Ladies and gentlemen, thank you for standing by, and welcome to the Simon Properties Group Conference Call. As a reminder, today's conference is being recorded. I would now like to introduce your host for this conference call, Mr. Tom Ward, Senior Vice President, Investor Relations. You may begin.
Thank you, Kevin, and good morning, everyone. Thank you for joining us on short notice to discuss the transaction announced this morning. David Simon, Chairman, Chief Executive Officer and President of Simon Property Group, Inc. And Robert Taubman, Chairman, President and Chief Executive Officer of Taubman Centers, Inc. Will be presenting on today's call.
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 1990 5, 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 investor presentation as well as our SEC filings for a detailed discussion of the risk factors relating to forward looking statements and reconciliations of non GAAP financial measures. Both the press release and investor deck are available on our IR website at investors. Simon.com and the press release is also posted on Taubman's website at investors. Taubman.com.
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 and one follow-up question, so we might allow everyone with interest the opportunity to participate. With that, I'm pleased to introduce David Simon.
Thank you, Tom. So hopefully everybody can hear us. We had a little technical problem this morning. But we're pleased to announce that Simon will acquire an 80% interest in the Taubman Realty Group or TRG operating partnership by purchasing all of the publicly traded Taubman Center shares and approximately 1 third of the Taubman family's interest in TRG for $52.50 per share in cash. Simon expects to fund the total required cash consideration of approximately $3,600,000,000 with existing liquidity.
The Taubman family will reduce its ownership interest in TRG from its current ownership of approximately 29% to 20%, with the other 80% to be owned by Simon. The Taubman family will receive the same consideration as other shareholders for their shares and units they sell. The transaction, which has been recommended unanimously by a special committee of the independent directors of the Taubman Board and approved unanimously by the boards of both companies is expected to close in mid-twenty 20 and is subject to customary closing conditions and the support of 2 thirds majority of Taubman's voting stock and a majority of the outstanding Taubman's voting stock not held by the family, Taubman family. The Taubman family, which in the aggregate currently represents approximately 29% of the outstanding voting power of the Taubman voting stock has agreed to support the transaction. TRG's leadership team will continue to operate the TRG assets in partnership with Simon.
Bobby, who will remain Chairman, President and CEO of TRG will provide further color on TRG in a few moments. The Board of TRG will compromise will be compromised with 3 Simon designees and 3 Taubman designees and have operational and corporate approval rights. The Taubman family is subject to a 2 year lockout after which we'll be able to exchange its interest in TRG to Simon for either cash or Simon OP units subject to certain limitations and procedures. Simon will also have a call right to purchase the Taubman family interest in TRG under circumstances. We are very excited about the strategic and financial benefits this transaction offers shareholders of both Simon and Taubman.
Most of you on this call know the high quality of the Taubman assets. Simon is investing in a portfolio of highly productive mall assets and an attractive underwritten capitalization rate of approximately 0.2%. The Taubman shareholders are receiving a significant and immediate cash premium for the value of their shares. The transaction price of $52.50 represents a substantial 51% premium to TCO's closing price on February 7 and a 19% premium over total enterprise value, which includes net debt and preferred equity. And at the same time, the transaction is expected to be accreted to SPG's FFO per share of at least 3% on an annualized basis immediately following consummation.
In addition to these near term financial benefits, we believe that by forming this venture, we can enhance TRG's growth prospects. With this partnership, TRG will be in a better position to invest in its properties and create the sort of innovative retail environments that drive traffic. These include immersive opportunities for retailers and the new and exciting shopping and entertainment experiences for our consumers. In addition, these investments should also provide new job prospects for our local communities. We also expect to achieve operational efficiencies by implementing best practices at both companies and will immediately eliminate the public company costs.
And finally, Simon will have the ability to continue to attract capital and maintain the necessary investment in TRG's assets over the long term. Before I turn the call over to Bobby, I'll go over the transaction sources and uses. The $52.50 per share transaction implies an acquired equity value of approximately $3,700,000,000 We expect to fund the 80% acquired interest in TRG with $3,600,000,000 of existing liquidity, Existing non family OP units holders will have the option to exchange for assignment OP units or cash or receive cash at the transaction price. The Taubman's family's 20% retained interest will be rolled over into the new venture with implied equity value of approximately $900,000,000 And finally, the existing debt at TRG and its subsidiaries is currently expected to remain in place subject to lender consents were required. We expect Simon's net debt to NOI ratio to increase from 5.2 times to 6.1 upon closing and we are not anticipating changes to Simon's credit ratings.
Our balance sheet will continue to be strong as our industry leading credit metrics allow for superior operating and financial flexibility. We will continue to maintain significant liquidity, which complements our existing free cash flow, allowing us to fund our exciting redevelopments and new developments worldwide. Now I'll turn the call over to Bobby, who will provide further details on TRG. Bobby? Thanks, David, and hello, everyone.
Let me begin by saying that our management team at Taubman and I are excited to join forces with David and the Simon team through this joint venture, which we think is a great outcome for all our stakeholders. Obviously, we are very familiar with each other's portfolios. Both companies have great assets. David and I have known each other forever and have been able to develop a terrific relationship in the last few years. I'm looking forward to working closely with him and the new Board to execute on our portfolio's next phase of development and growth.
The retail environment is constantly evolving and we must continue to adapt as well. That's an important reason we are excited to partner with Simon. We believe we will accomplish more given the expertise and best practices of our 2 companies as well as the added financial strength that Simon represents. Taking a step back, I'm very proud of Taubman's accomplishments over our 7 year history and during our more than 27 years as a public company. Through the hard work of our management team, our board and employees, We have successfully grown Taubman's portfolio and created extraordinary retail environments for shoppers, merchants, communities and investors.
At the $52.50 transaction price, Taubman will have delivered a 12% compounded total shareholder return over the last 27 years, significantly outpacing the S and P 500. We are extremely confident that Simon is the ideal partner to help us build on our progress. We're excited to deliver significant and all cash premium for our shareholders. I'm also really pleased with the benefits of this transaction for all our other stakeholders, including our employees, our retail partners and the communities we serve. Now I'll turn the call back over to David for some closing remarks.
Thanks, Bobby. And clearly, there's a lot of excitement at both of our companies about the opportunities today's announcement offers to stakeholders of both companies. And just to remind everybody, we are investing in premier assets and an attractive underwritten cap rate that is expected to be immediately accretive to Simon's FFO per share upon closing. We're offering significant immediate cash value to Talbot's shareholders and we believe Simon's shareholders will benefit from future upside of the joint venture. And we are positioning ERG to invest in the innovative retail environments that attract consumers and tenants now and in the future.
I very much look forward to working with Bobby and the rest of the TRG team. And I'm confident that together we will do great things for these properties and the many people who depend on them, whether it be for employment, entertainment, shopping and the like. And I do truly believe that Bobby and I have found a win win for everybody involved. So we look forward to prospering together. And with that said, we'll open it up
Our first question comes from Craig Schmidt with Bank of America.
Good morning. My understanding is that this will be run as a JV and that the Taubman offices in Detroit will remain open and pretty much anyone not associated with corporate reporting will still stay on?
Yes. Craig, this is David. We have I assume when we answer questions you'll now be speaking. So we're all in a good seat out there all the time. And Bobby is with me here today in Indianapolis.
So we are yes, TRG will still be headquartered in Bloomfield. And obviously, we're going to work together to create best practices of both companies, But it will be very much run like a partnership similar to what we have with McArthur Glenn in London. So it's a very familiar structure for us. We feel good about it and we intend to share ideas and best practices. There'll be some obviously public company costs that will be immediately saved.
And then as we look at it, we're hopeful that together we'll be able to grow both the Simon and the Taubman portfolio better because we'll be able to share ideas.
Great. And then just can you give us a little bit of back detail on the 6.2% cap rate?
Well, that's just the math. I mean, there's not if you look at we obviously underwrote the portfolio and you do it at that with their NOI. That's basically the cap rate that is backed into.
Okay. Thank you.
Sure.
Our next question comes from Christy McDonough with Citigroup.
Hey, it's Mark Belman here with Christy. I was wondering if each of you can talk about the transaction structure in terms of predominantly being all cash. And I guess, David, from your side, while the balance sheet still remains very solid, you've noted in your presentation, your book EBITDA is going up to 6.1%, debt to gross asset value is probably going up 500 basis points, and the capital needs of the top end assets are going to be high. So I guess from your perspective, why not issue stock in the transaction? And what are your deleveraging plans to bring leverage back down to where it was and also create the capital to go out and invest?
So I don't know if there's partners you're talking to about selling assets or what those plans are. And then from Bobby's perspective about, you talked a lot about the benefits of combining the expertise that David and his organization will bring to drive further value. How did you think about cashing out your shareholders $52.50 versus taking script where the combination could lead to something better? Well, I'll just start simply. We have no intention of issuing equity at this at our share price.
I mean, it is where we feel we're significantly undervalued. If you look at a multiple of earnings, EBITDA, NAV, any metrics you want, We are undervalued and I have no desire to issue stock at this time. At the same time, Michael, as you know, our balance sheet is very strong. We think we can accomplish all the goals that we need to in with redeveloping the PRG assets and the SDG assets. So we don't see any need to do there.
And if you look at our peer group across the board, even with this transaction, we still have the highest metrics. And we expect to be reaffirmed A rated at S and P and Moody's. So I think it's really a testament to the belief in the business and in our cash flow generating abilities. And we're also a testament that we think our company is undervalued. So we're just not going to issue shares at these kind of levels.
I'll turn it over to Bobby to answer your other question. Yes. I think it's pretty simple. It's a very significant premium on an all cash basis. And it's all the volatility in the market, we think our shareholders would be delighted with an all cash significant premium transaction.
And then David, I would just say too, not you'll see this in the background. I mean, we did I don't think it was a question of Taubman for the same thing on our stock. It was really a question of Simon's board not wanting to issue stock at this price. So just so you'll see this when it's described in the background, but that's an absolute statement. So was it that the Taubman Board didn't want our stock, it's just Simon was not prepared to receive stock at this price.
And then in terms of deleveraging and raising the capital going forward, which it sounds like there's no intent at all on issuing equity. Are there institutional capital partners, David, that can come in and recapitalize some assets that would help you delever back to where you started and also provide the incremental capital that's needed for redevelopment and some of the plans that Bobby, I think, has been a little bit more limited to be able to execute given his size and where his balance sheet has been? Well, look, we're only the answer is all of those are opportunities, but we don't need to do it. Remember, we're only increasing our leverage by less than one time. And when you look at the peer group, I don't want to name names because that's not appropriate.
But we are way under we have much stronger ratios than kind of the other 2 or 3 big players out there. So Michael, the balance sheet and our ability to invest is of no we're very thoughtful capital allocators. As you know, there is absolutely no issue about our ability to fund redevelopment, new development. And the reality is we could do other stuff that we wanted to. So I don't think folks ever appreciated our balance sheet.
This is now gives you a sense of our ability to do it. Imagine a company that can fund this without even going to 3rd party financing. So that's so I am very confident about the balance sheet. There's no issue. We're good capital allocators.
We could do more stuff if it arose. And we'll continue to make these properties better. I feel very confident about it. Let me just say, I am one person who appreciates his balance sheet after this transaction. Right.
Now I was thinking about it more so from the perspective of whether there is institutional capital that could, a, make a mark for assets and also bring you more capital, right? I'm not worried about from a balance sheet perspective, giving your metrics, but it was more so that element of Yes. I mean, we could do that, Michael, but we just don't there's just no need to do that. But we'll see how popular Bobby and I are. Okay.
All right. Thank you.
Our next question comes from Todd Thomas with KeyBanc Capital Markets.
Hi, thanks. Just circling back to the 6.2% cap rate, David and maybe Bobby can weigh in here a little bit, but how did you get comfortable with the CapEx requirements? And how do you think about the IRR on a portfolio of malls like this today?
Well, look, I think when you negotiate any deal like this, you try to unless it's a win win, it's not going to happen. So we circled a price that was good for Simon Property Group and obviously good for Taubman Centers Inc. And their group. So at the end of the day, if you look at the historical if you look at generally A assets, this is a pretty good price from our standpoint. And if you look at it as a spread being treasuries, historically, it's probably over a 2 to maybe 2.5 standard deviation above that.
So at the same time, we do think together we're going to be a much stronger company, which is yet to really be factored into any of the math. Again, I think we try to create this win win. We have a history of doing that. And I feel very confident that we're going to be able to get some returns that are required to justify this kind of capital.
And how much capital do you anticipate employing beyond the initial capitalization here in terms of redevelopment or new investment in Asia?
Well, look, Asia will be as you know, we're in the outlet business. We do think Asia Bobby has done a great job in Asia. He's made money. Got criticized a lot. Welcome to my world.
So I think they've done very well in Asia. We've done great in Asia with our outlet business across the board. So I think we're going to continue to look at incremental opportunities there. And again, I think that TRG certainly spent a lot of money on assets. So and they have always been very good operators.
So it's not like there's the way we look at it, we don't think there's like deferred capital. We just think it's opportunistic new capital that would add to the growth of the company. I'll give you an example. One thing which we try to do on our earnings call last week was that when we get a department store space back, that's new incremental land or real estate or space that gives us the opportunity to create a separate return on it. It's not going back necessarily into a building we own.
So I'm sure there's going to be a handful of opportunities like that with the TRG portfolio. But it's not they've done a very good job of maintaining it and have spent a lot of capital. So I think it will be incremental opportunities that will generate returns on investment. And we'll make decisions together where we want to put capital. And if it doesn't make sense to do it, we won't.
So I mean, it will be an individual decision, the property at a time as we go.
All right. Thank you.
Sure. Our next question comes from Steve Sakwa with Evercore ISI.
Thanks. Good morning. David, I wanted to just circle back on the accretion analysis that you quoted. And just trying to understand, obviously, it sounds like a lot of the overhead from Taubman will sort of stay in place other than the public company. So one, can you give us just a little sense as to or maybe Bobby as to kind of what the savings might be at the G and A level?
And then one of the benefits of doing a full collapse would have obviously been your lower debt costs and your ability to finance a transaction initial accretion analysis? And then how do you think about sort of the upside going forward?
Well, the initial accretion analysis is essentially based upon other than the public company process, not a lot of what I'd call synergies or overhead savings or even improvement in best practice property operations, it's more or less as is. So we're hopefully able to achieve that. We do think at the TRG level, we do think we'll be able to lower the cost. With our financial resources, we said that we're going to own 80% of it and we would hope to bring that to bear. That's further upside as we go forward on that.
We don't have to do that, but we certainly can and drive cost down. So it's more or less as is without the if it were without the all the best practices, all the finance savings. So it's still very attractive. And I think over time, the best practices will add to the cash flow growth, not just TRG, but hopefully SPG as well.
And then I guess just kind of follow-up on kind of the margin. I mean you've obviously run at much higher margins than many of your peers. Some of that's a difference with the outlets and the malls. But just over what period of time do you think some of these operational synergies both at your company and at TRG can sort of become recognizable?
Too early to say, frankly. The last period of time, we've been obviously focusing on the deal, creating a win win scenario. The next step obviously will be the shareholder vote at Taplin and then we'll have plenty of time to put our plan together. I'm very comfortable to deal out of the box. And then I do think there'll be savings and best practices that allow us both to increase the cash flow as a standalone basis.
I think as you know, you know, historically, whether we partnered or bought things, I mean, we've always been able to add value to it. And I don't see this as any differently. And it's they run a very good company, so do we. You put both smart companies together, you're bound to add further value to it beyond what it is today. And even just look the reality is, we feel very comfortable with the family.
I mean, it's to me, it was a testament to their belief in the business and their belief that together we could add value to both companies. So I actually think the structure is really a testament to the deal and to the assets and to us and all of that. And so I wouldn't overlook that commitment by the family to be partners with Simon, I think it's terrific. And we're going to do some really unique stuff together. Bob, I don't know if you want to add anything.
No, I mean, I think you said it. I mean, look, we love the business. Obviously, the business has had challenges. The sector has had challenges. But we believe in this business long term.
We're rolling almost $1,000,000,000 worth of value. And we intend to remain very, very actively involved in our new business.
Okay, thanks.
Our next question comes from Alexander Goldfarb with Piper Sandler.
Hey, good morning. Good morning out there.
Again, every time you answer, you say out there, not that far out there.
True. Although from New York, it's definitely a flight.
So just two questions. First, just following
up on Steve's question on accretion. David, you are a cash man. You are cash is king. Yes. In hearing you talk about the 3%, it sounded like it was just FFO, which is accounting.
So can you just talk a bit more about the 3%? Is that cash accretion and therefore the GAAP accretion is more? And then it also sounds like you're going to let Taco sort of run the malls as they have, which is a lot less ancillary income than you guys have. So how much brand venture may come in? I'm just trying to get a sense for how much accretion is initially cash versus GAAP.
And then longer term, as you put the Simon platform presumably on those assets, do you think you can boost NOI over time?
Yes. Well, the 3% is cash, okay? So that's the first point of that. I mean, it doesn't include any of the accounting no accounting, it's pure cash. So that's the first point.
The second point is without question, we think together we're going to be able to grow the NOIs of both portfolios. And I think, as I mentioned earlier, I mean, we didn't that to us is always gravy. It's always additional upside, which we've been able to do. Look, when we bought Chelsea, people didn't think there was cash flow growth in the outlet business. And obviously, we've proven that long.
We took a business that had $400 ish million of EBITDA to $1,800,000,000 I don't know that we'll be able to replicate that here. But together, we're just going to be a much stronger company that we'll be able to use our marketing, whether it's brand ventures. I mean, the portfolio is, obviously, as you know, they're in major markets and that means a lot to that business. So there is no incremental when we underwrote this, we took the NOI at this. We didn't add anything to it beyond that.
But obviously, we expect to be able to do that. Otherwise, we wouldn't do the deal. No question about it.
No, that's yes, I didn't know if Taubman was going to remain with the traditional approach to their malls, but it sounds like you're going to bring in the Simon approach. The second question is
Yes. I don't listen, I think together we'll be stronger and I expect the improvement to come in with both portfolios. Alex, 1 and 1 will be 3 here. And how we get there, we'll figure it out, okay? These are 2 great companies, the 2 great sets of assets.
And as they come together, they're going to find ways to grow better than separately. Okay. And I would just look at the outlet business as kind of the even though we acquired 100% of it, I mean that goes David and the team ran that business, what David Bloom that is, ran that business the way it was, and we just kind of helped them along. Obviously, we've done that in basically every deal. I mean, we don't we run a pretty lean shop here.
In fact, we're on an iPhone because our tech went down. So we're talking to you from an iPhone. So we've run a pretty lean shift. Every big deal that we've done, it's not like we didn't go back to the bar law. We kept the yanks down.
So this is not uncommon for us. And yes, over time, there'll be opportunities there. But the really idea, as Bobby said, is to understand where we can add value to both portfolios. And essentially, if the family Southern family didn't think there was opportunity, they would probably have taken a different approach. So I think it's a win win and I'm very comfortable with the structure and everything else.
Speaking of structure, can you just go over a few of the deal points, namely the break fee? Is there a go shop period? And then did this trigger change of control for either for Taubman management?
So Alex, first of all, there is a go shop. Our independent committee and their advisers will work through that go shop period and they'll be very active in that period. It is technically a change of control, but we don't anticipate many shifts or changes in our organization other than obviously the public company costs that David referred to earlier. We are going to look for best practices everywhere we can. And we think we can learn a lot from them, and we're hopeful that they can learn something from us.
What I said earlier, 1 plus 1 will equal 3 here. I'm very, very strongly in that belief. So we think this is a really good outcome, a true win win win for everybody. It's a win for our shareholders. It's a win for Simon and their company and shareholders.
And we believe it's a win for all our stakeholders, including our employees.
Thanks, Serge.
There is a break fee. I can't remember. It'll all be disclosed here shortly, 1.5% or something like that.
1.25%. 1.25%. Okay. But in the change of control that triggers the payments change of control or management is foregoing this?
Change of control is typically a
trigger.
We don't anticipate a double trigger. So we're not again, TRG is going to continue to run the company and run TRG assets. And we are very much looking forward to the Simon investment in TRG. And we are going to have a lot of savings for no longer being a public company. I mean just our director group is one example.
The filings that we have to make, all that other stuff that is as a separate independent company will be part of the initial savings once we close down the transaction. So again, the context of the deal is effectively a privatization and that's what's occurring.
Thank you, Bobby.
Okay. Thanks.
Our next question comes from Rich Hill with Morgan Stanley.
Hey, good morning. Bobby, quick question for you to begin. Just making sure I understand this, prior to this transaction, you owned around 71% of TRG. Is that right?
No, no, no. TCO, the public entity, the UPREIT owns the 71% and we and other unitholders, but largely us own the other 29%. Now in the 29% is we actually own a few shares too. So there are other, like as an example, when we bought Palm Beach Gardens earlier last year, they took units because they were very interested in the tax accrual. So those individuals will now have a choice.
Do they want to go into Simon Property Group Partnership Units, so that they can maintain their tax deferral and have the liquidity option through that entity or do they want to take cash? Well, it was less than a year ago that they decided they wanted to defer and take our units. It's very likely they're going to take Simon Property Group units. But it's a very small group. It's outlined in the presentation as to what the expectation is of those types of unitholders.
And we're maintaining our interest, but along the way, in total selling about 9,000,000 shares in units, mainly units through this transaction.
Thank you, Bobby. Sorry, I should have been clear when I said you, I was referring to TCO and not you, you. But thank you for that. And David and Bobby, both collectively, why now? Because obviously, the stock has traded above the 52.50 price over the past 18 to 24 months.
So why now? Why come together now?
Well, clearly, we're maximizing shareholder value today. It's a very significant 51% premium. I think the whole deal, the deal price, the whole context of the deal, I think, recognizes the track record at TRG and what we put together, our employees and our company. Simon, as I said in my comments, is a truly ideal partner. They provide the resources and the flexibility to support our growth on a long term basis.
I just I think the deal is the right deal at the right time for TRG and it works for Simon. And as I said earlier to Alex, I really believe this is a win win win. I mean, win for our shareholders, win for his shareholders and his company as well as for all our other stakeholders. Yes. I would just say, why not now?
I mean that deals happen like this with all sorts of different times in company's evolution. So as Bobby said, this should be a terrific deal for everybody involved.
Thanks guys. I appreciate the color.
Yes.
The next question comes from Hamzah Jagdevi from Mizuho.
Hey, good morning out there. So David, I wanted to go back to your earlier comments on Asia. I guess I'm curious just if you could clarify what are the plans for the existing partnership assets with Blackstone? It sounded like you mentioned you're looking at incremental opportunities in Asia. So will you be doing that all on your own in terms of Simon pre the Taubman merger here outside of the Blackstone partnership?
Or should we be thinking of you maybe working with Blackstone on further opportunities in Asia?
Well, you adjust it to me. So simply put, I mean, we'll continue to build our outlets in Asia. So as you know, we have one under construction in Bangkok. So that really will not be it will not involve our interest in TRG. And then with respect to what TRG is doing in Asia, they'll continue to do it.
I'll let Bobby speak to it. And I think there's they have one under construction already. The interesting thing is they've had good success. And the other interesting thing is one of their partners in Korea is actually our partner in our outlet business. So that's all good.
So but Bobby will continue to do what they're doing in Asia. Do you want to add some? Sure, sure. I mean, we're very committed to Asia, which I think everybody knows. Shinsegae is the partner that David was talking to.
They've been a fabulous strategic partner for us in Korea. They built Hanam with us, which is really one of the great assets of its type in the world. We have another project under literally
like
30,000,000 square feet that's being built right now. Literally like 30,000,000 square feet that's being built right now. It's already partly occupied. It's being done. We are looking at expansion elsewhere in China as well as in Korea.
And we had a terrific team there that and I think obviously with Simon Organization's understanding of Asia and all its very big and tremendous success in their outlook business there. We should be able again, 1 on 1 should equal 3. So we're looking forward to sharing our knowledge with them and seeing how we can create more value for shareholders.
Thank you for that. A question on the balance sheet. I guess, I'm curious what the plans are for the TCO side. Historically, they've been more of a secured borrower than you have, David. I guess I'm curious if you're going to should we think of you keeping that in place for now?
Are you looking at taking out some of that? Any level of prepay penalties that we should assume anything embedded in this deal? And then maybe also, when broad ballpark broadly, can we see Simon get back down to the low five debt EBITDA? It's clearly been a differentiator for you here over the last couple of years versus peers. So I'm curious on how soon potentially we can see some improvement in that net debt?
Well, look, given our cash flow,
to be able to do that. I mean, remember just to put it in context, I mean, we have roughly $3,000,000,000 a year of dividends. So it's not like we don't generate a ton of cash flow. So every deal we've ever done, we've had a little bit of uptick and then through our hard work and everything else, we've been able to manage it down. So we'll expect to see that those results as well.
And again, our balance sheet still is a differentiator when you compare it to our peer group. We'd encourage you to study that. You'll see that. So I mean, there are some in our industries that are big players that are 11, 12, maybe even higher debt to EBITDA, we're going to be half that. So we feel very comfortable about that.
I do think right now the construct is to keep the TRG debt in place. And then over time, hopefully, it will be considered, though it is a strong credit, it will be considered even stronger with our fact that we own 80% of it. I would hope that we would be able to lower its borrowing costs. They do have unencumbered assets, which we would maintain. And again, in our 3% cash FFO accretion or cash accretion, we would not we have not factored that really into our map all that much.
So it will stay pretty much as is, but hopefully we'll get some benefits on interest costs given our significant investment in it.
Great. Thank you.
Sure.
Our next question comes from Ki Bin Kim with SunTrust.
Thanks. Going back to the dual management operational structure in the joint venture, is there any contractual language in terms of how long that lasts contractually?
You'll see that there's a lockup on Bobby for 2 years and the family for 2 years and then rights start to open up after that. So all that will be outlined in once we file all the documents.
Okay. And just a second question. What particular for this deal made it more sense than the other investment opportunities out there, whether that be domestic operators that are trading at other high quality operators that are trading at high cap rates or international companies?
Well, look, I think, first of all, being partners with the family means a lot, 1. 2 is their portfolio is best in class. 3 is it's a lot less risky to do something in your own domestic world than outside of that. And I mean, again, it's terrific opportunity for us to put these two companies together with a portfolio like this. And then their full price Asia assets coupled with our outlet assets in Asia really give us kind of a unique look there through that whole market.
So our involvement in Europe with our outlet business there and Klepierre, I mean, you're building a company here that can clearly prosper on all sorts of different fronts. We've got a marketing platform with the coupled with the Simon portfolio that's unrivaled, eyeballs, visitors, tenant sales, etcetera. So it's really a unique combination that frankly will never be built again. And that's how we have to look at it. And no one will be able to really do this kind of transact this kind of build this kind of network of high quality assets with good operators.
So it's a unique separator that should last for a long, long time.
Okay. Congratulations.
Thank you.
Our next question comes from Wes Golladay with RBC Capital Markets.
Hey, good morning guys. Looking at the top end dividend, will that continue until the deal closes? Yes. Okay. And then Okay.
Fantastic. And then David, looking at leverage, you mentioned that some of the other operators had really high leverage, but you have always had very low leverage. Can you refresh us
on what your leverage goals are? Well, like I said, I mean, our the most important thing is that our rating does not change and we have a high degree of confidence that we're going to get reaffirmed. And as long as we maintain kind of the A rating, I think we're in pretty good shape in terms of what we do. So that's our intention. We don't expect any kind of negativity around it.
I think we've got we'll expect to hear from them today reaffirming our ratings. Obviously, we brought them up to speed. We don't do this in a vacuum. And given our cash flow generation, we expect to be in that kind of A rated, which gives us a lot of confidence. Okay.
And do you think
the rate agencies are more focused on fixed charge coverage versus
the debt to EBITDA that we focus on? I think debt to EBITDA for sure.
Okay. Thank you, guys.
Our next question comes from Jim Sullivan with BTIG.
Thank you. Just a further question on the dividend. Taubman currently has been paying out dividends at the annual rate of something like $260,000,000 So I'm just curious, I know to answer Mike's question, you said you intended to maintain the dividend, I think until closing. Does that mean 1 or 2 dividends? Really depends how long the Calvin needs a shareholder vote.
And so we've got to file a proxy. We're anticipating mid but it will be prorated after closing as well. So it's almost irrelevant in that sense. So but we expect that kind of mid year close. We've got the go shop 45 days, which can be extended slightly.
And then there's a proxy and then a shareholder vote. So we're looking at 3 ish months, 3, 4 months. Okay. And then do you anticipate any FTC issues on this transaction? No.
And then final question, this is for Bobby. I mean, you're going to retain a 20 your family will retain a 20% plus interest in TRG. What level of distributions, how should we think about the distributions on those OP units? Well, it's a private company at that point. And whatever we decide, whatever the Board decides of that private company, again, Simon will have an 80% equity investment in the company.
My family will own the other 20%. There's going to be a 6 person board, 3 from Simon, 3 from Zelman. They together will make the determinations based on how the business is doing. And but we do have expectation that distributions will continue in a similar fashion as they've been. I mean, our business notwithstanding all the noise out there, our business continues to grow.
We did have NOI comp. It wasn't a huge amount, but we did have NOI comp in our 2019 results. And that's how we feel about the future. So we don't see a decline in income. We see growth in income.
Okay. Very good. Thanks. And so sorry, go ahead, David. Yes.
No, I was just going to say TCO did announce earnings right after our call. And you can see the results that Bobby is referring to. Yes. I mean, our FFO was we had moved up through the year from the midpoint of $3.68 to $3.69 We actually announced at $3.71 dollars But in that $3.71 are actually about $0.03 of expenses related to this transaction. So we would have been at 3.74%.
We talked about our NOI comp. Originally, our guidance was about 2%. We ended up at 20 basis points positive, but 80 basis points of difference was currency. 60 basis points was the Forever 21 impact that we had discussed previously in our Q3 call. And then another 40 basis points is related to a single asset.
Literally in December, real estate taxes suddenly changed. So absent that, we would have at 2%. So the growth of the business continues and we've got great assets. And these assets are going to continue to gather all the great tenants and serve their communities well, and they ultimately are going to produce more and more cash flow. Okay, great.
Appreciate that. And I think the deal makes all the sense in the world. Thank you, Jim.
Our next question comes from Michael Mueller with JPMorgan.
Yes. Hi. David, what sort of redevelopment and expansion potential do you see in the existing domestic portfolio? And can you put some rough dollar amounts around it? Well, they you're talking about Simon or TRG?
TRG. Okay. Well, Bobby, why don't I mean, you've got capital plans this year that are so why don't you just mention that. We've got a lot of capital plans this year that obviously brought through in great detail with the Simon Organization as well as frankly our capital plans over the next 5 years. We've looked at everything in front of us.
I think we've talked with many of you about the 14 boxes within our portfolio. We have 4 Penny Stores, we have 3 Sears Stores, We have 3 Lord and Taylor stores and we have 4 Macy's Double stores. In fact, one of them we're getting ready to make an announcement that on soon that we will have a replacement for it, we think is really fantastic. So it will be good for Macy's. It will be also good for that asset.
So we will together look at each opportunity as they come up. In many cases, on these 14 boxes, we've been talking to the owners of those boxes, the stores for 10 years. So one of these days, we'll get 1 bath or 2 bath or 3 bath. And together, the Simon Organization and us will figure out what makes the most sense. And we'll make a decision on capital and look forward.
Yes. And I would just say, again, we don't view I mean, the TRD portfolio is excellent and we don't view that there's defensive capital that needs to be plowed back in. And it's really like I said earlier on the call, when we get incremental space back and really good real estate, that's when we whether it's SPG, TRG, international, then I mean, then what can you do? What kind of capital can you put to work? But most importantly, do it on a return on investment basis.
And that's we see that all over the place. And there'll be opportunities certainly in the Taubman portfolio. So it's not defensive. It's on the offense. As we said last week in our call, we're not we're on the offense here.
We believe in our industry. We believe in the business. And we don't believe in the narrative. And I said earlier, we zig when others act. So this is all part of that philosophy.
Got it. And then what are some
of the circumstances you referred to where you can buy out the remaining 20% after 2 years? That all will be disclosed when we file the 8 ks. You'll see that. Nothing dramatic. It's what you would imagine what happens on those kind of transactions.
Got it. Okay. Thank you.
Thank you.
Our next question comes from Linda Tsai with Jefferies.
Hi. In terms of the 3% cash accretion on day 1, at what point will we receive detailed or more updated guidance range? Will it be before next quarter's earnings call?
No, I think we'll do that. It's a good question, Linda. I think we'll do that once the deal closes. We'll lay out all the math at that point. I wouldn't change any recommend not changing anything until we close the deal.
And obviously, that's subject to Simon Property Group does not need obviously shareholder vote. We obviously get the full support of our Board who's deliberated on this for it's been a long winding road here, but we got somehow we got here. But so it's really we'll update that essentially the minute it closes and whether that's if it coincides with an earnings that will be the best. If it's way off earnings, we'll figure a way to communicate it.
Thanks for that. And then while Taubman is not providing guidance, Bobby, any sense of what same store NOI growth is for the Taubman assets in 2020? Would any of the 2019 headwinds like currency or Forever 2021 you detailed have lessened in 2020?
Well, let me say we're not providing guidance at all on 2020. But I will say that there would be good modest growth in NOI comp for 2020.
Thanks.
Thank you. Okay. So anyway, thanks everybody. I know Dobby and I are going to catch up on our sleep. But we really appreciate everybody's interest and support.
We think it's a terrific transaction. Bobby, do you want to say anything else? No. I appreciate all the support of all the investors over many, many years. Now, as I said, 27 years.
And we're moving into another chapter, and we're delighted to be alongside the strength of Simon Property Group. Thank you all. Bye bye. Thank you.
Ladies and gentlemen, that concludes today's presentation. You may now disconnect and have a wonderful day.