Greetings, and welcome to the Simon Property Group Q3 2022 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. If anyone should require operator assistance during the conference, please press Star, then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tom Ward. Thank you, Mr. Ward, you may begin.
Thank you, Irene, and thank you all for joining us this morning. Presenting on today's call is David Simon, Chairman, Chief Executive Officer, and President. Also on the call are Brian McDade, Chief Financial Officer, and Adam Reuille, Chief Accounting Officer. A quick reminder that statements made during this call may be deemed forward-looking statements within the meaning of the Safe Harbor of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to a variety of risks, uncertainties, and other factors. We refer you to today's press release and our SEC filings for a detailed discussion of the risk factors relating to those forward-looking statements. Please note that this call includes information that may be accurate only as of today's date.
Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included within the press release and the supplemental information in today's Form 8-K filing. Both the press release and the supplemental information are available on our IR website at investors.simon.com. Our conference call this morning will be limited to one hour. For those who would like to participate in the question-and-answer session, we ask that you please respect the request to limit yourself to one question. I'm pleased to introduce David Simon.
Good morning, and I'm pleased to report our Q3 results. Q3 funds from operations were $1.1 billion, or $2.97 per share, prior to a non-cash unrealized loss of $0.04 from a mark-to-market in fair value of publicly held securities. Let me walk you through some of the variances for the quarter compared to Q3 2021. Our domestic operations had a very good quarter and contributed $0.05 of growth, driven by higher rental income. Our international operations posted strong results in the quarter and increased $0.05 despite the negative currency impact of $0.05, given the strength in the dollar. These positive contributions were partially offset by an 11-cent lower contribution from our other platform investments, which reflects costs associated with the J.C. Penney.
Penney launch of new beauty brands, Reebok integration cost, and some softening of sales compared to 2021 from our two value-oriented brands. Domestic property net operating income increased 2.3% for the quarter and 4.4% for the first nine months of the year. NOI growth for the quarter was negatively impacted by approximately 100 basis points due to the write-off of outstanding receivables from Regal Cinemas upon its bankruptcy filing. Portfolio NOI, which includes our international properties at constant currency, grew 3.2% for the quarter and 5.5% for the first nine months of the year. Occupancy ended the Q3 at 94.5%, an increase of 170 basis points compared to the prior year, and an increase of 60 basis points compared to the Q2.
TRG was 94.5%. Average base minimum rent increased for the Q4 in a row and was $54.80, an increase of 1.7% year-over-year. Leasing momentum continued. We signed nearly 900 leases for more than three million sq ft in the quarter and have signed over 3,100 leases for more than 10 million sq ft through the first nine months of the year, and we continue to have a significant number of leases in our pipeline. The opening rate on our new leases has increased 10% since last year, or roughly $6 per lease. Reported retail sales momentum continued. Our shopper remains resilient.
We reported another record in the Q3 of $749 per sq ft for the malls and outlets, which was an increase of 14% year-over-year. Mills ended up at $677 per sq ft, a 15% increase. TRG was 1,080 per sq ft, a 25% increase. Our occupancy cost is at 12%, which is a level not seen since early 2015. We opened our 10th Premium Outlet in Japan and started construction on a significant expansion at Busan in South Korea. Our redevelopment pipeline is moving forward with more creative projects. Turning to our other platform investments in the Q3, contributing $0.17 in FFO per share as compared to $0.28 in the prior year period.
After cash distributions received, we have approximately $475 million of net investment within our other platform investments, primarily in ABG and RGG. We expect to generate approximately $300 million in FFO from OPI. That is, for those of you who like math, is a 60% return on investment. We believe the value of our investments in OPI is over $2 billion. We recently announced our strategic partnership with Jamestown, a global real estate investment and management firm. We see great opportunity with this investment to capitalize on the growing asset and investment management businesses. The Jamestown team are experienced mixed-use operators, developers, property managers, and asset managers. We're pleased to expand our investment platform with this best-in-class operator, and we expect to grow their asset management business and accelerate our densification opportunities.
We anticipate this accretive transaction to close prior to the end of this year. Turning to the balance sheet, we completed the refinancing of 16 property mortgages during the first nine months of the year for a total of $1.8 billion at an average interest rate of 4.78%. Our balance sheet is strong with approximately $8.6 billion in liquidity. Net debt to EBITDA is at 5.7 x, and our fixed charge coverage is over 5 x. Today, we announced a 9.1% increase in our common stock dividend, and we will pay $1.80 per share for the Q4. The dividend is payable on December 30th.
Since May, we have purchased 1.8 million shares of our common stock at an average price of $98.57 per share. Given our current view for the remainder of the year, we are increasing our full year 2022 comparable FFO guidance from $11.70 to $11.77 per share to $11.83 per share to $11.88 per share compared to $11.44 last year. That's an increase of $0.13 cents at the bottom end of the range and $0.12 cents at the midpoint, and an increase of $0.26 cents at the midpoint compared to our initial guidance for the year. This guidance increase comes in the face of a strong U.S. dollar, rising interest rates, and inflationary pressures. Now, just let me conclude by saying we had another impressive quarter.
Before we get to questions, I would like to share some thoughts with you. For nearly 30 years as a public company, like many companies and industries, we have dealt with significant shifts within our industry. In our case, we embrace these challenges and are better operators and more thoughtful and astute capital allocators. Many have tried to kill off physical retail real estate, and in particular, enclosed malls. I need not remind you when physical retail was closed in COVID, all the naysayers saying that physical retail was gone forever. However, brick-and-mortar is strong. The brick-and-mortar retailer is strong, and e-commerce is flatlining. Importantly, over this period of time, we have paid out $39 billion in dividends to shareholders as we have become stronger and more profitable. Why do I bring this up constantly?
Well, because hopefully this will put an end to the so-called negative mall narrative, as you can't pay those dividends without a strong underlying business. Now, operator, we're ready for questions.
Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star and then one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and then two if you would like to remove a question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for questions. Our first question is from Steve Sakwa of Evercore ISI. Please go ahead.
Thanks. Good morning, David.
Good morning.
You know, it's nice to see the occupancy continue to climb, and I know minimum base rents are up 1.7%. You did mention in your comments that, you know, new lease rates were up 6% or $6, sorry, per foot.
Yeah.
Can you just kind of provide any color on how leasing spreads are trending? You know, do you envision bringing that metric back perhaps early next year? Just any thoughts around that?
Yeah. They are when you do comparable space, they're wildly positive.
Can you just provide any more color?
Well, we don't report spreads, but they're wildly positive when you focus on comparable space.
Our next question is from Alexander Goldfarb of Piper Sandler. Please go ahead.
Good morning. Morning out there, David. Hey, so, you know, I appreciate, you know, the continued disclosure of the different platforms, the core, the international, Klépierre, and the brands. My question is, just given, you know, continued inflation, obviously energy growing more of a concern, can you just help us understand, when we hear or see, like, retailer brand earnings contribution is down or we read about different retailers having issues, how that translates, if at all, to their leasing? Because I think one of the questions that certainly comes up is, you know, hey, retailers have a bad print. Oh, that's negative for the landlords. That doesn't seem to be the case, you know, except in maybe, you know, certain circumstances.
Is there a general insight that you can help us understand that when the retailers have a bad quarter or bad print, you know, what the impact, if at all, that you see on the leasing side?
Sure. I would say, you know, this is something we monitor every single day in good times, bad times, mediocre times. We have yet to see any pullback in, you know, opening new stores or renewals. There's been absolutely no impact. I mean, you're always gonna have a deal here or there that falls apart for all sorts of different reasons, but nothing based upon the macro conditions. I would tell you, Alex, that where they're seeing most of the pressure is in the e-commerce business. The flight toward bricks and mortar is real. It's going to be sustained. If they're in the retail business, and they wanna grow, they're gonna open stores. It's that simple because the returns on e-commerce just aren't quite what everybody talks about.
I think, you know, you've seen that, and we've seen no slowdown whatsoever. There's always gonna be a deal here or there, but you know, if they're a growing retailer, they have to put the money in bricks. Highest return on investment. We understand it, as well as anybody because we see the e-commerce business, not just in the brands that we own with ABG, you know, but also at Penney and RGG. It's been a difficult year for e-commerce, and bricks is where the action is.
Thank you.
Sure.
Our next question is from Derek Johnston of Deutsche Bank. Please go ahead.
Hi, everybody. Good morning. David, you've been doing this a long time.
Yeah.
How do you and the team feel?
You're right about that.
Yes, yes, sir. Now how do you and the team feel headed into holiday? You know, the consumer seems okay, but, you know, certainly we're facing a slowdown, you know, high inflation, it's hitting interest rates. I mean, what really keeps you optimistic on your retail investments? You know, then also on the holiday overall and, you know, it being a solid season?
Well, look, you know, you're always, as any kind of CEO, you're always worried about the macro, the macro environment. I will tell you what gives me unbelievable confidence going into, you know, into the next few years is the realization that, you know, what we have been saying is that don't underestimate physical retail. I, you know, and it's kind of repetitive what I said earlier, but I'll just reinforce. We feel really good because physical retail is where the action is. That's where the return on investment is.
You know, even though we may slow down next year or even into the holiday season, I don't think the growth from our existing business is gonna slow down because the demand for new deals and space is there. On the retail side, you know, we're trying to. One is, I don't wanna make a huge deal out of it. Two is, I want people to understand we've made an unbelievable investment. We're getting a 60% return on, you know, on our net investment there.
If it goes to 70% or it goes to 50%, it's, you know, we are gonna have volatility, but it's still a hell of an investment, still been a great thing for us to do to not only understand but, you know, what it takes for retailers to be successful but, you know, kind of where the future is. You know, there'll be volatility in that. You know, our better brands in there, like Brooks Brothers, Lucky Brand Jeans, Nautica, are really, really doing well. I said to you on the last call, the lower income consumer is tightening their belt and, you know, we do have a few brands that are affected by that.
Even with that said, we have an unbelievable return on investment, you know, after tax, from the earnings that those businesses throw off. We're also making investments in that, in those businesses. You know, I expect those investments to pay for future earnings growth. You know, the macro is concerning, but, you know, look, rates will have an impact. It's probably the most direct impact that we'll have next year. I still feel like demand and bricks and mortar where the action's gonna be.
Thank you.
Our next question is from Ronald Kamdem of Morgan Stanley. Please go ahead.
Hey. Quick ones if I could sneak them in. The first is just on the occupancy gains, pretty impressive this quarter. I think you talked about maybe getting a pre-COVID occupancy by 2023. Just how are you thinking about sort of the upside on occupancy in this portfolio at this point? The second one was just on the new disclosure, and the supplemental is really helpful on the fixed versus variable. Just any color or any comments as you're converting these variable leases to fixed. How's that going? How much is left to go? What's the economics look like? Would be helpful. Thank you.
Sure. I'll take the last one. I mean, we, you know, we expect to garner a lot of the percentage in overage rent to minimum rent, you know, as these leases roll. They, you know, they take time to roll over and, you know, our average lease term is probably seven years.
Yeah.
You know, it's not gonna happen overnight, but it'll happen over time. Remind me of your first question.
Occupancy.
Oh, thank you.
Sorry.
Look, I think we're still on track to, you know, achieve our goal. I mean, frankly, I think we, you know, we've done an unbelievable job at increasing our occupancy and increasing our cash flow since the shutdowns. Hopefully in 2023, we'll get back to pre-COVID levels.
Our next question is from Vince Tibone of Green Street. Please go ahead.
Hi, good morning. Could you elaborate on how you expect to grow Jamestown's asset management business? Can you see that platform being an acquisition vehicle for U.S. malls or Simon is the operating partner and has a, you know, minority stake in the fund or investment?
Well, it's really in the asset management business. I don't see buying malls in that platform under any circumstance. They, you know, have a lot of institutional relationships, as do we, and we think by working together, we'll be able to you know get separate account money to invest in you know kind of the opportunities that exist in real estate. You know, they're great at placemaking real estate, so you know, there'll be some of those opportunities. They're also historically a big German fund operator.
We expect them to continue that, and they look for opportunities both internationally and domestically, not in our core business, but you know, in other forms of real estate. I think between essentially kind of the historical separate account business, they have their premier fund, plus their German fund business, and then our adding to that platform in terms of you know, owning 50% of the business, I think it will be attractive for institutional and retail investors. Not retail real estate investors, but retail investors to potentially you know, wanna have Jamestown invest in real estate for them.
That's a helpful call. Thank you.
Sure.
Our next question is from Floris van Dijkum of Compass Point. Please go ahead.
Thanks, David. It was heartening to hear you talk about the benefits of physical real estate over e-commerce. Your perspective is always much valued on those. You have better insight probably on that than anybody in the industry. Obviously, sales are at records, tenant sales are at records, leasing remains strong. I guess the question I have for you is, last quarter, I think you said your SNO pipeline was around 200 basis points. Is that still the case because you're signing new leases, as well as opening stores? When do you think you're gonna be able to achieve 19 levels of NOI on a same store basis?
We're pushing the group to achieve that next year, okay? Floris, I would say to you that the biggest issue for us next year will be just getting our pipeline opened. A lot of these are, you know, really good retailers with really good stores, and it takes time to build them and open them. That will be our challenge. That will be our primary challenge, you know, to reach next year's, you know, to get back to 2019 levels. I'm hopeful that we can do it, and we are pushing very hard to do that, which is, I think, pretty much ahead of schedule. It's a very fair and good question to ask that because I ask that every single day. You and I are in sync. On the pipe.
Yes, Floris, this is Brian. We're still running about 200 basis points. You know, we've added stuff, and we've taken stuff out as we open, but we're running around 200 basis points consistently.
In the malls and the outlets, relatively unchanged?
Yes. Very consistent.
Thanks.
Sure.
Next question is from Craig Mailman of Citi. Please go ahead.
Thanks. This is Nick Joseph here with Craig. Just on the Jamestown strategic partnership, what was the price and valuation for the deal? Do you expect to move more into asset management? If so, how large could that platform become?
What? I'm not sure. You broke up there. Could you repeat your question? Hello?
The Jamestown deal.
Yeah, we're not disclosing the private company, and we both chose not to disclose it. So I think you asked the size of the deal. I'm sorry, Craig, but you're breaking up, so I'm guessing that's what you've asked. They manage roughly $13 billion of assets across their various funds. We are hopeful that over time it's not just quantity, but there is quality involved. But there's no reason why we can't turn that into one of the bigger asset management players with their expertise and our expertise combined, their reputation and our reputation combined. We think it'll be an attractive platform to raise additional funds to invest in real estate.
I am hopeful that, you know, we can, you know, more than double it. You know, I'm not gonna put a number out there, but you know, we didn't do it to be flat. We did it because we expect to grow their assets under management. Given the existing size, we think we can grow it, you know, with time, pretty significantly. Thank you.
Our next question is from Michael Mueller of JPMorgan. Please go ahead.
Yeah, hi. David, on your comment about wildly positive leasing spreads, I guess, you know, how recent of a dynamic is that where you would, you know, I guess, describe them as being wildly positive?
I would say it really started at the beginning of this year. You know, look, again, you know, spreads ultimately you see it in our minimum base rent growth, right? But that's a huge. That's everything, so it takes time. Again, we want you to focus on cash flow growth as opposed to spreads. If we were to track comparable space, i.e., you know, space A leases to same space, it would be wildly positive, more than the $6 per foot that I mentioned. But we don't. Then we don't want you to, like, be obsessed with that either. We're trying just to focus everyone on occupancy, minimum rent growth. We've outlined kind of where we get the variable income, where we get our contractual income.
It's all in the 8-K, and it all manifests itself in the NOI. That's what we want you to focus on. If you were to take the subset, which is, you know, space for space that's like, it's, you know, it's pretty damn impressive, and our renewals are positive overall. That's changed. That's, you know, you're right, over the last, certainly in COVID, you know, we got those renewals were tough that happened to show up during COVID. I am happy to report renewals generally and new deals with ending space and new space is wildly positive, and that's manifesting itself in our comp NOI growth. You add that to the pipeline, and that's why we feel good about next year.
Unfortunately, the only negative next year will be getting stores open and getting this 200 basis point pipe open and operating. That takes time because the retailers that we're doing business with, you know, wanna have the proper looking store. You know, we are very pleased to see the spread story change.
Okay. Thanks, David.
Sure.
Our next question is from Craig Schmidt of Bank of America. Please go ahead.
Great. Thank you. Will Simon's total investment in redevelopments and developments grow in 2023, or might macro events like, you know, potential recession cause a pause in new projects?
A good question, Craig. Right now, you know, we think if we do run into a recession, actually from the standpoint of new projects, actually we see a slight benefit. Now, it may sound counterintuitive, but, you know, construction pricing for new projects is higher than what we want to see. So I'm hopeful that any slowdown will demonstrate, you know, will reduce cost of new construction, which we will, you know, then wanna, like, move forward more aggressively. So it's kinda counterintuitive, but, again, I'm not looking forward. I don't want a recession. I hope there's not a recession. But from the standpoint of redevelopment and new development, we actually see a slight benefit.
The countercyclicality of cost of construction may actually be one of the side benefits, you know, that we can take advantage of.
Our next question is from Juan Sanabria of BMO Capital Markets. Please go ahead.
Hi. Good morning. I was just looking at the lease income disclosed in the supplemental for the consolidated properties, and it seems like that was up 60 basis points year-over-year, but your domestic NOI was up 2.3%. At the same time, the lease income was down modestly sequentially. Just hoping for a little bit more of an explanation, I guess, or tying a loose end as to the difference between the lease income and then the NOI reported. Is it cost controls or any other kind of unusual items that kind of drove that disparity between the lease income growth?
Yeah. I think you had less.
That cancels on NOI?
Yeah, I think we had a reduction in overage rent, right? Would be one of the reasons.
Reduction in overage rent. Juan, don't forget, we mentioned that we took a charge for the Regal write-off, which will reduce that line item as well in the current quarter. We do have certainly cost containment, as you can see through the P&L. All of that mixed together drove the levers to higher NOI growth.
Thank you.
Our next question is from Greg McGinniss of Scotiabank. Please go ahead.
Hey, good morning.
Good morning.
If you could just please touch on the reduction in overage rent, again, and you know, how much of that is driven by, you know, one, reduced sales, despite kind of tenant sales being up 14% year-over-year, and then otherwise, the conversion of pandemic leases back to fixed, and then maybe how much more of that kind of conversion we expect to see this year and into next year.
Well, Look, I mean, strategy-wise, we always try to convert our, you know, our overage rent into minimum rent. Certainly some reduction is associated with it. You know, it usually 2021 obviously on sales was pretty strong. In certain cases, percentage rent, you know, it's not so much the overage, I'd say the percentage rent. We have some tenants that are just purely percentage rent. They've had slower sales since 2021, and that's showing up in the numbers. You know, we're still very pleased with the results. I think those are kind of, you know, the big picture. You know, we'll continue to reduce percentage and overage rent as leases roll over.
On the other hand, our sales are rising, you know, and the retailers focused on, you know, the higher income consumer continue to spend. That's, you know, that's good for us as it shows up in our cash flow.
Our next question is from Michael Goldsmith of UBS. Please go ahead.
Good morning. Thanks a lot for taking my question. The domestic property NOI increased 2.3% in the quarter. The portfolio increased 3.2%. That's a deceleration from last quarter, about 130-140 basis points. It sounds like there's an offset of 100 basis points from the Regal write-off, so maybe like a 30-40 basis point slowdown from the last quarter. I guess the question is this like the right rate of portfolio NOI growth that we should expect kinda going forward? Or is there an expectation that things kinda continue to moderate from here?
Well, again, you know, I wouldn't focus too much on quarter-over-quarter. You know, there is volatility in our numbers because of overage rent and other factors like a write-off like Regal, which is highly unusual that it would manifest itself in a material number, but it's important to point out. Look, I think you have to go back to the beginning of the year where we thought because 2021 was a, you know, a really banner year. We were very conservative in our top NOI estimate of 2%. We're blowing through that number. We'll see what the Q4 brings.
You know, it's our top NOI growth is gonna be really strong and you know, we continue to expect it to grow next year as well. You've got to look at this over a two- or three-year period as opposed to quarter-over-quarter or, you know, even year-over-year. You know, we're making a tremendous amount of progress. Remember, we were one of the few industries that were literally mandated to shut down. You know, we're kind of back up and running and producing results, you know, that are pre-pandemic, which is very good to see. We'll expect to see top NOI growth next year, even in the face of you know, a potential recession.
Thank you very much. Good luck in the Q4.
Thank you.
Our next question is from Linda Tsai of Jefferies. Please go ahead.
Hi. Good morning.
Good morning.
[crosstalk]
In terms of the write-off from Regal, is this for all your Regals, and are they rent reductions or rejected leases?
This is all of our Regal. We took a reserve against outstanding receivables.
What would happen with the Regal? Are they still going to operate as Regals or?
Well, we don't know. I mean, they're in bankruptcy. We've you know, my guess is they'll you know, come out of bankruptcy as a you know, as an ongoing business, but we'd have to wait to see. I'm sure they're gonna restructure their debt. You know, we're experts in understanding bankruptcies. I would imagine they'll reorg and you know, some of this may come back because it's pre-petition. In order for them to assume a lease, they have to clear up the pre-petition rent. You know, it gets very technical and complicated. There's trade-offs. You know, we'll just have to see how it goes through bankruptcy at this point. I expect them to continue to operate.
There could be a couple of theater closures in our portfolio. Some of that will be fine. You know, I think their debt and financing is, I think, just about approved or was approved. You know, it's gonna go through a process that, you know, we have seen hundreds of times.
Thanks.
Sure.
The next question is from Ki Bin Kim of Truist Securities. Please go ahead.
Thanks, Don. Good morning. So just want to go back to your comments about the lease spreads looking pretty positive this quarter. If you take a step back to look at it from a kind of net economic basis, meaning, you know, regardless of if it's minimum rent or income from percentage deals, as you're signing new deals, how does the net economic benefit look like versus the comments you made about the lease spread looking positive? How, what do you think that looks like going forward?
Ki Bin Kim, can you repeat your question? You were breaking up a little bit.
Sure.
Yeah. I'm sorry. It was really hard to
Talking about the lease spreads. Yeah. Is this better?
Yeah. Thank you. Yes.
Yeah. Just talking about the lease spreads, you guys mentioned that the spreads were pretty positive this quarter. I'm just curious about the net economic impact of the renewals or new leases, meaning as you convert some of the percentage deals into fixed, you know, is the net economic benefit you're getting as good as the comments you made about the spreads looking pretty positive?
Well, sure. I mean, because we obviously take into account our existing income stream from that space, which includes if we have overage or percent rent. You know, we look at it in totality, but we expect the total income stream to go up. You know, could include, you know, tends to be minimum rent increase and some assumption on overage. That's why rent spreads are kinda, you know, whatever you want it to be, okay? That's why we chose not to do it. As an example, you know, when we disclosed it historically, we included everything. We had minimum rent against minimum rent. We did not factor in overage. You know, Taubman, as an example, when they did their rent spreads, they included some assumption on overage.
Well, when they disclosed it, you know, their rent spreads, is that beneficial or not beneficial? To me, it's like, hey, it all shows up in cash flow, man. See the cash flow, see the NOI. That's why you gotta be very careful with rent spreads. That's why they're more manufactured than they should be. They're, in some cases, take assumptions and whether you want assumptions or not. You know, we'd rather not have assumptions, so we just say, "Here's the math. Minimum rent. You see our overage, see the NOI, you know, next question." When we look at our when we go lease by lease, space by space, we're looking at the total income stream before and after the renewal, or in the case of new, a new tenant, to see whether we're going up or down or it's flat.
What I'm telling you is the trend is up, pretty straightforwardly.
Okay. Great. You guys mentioned that the lease percentage for your portfolio is about 200 basis points higher than the 94.5%. I'm just curious if you look at the forward leasing pipeline of new deals that you're looking at, as we head into next year, what does that picture look like compared to maybe a couple quarters ago? Tied to that, I also noticed your 2023 lease expirations didn't really budge all that much quarter-over-quarter. Just like any kind of preliminary thoughts on that roll.
Yeah. The stuff out there, we're very close to it. You know, some of the larger accounts just takes time to do renewals, paper 'em and all that stuff. That's all moving. No real concerns there. Go ahead, Brian.
Ki Bin, you said something about the 200 basis points. Let me just clarify, that is included within the current occupancy level. It is leasing that has been done but hasn't commenced paying rent. That is next year or effectively will be partially next year's growth.
Thank you.
Thank you.
Thank you. Our last question is from Haendel St. Juste of Mizuho. Please go ahead.
Hey there. Good morning.
Good morning.
I have a question, a follow-up for you on the leasing. The occupancy is up 170 basis points year-over-year, but your leasing comes only up about 60 basis points. My question is, when are we gonna see the impact of that occupancy gain? Is that part of the cautious optimism embedded in your thinking for next year and your hopes for getting back to 2019 NOI levels, or that'd be more of a full year 2024 impact? Thanks.
Well, I think you've seen it, and you'll continue to see it. Our comp NOI growth first nine months is.
4.4%.
4.4%. You've seen it for the first nine months, 4.4% growth. As Brian mentioned earlier, and I've mentioned throughout the call, we had this other pipeline that's basically leases that will open and start paying commencing rent in 2023. That's why we're positive about the feeling that we'll continue to have future comp NOI growth for next year, even in the face of potential recessionary environment. Okay?
Fair enough. I guess as a follow-on to that, if we assume expenses have to go up, given what's going on with inflation and operating expenses, personnel, is it your expectation that you can grow NOI between the Q4 here and middle of next year?
Absolutely. That's what I. Yeah. We said we expect comp NOI growth next year. Obviously that includes the expense side as well.
Right. I was thinking more than six months. Nevertheless, one more if I could squeeze it in for Brian. Maybe it's a bit far off, but the $600 million of unsecured maturing next June, bearing interest at 2.75, what's the early thinking there, and where do you think you could issue 10-year unsecured today? Thanks.
Sure. Look, we actively monitor markets at all times, and you've seen us numerous times react ahead of maturities or at maturities. We would expect to continue to keep our finger on the pulse of the market. Unsecured today is approximately 6% for us.
Great. Thank you.
All right. Nice to squeak in a few extra questions there.
Good try.
Okay. I think that was it on the question side. Thank you. It's a change of pace to do it in the morning, but we did it in hopes that you got home early enough to trick or treat, and hopefully you had a great Halloween. Thank you, and we'll talk to you soon.