business with both Penny and Spark and then other investments that are in that, including our and GTD and so on. So just important to put it in context. So the retail part, the pure retail apart Penny and Spark is seasonal. And last quarter, Q1 of 22 was — I’ll just stimulus whatever was the really tough comparison for the retail — retailer part of OPI.

With that said. It will, we expect it to be profitable in Q2 and Q3. And but the vast majority of the vast majority of it will be Q4, like all the other retailers. So when you see retailers report this quarter that are public. I think general you will probably all have tough comps against Q1 of last year. Yes, the comps get a lot easier.

Now this is a lot more information for a business that’s, we have no cash investment, remember, and it does create a little volatility of our earnings for better or worse. In this case, this quarter it’s worse, fourth quarter will be much better does create a little volatility, but you’ll see it mapped out, part of that OPI map out. Just like other retailers, where the loss will be in Q1, profitability in Q 2 and Q3 and then know 70%, 65%, 70% in Q4.

Craig Schmidt — Bank of America — Analyst

Thank you.

David Simon — Chairman, Chief Executive Officer and President

Thank you.

Operator

The next question comes from Juan Sanabria from BMO Capital Markets. Please proceed with your question, Juan.

Juan Sanabria — BMO Capital Markets — Analyst

Hi, good afternoon. Just hoping to get a little color on the month-to-month leases. They’ve kicked up from about 4.5 to 7.5% sequentially in the first quarter, while you did a fantastic job chopping wood and reducing the rest of the ’23 expiration. But just curious on why the increase in the month-to-month basis and what’s going on behind that?, and than I have a follow-up.

David Simon — Chairman, Chief Executive Officer and President

Yeah. One of the comments I made was, we expect to be basically 75% by the end of Q2. It’s just a process, it’s just, we’re negotiating, the retailers are negotiating. The stores are open and operating. But you know, we’ll — it’s just a typical drawn-out process that is the — so to speak, the art of the negotiation, but a lot of that’s already handshake committed to that we’re just going through a processing now.

Brian McDade — Chief Financial Officer

If you look historically, Juan, it’s normal seasonality of that line items at this point time of the year.

Juan Sanabria — BMO Capital Markets — Analyst

Great, that was my follow-up. Thank you.

Operator

Thank you. The next question comes from Mike Mueller from JPMorgan. Please proceed with your question, Mike.

Mike Mueller — JP Morgan — Analyst

Thanks. I was wondering has there been any notable change in lease duration for what you’re signing so far in 2023 compared to last year.

David Simon — Chairman, Chief Executive Officer and President

Not really. Not at all.

Mike Mueller — JP Morgan — Analyst

Okay. That was it, thank you. Thank you.

David Simon — Chairman, Chief Executive Officer and President

Thank you.

Operator

Thank you. The next question comes from Haendel Juste from Mizuho. Please proceed with your question.

Haendel St. Juste — Mizuho — Analyst

Hey, good evening. Dave. I think earlier you mentioned that new leases were 25% of the deal volume in the first quarter. I guess, I’m curious if that’s why capex picked-up and is up 8% in the quarter and if this is also a new level — new versus renewal leasing that you should expect in near-term? Thanks.

David Simon — Chairman, Chief Executive Officer and President

We have a tough — tough connections. Did you guys hear that?

Brian McDade — Chief Financial Officer

Haendel, can you repeat your question please, you kind of broke up a bit.

Haendel St. Juste — Mizuho — Analyst

Sure. [Speech Overlap] So my question was on, David. I think you mentioned earlier in the call that new leases were 25% of the deal volume in the first quarter. So I’m curious if that’s capex was up. I think, 8% in the first quarter. And also if this level of new leases, 25% or so would be kind of the right way to think about new versus renewal leasing going-forward? Thanks.

David Simon — Chairman, Chief Executive Officer and President

Yeah. I guess on the on the PA line, there is some — we are doing more deals. So there is probably more PA associated with it. So I’m not sure, the capex line, where you looking at the PA line, but generally, the answer is yes, we’re doing a lot more new business and in some cases that does. I mean, a little bit more PA. And I still have a hard time on the last part. Did anybody here.

Brian McDade — Chief Financial Officer

We didn’t hear,

David Simon — Chairman, Chief Executive Officer and President

Unfortunately we didn’t hear it, but if you want to call-back with, we’re happy to answer that.

Operator

Thank you. Moving onto the next question. The next question comes from Ki Bin Kim from Truist. Please proceed with your question.

Ki Bin Kim — Truist — Analyst

Thanks, good afternoon. Going back to your comments on international tourism, David. Can you remind us where international tourism on the bar for your portfolio today versus, let’s say, pre-COVID and if it should return to that normal level, what does that mean for Simon’s NOI or earnings, how we want to look at it?

David Simon — Chairman, Chief Executive Officer and President

Well. I would say, generally speaking, we — just to give you a sense our sales for our tourist properties that we Identify, was up 8% quarter-over-quarter, right generally?

Brian McDade — Chief Financial Officer

Yeah.

David Simon — Chairman, Chief Executive Officer and President

So the bottom line is it is — it’s really going to resolve in overage rent. That we’ve probably flat-line, more or less on those properties. So and that will manifest itself, once we reach the breakpoints later in the year. But we’re seeing — we’re starting to see. I mean like Vegas, where our tourist properties, Florida, which has been pretty strong, but we’re seeing more-and-more international tourism there. Woodbury. here in New York area, I’d say here in Indianapolis, but. In the New York area is really starting to see a lot more international tourism. California has been kind of a weak link, but we’re starting to see more-and-more sales there and then Vegas is just going crazy. Vegas — and we have really important exposure in Vegas between Forum and Crystal, our two outlet centers. Vegas is as good as it gets it’s — the casinos, what’s going on with the city. The movements from California to Nevada, all of the football, baseball, sporting activity, Formula One — it just — It’s a great place to have a lot of retail real-estate, and we’re seeing real benefits in that so.

This will manifest itself in the fourth quarter as we’re — we’re seeing seeing that, but now as we reach the breakpoints, but we’re finally seeing the international tourists to come back to the states. Although weaker dollar helps and obviously all that — I think, finally, you don’t have a vaccine card or whatever is required to come here,, all of that kind of yesterday’s news as of today or yesterday. So we’re — well. I think we’re finally starting to see that come back like it was three pandemic.

Ki Bin Kim — Truist — Analyst

Okay, and a quick question for Brian. You guys have a pretty healthy cash balance of over $1 billion, yet you’re still carry a balanced and a revolver, I’m sure there is a pretty logical simple answer to this, but just curious.

Brian McDade — Chief Financial Officer

Yeah, that’s exactly right, the outstandings on our revolver are denominated in Euros and they serve as a net investment hedge against our asset-base in Europe. We do have a heavy sizable cash balance as we did our offering earlier in this year and pre-funded the balance of our unsecured maturities for this year. So we’re carrying cash and will pay-off the due maturities at par and maturity.

Ki Bin Kim — Truist — Analyst

Okay, thank you.

Brian McDade — Chief Financial Officer

Sure.

Operator

Thank you. The next question comes from Michael Goldsmith from UBS. Please proceed with your question, Michael.

Michael Goldsmith — UBS — Analyst

Good afternoon, and thanks a lot for taking my question. David, your base minimum rent growth is accelerating with a nice S&L pipeline, you’re talking about blowing past your 2% NOI growth guidance for the year, all sounds great. I guess the question is how sustainable is this algorithm, how long can it continue. What are the factors that are ultimately going to weigh on this momentum that you have?

David Simon — Chairman, Chief Executive Officer and President

Look. I mean I think. I see it continuing, we see good demand. We are tied to the general economic condition, but you know supply demand is in our favor. I think, our spot in our industry is well established. We have the confidence with our retail partners. We know what we want to do with our properties, we’ re not — we don’t bet[Phonetic] 1,000, we make mistakes all the time, but we know where we want to position them. And also I hate using — got it is, but I it’s really going to be the external environment that could slow this down, meaning you know what happens do we do a recession or that and. I honestly think some of these markets are — when people ask me that I actually think if we do go into recession, it will be “kind of regional recession.” I just don’t see markets right now, they may flatten — they may not grow as much, but. I don’t see Florida’s, Texas. Nevada of the world. Georgia’s — I just don’t see them slowing. I don’t see them going into a recession. So if there is one, we’ve always served well, it’s going to be a regional one, this one might be one. But who — I really don’t know,, but I think that’s what slows us down.

Obviously, we do have some headwinds with higher interest rates. We do — we do have debt maturity at low rates sort of rollover will cost us some growth, but we just have to kind of go through that and deal with it.

Michael Goldsmith — UBS — Analyst

Thank you very much.

David Simon — Chairman, Chief Executive Officer and President

Thank you.

Operator

The next question comes from Linda Tsai from Jefferies, please proceed with your question. Linda.

Linda Tsai — Jefferies & Co. — Analyst

Hi. How do you think about the longer-term growth profile of the OPI business versus growth in overall portfolio NOI. Do you think the OPI business requires more consistent investment before it generates more stable returns?

David Simon — Chairman, Chief Executive Officer and President

Well. I think yes. I think you have to look at the individual investments and — like for instance Authentic Brands Group is a growth machine. We’re buying brands left and right. They’re buying Billabong, they’re buying Vince. They’ve got a huge pipeline. So I really seen that company, growing, growing, growing. Spark and Penny or Spark is opening new stores, getting better at E-commerce. Getting better operating, I’m sure — they added Reebok to its portfolio last year that’s still hasn’t been fully-integrated. So I would expect EBITDA growth to accelerate in the — latter half of ’23 and ’24. RGG, which includes Rue La La and Gilt, and importantly, Shop Premium Outlets remember we contributed to that, their joint-venture. Shop Premium Outlets is on fire, we’re growing our GMV by leaps and bounds. I really take this was an idea we had years ago, we had got it off the ground. Maybe not quite as good as [Indecipherable] we got it off the ground, we merged in RGG. And it’s really rocking and rolling. We’ve got — we’re signing-up good retailers all-the-time. That’s got a great, great story to. We have some smaller investments in that. So I think, I see a real growth pattern and all of those, Penny’s reinvesting. I think Penny has found its mojo, it’s getting better brands in the store, we’re making the stores look better, it’s got growth in beauty that’s investing. The retailer side of OPI, has a little more exposure, the economy because retail just does, but I think, they are in their own ways have your own growth story. And but you know what — we’re economic animals to extent that we think we get fair-value. We’ve got lots of opportunities to invest in our company or other transactions that will add value. So we look at these very clinical. And I just remember, we’ve created a lot of value here with very little capital. And what’s amazing, it’s in our earnings now and which is a good sign because it means it’s earning money and given the small investment, it’s been if you just want to work on return on — return on our earnings and return on investment, it’s been outstanding.

So very proud of it. Very profitable. Not that our core focus yet, while used executive team here to leverage our capabilities intellectual firepower, etc., To make those companies better and I think we’ve done a pretty darn good job and which had good partners across the board. So we’ve done it in a very prudent way. And it’s been very beneficial for us and I expect growth to continue. Then I’ll have more ups and downs, won’t be a straight-line, but. I have. I expect more growth from that category. Same time, 10 years from now or five years from now, we don’t own in any of these companies.

Linda Tsai — Jefferies & Co. — Analyst

Thanks for that. And then just a follow-up, do you have a sense of how much mixed-use development could be kind as a percentage of portfolio NOI. And could you give us a sense of what that might represent today?

David Simon — Chairman, Chief Executive Officer and President

It’s not very big, today, what — it is what is 3% – 4%

Brian McDade — Chief Financial Officer

Yes, about 3%.

David Simon — Chairman, Chief Executive Officer and President

3%. So. We’re a big company so to do a lot to get to like. eight to 10 will take a lot would be a few years down the road, but I don’t see any reason why. We certainly should sure, try to strive to get up here, if we can do it accretively in Canada. The 7% – 8% range, but that would be roughly 500 plus million dollars of NOI. So it’s not — It’s not. It’s going to take time.

Brian McDade — Chief Financial Officer

Yeah.

Linda Tsai — Jefferies & Co. — Analyst

Thank you.

David Simon — Chairman, Chief Executive Officer and President

Thank you.

Operator

Thank you. The next question. The final question comes from Haendel Juste from Mizuho. Please proceed with your question,

Haendel St. Juste — Mizuho — Analyst

Hey there. Thanks for letting me back-in. I wanted to get to the second part of my question, and then. I have one more. So the second part of my earlier question was, if you’re expecting new leased volume to be about 25% of the overall leasing volume as they were in the first quarter over the near-term?

David Simon — Chairman, Chief Executive Officer and President

Yeah. I think that’s a reasonable number, yes, in that range.

Haendel St. Juste — Mizuho — Analyst

Okay, Fair enough. Okay, And then the second question was on foot traffic. We saw some recent placer foot traffic data for March, indicating that your foot traffic at enclosed retail malls is down 8% year-over-year in March. I’m curious if you’re seeing similar trends at your properties. And if you think that’s the reflecting the consumer that’s coming up in lease negotiations. In the current environment thanks.

David Simon — Chairman, Chief Executive Officer and President

Well, yeah, I’m glad you asked that because. I have — we keep track of that ourselves. And just to give you March over March;23 over March ’22. We are 105.5% for malls 105.6% for mills and 120.2% for outlets, for 108%[Phonetic] above last year this time. In January and February, we’re actually much higher. month-over-month. So for our portfolio, we’re above — traffic is above where it was this time last year. year-to-date, month-to-month.

Haendel St. Juste — Mizuho — Analyst

Okay, thank you.

David Simon — Chairman, Chief Executive Officer and President

Thank you.

Brian McDade — Chief Financial Officer

Thank you.

Operator

Thank you very much. There are no further questions at this time. I would like to turn the floor back over to David Simon for closing remarks. Thank you sir.

David Simon — Chairman, Chief Executive Officer and President

Okay, thank you and. I appreciate the the questions and we’ll talk soon. Thank you.

Operator

Thank you very much, sir. [Operator Closing Remarks]