Good day, ladies and gentlemen, and welcome to the Q1 2015 Simon Property Group Inc. Earnings Conference Call. My name is Whitley, and I'll be your operator for As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to your host for today, Mr. Tom Ward, Vice President of Investor Relations.
Please proceed, sir.
Thank you, Whitley. Good morning, and welcome to Simon Property Group's Q1 2015 earnings conference call. Presenting on today's call is David Simon, Chairman and Chief Executive Officer. Also on the call are Rick Sokolov, President and Chief Operating Officer Andy Juster, Chief Financial Officer and Steve Broadwater, Chief Accounting Officer. Before we begin, a quick reminder that statements made during this call may be deemed forward looking statements within the meaning of the Safe Harbor of the Private Securities Litigation Reform Act of 1995 and actual results may differ materially due to a variety of risks, uncertainties and other factors.
We refer you to today's press release and our SEC filings for a detailed discussion of 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 ks filing. Both the press release and the supplemental information are available on our IR website at investors. Simon.com.
For our prepared remarks, I'm pleased to introduce David Simon.
Okay. Good morning. We had a strong start to 2015. As you know, we closed on the acquisition of Jersey Gardens and University Park Village, 2 great properties that we're excited to have in our portfolio. We created 2 joint ventures with 2 of our long standing retail partners, 1 with Hudson Bay Company and the other with Sears Holdings, which will serve as additional avenues for growth.
And of course, we continue to produce strong operating and financial performance. As you know, results in the quarter were highlighted by funds from operation of 2 point $2.8 per share, exceeding once again the first call consensus by 0 point 0 $3 and that was achieved even though we had a decrease of approximately $0.03 for the quarter due to the strong dollar against the euro and the yen. And on a comparable basis, excluding the operating results from WPG Properties in the prior year period, our FFO per share increased 6.5 percent or $0.14 even with the currency devaluation. Let me turn to our operating metrics. Cash flow, occupancy was 95.8%.
Leasing activity remains strong and healthy. The malls and premium outlets recorded leasing spreads of $11.19 per square foot, an increase of 18.9%. Now let's talk about comp NOI. Comp NOI increased 3.5% in the Q1 of 2015 compared to an increase of 5.3% in the Q1 of 2014. As a reminder, approximately 95 percent of our domestic property NOI is included in our comp NOI calculation.
And very importantly, with respect to this quarter, our comp NOI in the Q1 was negatively impacted by about 50 basis points due to a significant overage rent retroactive billing within the mills in the Q1 of 2014. And if you remember, we put in the mills in terms of our comp NOI beginning last year. If you wanted the to understand our comp NOI on the outlets and the malls. It's approximately 4%. So and right on our budget, total sales across our portfolio increased 2% in the Q1 compared to the Q1 of last year.
And I will also point out there was a recent pitch affirming our A rating. They did a report that I would suggest that the analytic community review just to put in the back of your mind on our comp NOI growth, we have exceeded our peers by an average of 2.40 basis points from the period of time of 2,005 to 2014. I thought that was interesting reading. In any event, let's go to construction. We continue new premium outlets in Gloucester, which will serve the South Jersey and Philadelphia areas and new centers in Tampa and Tucson, as well as our designer outlet in Vancouver, all are great high quality major markets and each is scheduled to open later this year.
We are slated to begin construction on as many as 3 additional domestic premium outlets in 2015 as well as 3 international outlets in 2015 for a total of 6. We are beginning site work shortly at The Shops at Clear Fork, which as you know is our new full price development in Fort Worth anchored by Neiman. We plan on opening that in early 2017. Yesterday, we were excited to announce our partnership with Swire and the Whitman family for the retail component of Brickell City Center, which is anchored by Saks. We look forward to contributing our leasing and management expertise to this signature project, which includes a significant residential component and that will open in the fall of 2016.
And on Oyster Bay, which we are renaming Syosset Park, we have begun the approval process for what will be a unique mixed use lifestyle center with retail office, hotel, park for the families of the Oster Bay Area and residential components. Initial feedback on our plan has been positive. We expect the process to go well. On the redevelopment and expansion, we've got 24 properties across our 3 platforms in the U. S.
And Asia for a total commitment of $1,800,000,000 at the end of Q1. During the quarter, we completed a 265,000 square foot expansion at Yeoju Premium Outlets in Seoul and recently completed a 136,000 square foot expansion at Shishui Premium Outlets in Tokyo both off to great starts. And let's not forget construction continues on major redevelopment expansion projects at some of our most productive malls all under construction including, but not limited to, Roosevelt Field, the Gallery in Houston, Stanford Shopping Center, King of Prussia, the Lamo and our premium outlets in Woodbury, Las Vegas and San Francisco and Chicago all under construction, all bringing significant amount of new square footage for 2016 and over the next 18 months. Clepierre, we were pleased to have played the key role in Klepierre's acquisition of Corio, which became effective at the end of March, creating the leading pure play retail property company in Continental Europe. We now have a €21,000,000,000 portfolio in 16 countries.
And to remind the investment community, this was a €7,400,000,000 M and A transaction. We are pleased to see the rebound in the European shopper. Klepierre will report the results next week and we expect a higher and stronger growth portfolio given the acquisition. Capital markets, we expanded our $2,000,000,000 revolving credit facility to get $2,750,000,000 and extended its maturity to 2020. Our current liquidity including revolvers and cash on hands is over $6,000,000,000 Our industry leading balance sheet continues to differentiate us from our peer group.
As you know, we announced a $2,000,000,000 share repurchase program. We have not yet repurchased any shares as a result of our trading window blackout due to earnings and the timing of our buyback announcement. And proudly, we are proud to announce yet another dividend increase of 1.50 dollars which is a year over year increase of 15% and a 7% increase from the Q1 2015. Again, nobody's got our dividend growth. We will pay at least $5.90 an increase of nearly as I said 15% from last year.
So let me turn to guidance. We've increased our guidance based on our view of the year again from $9.65 to $9.75 Again, nobody in our peer group has the kind of growth that we have. And we continue to feel very comfortable as I mentioned to you on the
Your first question comes from the line of Christy McElroy with Citi.
Hey, good morning. It's Michael Bilerman here with Christy. How are you doing? Great. So David, I was curious as how you think about your stake in Macerich at this point.
Do you sort of view it as a $470,000,000 mall that's given you a 3% yield that you think is potentially worth $570,000,000 Or do you sort of view it as worth $470,000,000 you bought it for $370,000,000 you have $100,000,000 profit and sort of take that money and go home?
Well, Michael, frankly, since we were not able to engage with Macerich even though we tried very hard to as you know and we put what I felt was an unbelievable hell of an offer on the table. And I obviously tried very hard to engage. We have been so busy between the Sears and the HPC finishing Brickell, doing Clear Fork, making sure our redevelopment is on time and on budget. The 3 new deals that we have internationally, I have really had the luxury of figuring out what I'm going to do with that stake. So at this point, I can't really answer your question, But at some point, I'll address it in the near future.
But we had just been too busy running the business, producing very good strong results, raising the dividend, doing the buyback, doing all the redevelopment, all the new ventures that I haven't really sat down and figured out what to do next. I'm open to your ideas if you have any though.
Yes. I don't think I should publicly say that on a call. In terms of Europe and you talked about the Klepierre Corio transaction in being instrumental in that deal. As you think about potentially putting additional capital to Europe, when you originally made the stake, the euro was about $1.30 and you're under $1.10 today. You obviously have some hedge because you have some euro denominated debt.
But I'm just curious as you think about potentially taking your stake back up to a 30 level, if that's in the cards and putting capital out given where the euro is and how you sort of think about that?
Well, look that kind of opportunity is always on the table. I will say this. Look, we are up €1,400,000,000 in our investment guys, right? Yes. So that's not too shabby of a trade.
If I can quote Adam Sandler, he was one of my heroes. I quoted him last year, not last year, but 2013 annual letter. But all you talk about is Steve Ross' letter. You never mentioned mine. So but I thought I had a pretty good line in there.
But I mentioned in our call, I think people lose sight. We did help engineer a 7 point $4,000,000,000 European merger. That again is not to don't underestimate the fact and the role that I played, that we played in putting together those 2 companies that was a €7,400,000,000 investment. And as you know that the capital going towards Europe and the timing of that deal I think is going to be very attractive for us in the long run. So I couldn't be more pleased with my investment, but we'll just see how that evolves.
There are a couple of other large shareholders. They certainly haven't indicated to me anytime that they're going to that they're looking to get out. I think they're very pleased with what has transpired since our involvement over the last 3 years.
Hey, good morning, David. It's Christy here. You've talked often about your larger regional mall redevelopment and expansion projects. But I'm wondering with the new Hudson's Bay and Sears JVs and this may be more so with the Sears boxes, but does your new control over any of these boxes unlock any future potential major redevelopment projects at any of your centers? Or is it too early to tell?
And maybe you could just provide some general comments on the future opportunities for investment that could arise from these JVs?
Well, I think the JV with Sears clearly is all about redeveloping those boxes with Sears potentially as a taking some of that space and in some cases maybe not. And as also part of that deal, we bought the La Plaza store, which is a fantastic mall does I don't know $7.50 to $800 a foot, Got a lot of demand. So that also gives us the ability to look at expanding that mall. So the answer I don't want to put a number on it, Christy, but I would definitely say that it's all about re tenanting with Sears maybe downsizing their stores. And in La Plaza certainly there's a major expansion in the works there that we're going to move very, very fast on.
And that will La Plaza just as a general scope Rick
is a couple of $100,000,000 at
the end of the day. So all of that was part about all of that was done in the mind to foster
Your Your next question comes from the line of Craig Schmidt with Bank of America. Please proceed.
Thank you. This is somewhat related to Christy's last question. There seems to be more churning in both the mall specialty and the mall anchor space. I'm just wondering from Simon's mall portfolio perspective, is that actually an opportunity for you? I mean, that's something you actually would welcome just given your dominant portfolio and the opportunities that kind of distance you from your peers?
Well, I wouldn't say we have a we don't use the word dominant here. We have a very high quality portfolio that's produced outsized comp NOI growth with our peer over I know we get focused on a quarter here quarter there. But if you look over any kind of extended period of time, we've clearly outperformed our peer group. I would say there's not a lot of churning in the department store world. I think we have Rick 1 empty box out of how many Rick?
450 almost. Yes. And what is that 1? I should know it actually.
It's in Oxford. Okay. Yes, yes, yes.
That's a tough one. But in any event like in Riverside, we got the SAC building back. We actually just approved internally yesterday a whole redevelopment of that box. So we're down to 1 box. But clearly on the specialty side, we did lose a handful of retailers.
And I think at the end of the day, there will be an opportunity from it. Obviously, we're focused on releasing that on that space, but we're going to put in better retailers. And as you know, I mean, the retail business, like any business in today's environment, is Darwinian. And the retailers that are going away are relatively weaker ones. There's a whole host of stronger ones in the pipeline that we would expect to be able to add excitement to our properties and ultimately increase our cash flow from their participation in our building.
So that's the nature of our business. As you know Craig, we've we love showing the slide about the top 10 retailers in 93 when we went public to today. It's a little more going on today than maybe it was a year or 2 ago, but nothing that we're overly concerned about and we're poised to do the work necessary to make these properties better. And obviously, having a high quality portfolio like we do will make it happen.
Okay. And then just besides your significant redevelopment pipeline efforts, are there any emerging areas or real estate formats that you're looking to down the road that could be an area for growth for Simon?
Like other uses or
I mean, obviously, you haven't been that interested in high street retail. But is there I mean, just thinking the mall is a mature business at some point the opportunities for premium outlets flow. And then what are you seeing maybe 5 years down the road that might be an opportunity to grow?
Well, look we have always looked. I think the Hudson Bay joint venture is going to give us another avenue of growth in that whole single credit tenant kind of business both internationally in the Street retail potentially out of that. I don't know. The values there are pretty salty when the deals that we've seen. So I think Craig we've always been creative in trying to find other areas.
It will focus around retail real estate. But we're not concerned not at all about not being able to find avenues of growth. But clearly, we still got a big pipeline of redevelopment. The outlet business our outlet business is very strong. So we posted great comp NOI numbers this quarter.
Sales were very strong. So we see that growth continuing. And then with the redevelopment that we're doing at some of our iconic mall properties, Again, these aren't pipe dreams. They're Houston Galleria, Roosevelt Field, Stanford Galleria, Del Amo, King of Prussia. I mean, this stuff is maybe we should put on our website to show you the steel, but this stuff is all happening.
So we got plenty, plenty to say grace over right now.
Okay. Thank you.
Sure.
Your next question comes from the line of Jeff Donnelly with Wells Fargo. Please proceed.
Good morning, guys. Just a first question on back on Macerich. What were the Pursuit costs related there? And I guess where do they fall in your Q1 numbers?
It's another expense and they're done and we have no more.
Are you able to give an estimate or?
Immaterial. I mean, I don't know. I don't want to basic immaterial. We do a lot of this in house. You're looking at them.
Okay. For better or worse, okay?
And you work cheaply, so
Some may argue that, but the point is for better or worse, you're looking at the M and A guy here. Okay.
Okay. Maybe just switch gears. I'm just curious on occupancy. I think Q1 occupancy was down a little bit year over year and maybe I missed it in your remarks, but is that just a return to
a more normal what I'll call sort of pullback post holiday? Or is
there something else going on there?
Well, I would say Jeff, we clearly normally we're always going to lose 60 bps to 80 bps from the seasonality part of our business, right? We had more than that this time and that's all related to the I'd say another 50 bps or so all related to the bankruptcies.
Okay.
And again, we had planned that. That's why we were cautious on our comp NOI growth. So there's no surprise there. Cautious being I'd argue 4% is not is pretty significant when I look at other categories. I look at office, I look at industrial, I look at across the platform 4% ain't too bad.
But nevertheless, it is a little bit lower and it was all because we were planning the guys that were on the ropes. And the guys that were on the ropes ended up on the mat so to speak. In the spirit of the upcoming Pacquiao Mayweather fight, okay? Hands up on the mat.
I would say Jeff is we expect that occupancy to go up as we move through the year and get some of that space redeployed, which we're in the process of doing right now.
Yes. Because I
think at the end of Q4, you guys were looking for sort of flat occupancy by year end. I wasn't sure if that was still the case.
Yes. Yes. It's Look, could we be a few basis points below it? Sure. But again, you also have to factor in we've got a lot of redevelopment going on.
So our portfolio is in a pretty significant undergoing pretty significant activities going on. So it will be very close to that number.
And I saw that David Kontas is working on converting temporary space to permanent space. How much do you guys have in the way of short term tenancy today? And how does that compare to history?
It's been going down pretty significantly. I'm going to say, again, we don't in our occupancy, we only include folks that have a lease of a year in. So we do sometimes we do year to year leases because we're looking for a better group. But that number has been as high the year to year guides have been as high as the mid-5s. We're down about 4% now, Jeff.
Roughly rough numbers, right guys? Getting close? Yes.
And just a last question or 2 is on WP GLIMSURE. Is there a set date when you expect that arrangement on providing services to end?
May 16 is the end of that, right Rick? May 16.
Yes. And on Oyster Bay, how close do you guys
Let me clarify. May 2016, not May 2016.
Right. Right. And just on Oyster Bay, how close are you guys to getting the necessary approvals to move ahead there?
Look, it is a process. I think by the end of this year, we will be in very good shape, but we have a lot there's a lot to go through. So we're shooting the next 6 months or so are going to be very important. But that's how we're thinking about the timing.
Okay. Thanks guys.
Sure.
Your next question comes from the line of Ross Muken with UBS. Please proceed.
Hey guys. Good morning.
How are you?
David, let me first ask you on the stock buyback. Do you intend to actually buy back any stock around the current levels? Or was it put in place as a placeholder? Or was it a statement to Macerich or a little of obviously,
I'm not going to tell you when or how we're going to buy stock back, but obviously, I'm not going to tell you when or how we're going to buy stock back. But I would say, we wouldn't have announced it unless we were serious about it. We couldn't buy any stock back because we were in our blackout period when the announcement came. And as I look at other companies and their valuation and I look at ours and our growth prospects and our track record, I continue to think we are extremely well positioned. As I look at history year after year, quarter after quarter and all that we've got going on, and I look at our valuation compared to our peer group, I feel very comfortable that we've we are a very strong and good investment.
Now with the added volatility in the REIT sector, we want to be able to take advantage of that volatility. So I think you'll see us at the appropriate times of volatility. And no statement, it has nothing to do with Macerich. Obviously, had that deal gone forward, maybe the capital would have been allocated differently. But I look at our growth profile.
I look at the history of our results. I look at our balance sheet. I look at the peer group. I look at REIT valuations generally and I think I can't pick a better investment than ours as we look forward. So we'll take advantage of volatility.
We'll do this opportunistically and you'll see us in the market at the appropriate times.
Okay. Appreciate that. Can you talk a little bit about what's going on in the department store industry right now? And I know you've got different motivating factors behind what happened with Hudson's Bay and with what's going on with Sears. I guess a couple of questions.
One is, did you discuss with Sears or do they want to sell you more than what you actually bought? I'm curious what you think of their, I'll call it, spin rights offering? And do you see other department store companies also transacting with their real estate anytime soon?
Well, look, I would say that Sears and us got comfortable with the portfolio. It wasn't dramatically different from the beginning to where we ended up. And I think it's good to have that kind of relationship. I think it can grow over time. I think they have valuable real estate.
And we see Suratage as being able to as a company, we wouldn't invest in it unless we saw that going forward. So and frankly, Hudson Bay, I think they I really like their management team. I really like that real estate being a partner with them and their real estate and looking for future growth opportunities gives us another avenue of growth. So I see that as another good very good opportunity. Could other retailers take advantage of their inherent real estate value?
Sure. But if they do it to the extent or they've got a balloon if they squeeze one end too high. You got to be very careful on how they do it. But if they're thoughtful about how they want to take advantage of the real estate, I'm sure there's value to be made for their shareholders. But that's not necessarily a focus for us.
We're very pleased to have partnered with both these folks and we expect them to grow. Rick?
The only other thing that I would add is that it does put a spotlight on the fact the creditworthiness and operating stability of our department store companies, I believe is greater than the analysts and the investment community has recognized before. And when we've said all along, we thought that they were in a stable position. I think that's being borne out by the ability to add financial stability by taking a focus on the real estate assets.
And David, did you separate out the Hudson's Bay Venture from SPG, because you didn't want a bunch of boring long term net leases in SPG? Or was there something other than that?
Well, I think it's part of SPG. First of all, it hasn't actually closed yet. We're closing when we announced it, it should be closing in the next by the end of the quarter probably. But we've always viewed that as ultimately a standalone business going forward that will help grow foster the credit, the net lease retail. I mean, we they're great retailers.
They were how we're going to run that joint venture. They've got great real estate entrepreneurs. We certainly can underwrite retail credit. We have ideas on how to grow that business. So ultimately that business could in fact end up separated from us.
But we will want to add value to to it through our deal making capabilities. And yes, it probably if it ends up more focused on the credit lease business, it's that probably is better separated from SPG in the long run. But all that's to be determined Ross as we go forward.
Appreciate it. Thanks. Sure.
Your next question comes from the line of Alexander Goldfarb with Sandler O'Neill. Please proceed.
Good morning. David, just a few questions here. First, you brought up the rating agencies in your comments. So two questions on that. One is the 7% cap rate that they're using.
Clearly we've had a number of demonstrable mall trades that show cap rates are well below. So curious if they're going to move away from the 7%. And second on that is as you guys entertain the Macerich to buy them, did the rating agencies do any pushback to you guys on your rating? Or their view is they know who you are and even if anything was breached they know that you would resolve that in due course and therefore a rating impact was unlikely?
Well, look, I'll speak to the last first. I mean, no, they have all the confidence in the world in us that when it comes to doing a transaction of that nature that we were that we did not expect to be downgraded notched at all, right Andy? Right.
I mean, we've done $40,000,000,000
of acquisitions and they've been very pleased with the results. So and again as not that this is all that interesting anymore, but part of the reason we were selling assets to GGP was in fact the primary reason was in fact to make sure that our A rating would stay in place. As far as the 7, yes, they should update it. It's silly. I mean, but It's a disaster scenario.
But they're being conservative. It's not market. I agree with you. But I don't know what to do about it.
You said the
8. You said the 8. And 9.
Okay. So glacial compression there. Second question is on the Hudson Bay, can you just talk a little bit about the challenges of having real estate in other people's centers? And we've seen obviously other companies in the past try and do that. It hasn't worked out.
Is there a different perspective that you guys have on making that work? Or how should we think that this time it may work versus what we've seen historically?
That's not really even the there's no thinking that boy it's great to have own real estate in other people's centers. That's really not this is a growth vehicle to go find other in that sense, I mean, obviously, if for whatever reason they decided not to operate a store, we would have that opportunity. But that's really not anywhere near on the agenda. We value this at a pretty attractive cap rate 6.8 in really good malls. So we think it's attractive accretive transaction for us from a value point of view.
And it's really about creating the entity to go do more stuff and seeding it with these stores as opposed to we're going to go play. We have no intention at all to go play any kind of havoc or anything in other people's malls. So that's not even on the agenda.
Okay. And then just finally, your last presentation on Mace where you guys disclosed your top center productivity and some of your mall stats. If there's any way if that could be obviously quarterly would be great, but annually I mean it was tremendous retail candy for us and obviously helps in the analysis of you guys. So if there's a suggestion box, we'd love to see that on the annual basis at least.
Speaking of suggestion boxes, I better not say this because I might get criticized. But I'm a member at a golf club that was built by Pete Dye, okay, Crooked Stick here in Indianapolis. And the member's suggestion bot is in the middle of the pond, okay? So but I will not that will not be duly noted and I'm not saying that, but duly noted. And look, I think we put that together because we felt it was important if there were any confusion about stuff that was said there, we wanted to clarify that.
Frankly, Alex, we look at ourselves differently than a collection of assets. But duly noted expressed everybody expressed their views on that to Tom. We've been we have been, I think, as clear and as articulate in our financial presentations as anybody. We have never wavered from FFO as an example. We deliver it via the white paper.
Occasionally like with WP SPIN, we separate that out because it's important to note a transaction of that nature, but we give you WP first or we give you FFO first and then we show you whatever is important to change. So I feel like we necessarily are a little different in that area. But duly noted, we won't make it canoe to the pond to put in your suggestion box. We'll take it up with Tom and we'll see about it in the future.
Awesome. Thank you.
Sure.
Your next question comes from the line of Steve Sakwa with Evercore ISI. Please proceed.
Thanks. Good morning, David. Hey. A couple of questions. I don't think you disclosed the percentage ownership in the Brickell transaction.
Is that something you could provide? And what role exactly is Simon playing in this
manager of the be the manager of the retail portion of the project and we are going to be leading the leasing effort along with Swire and Whitman Properties.
Okay. So you'll be the I guess the lead leasing agent on this? Yes. Okay. I guess David on Copley, I didn't hear any talk on that.
Where do we stand on the residential project?
Well, We have an upcoming BRA meeting, which is the authority there in the next month. We're hopeful to get approved. And that'll there'll be a couple of other hurdles after that, but that puts us on the path to start construction. So the next month or so, we thought we were going to be able to do it this month. Things got a little a couple of political things happened out of our control, but we've been assured that we can get back on the agenda here in this upcoming month.
So it sounds like maybe kind of June July start?
Yes. I mean, I think we should we feel comfortable by July. We will have all of the permits and all the approvals done. It's a fluid situation, but that's correct.
And if that's the case, I guess, when would the sales process like just help us think through the timing. If you start construction, what when does the sales office start? Just how far after that? Is that a year later?
That's not going to start for a year after that only because the complexity of this build is significant. So we have to go down the turnpike, support the foundation, then we got to go into Neiman Marcus store, relay that and then go up. So there's no real need to rush that. I'd say roughly a year from now that would be the focus. A lot's going on at the mall.
We're going to start the renovation of the actual interior of it. We're going to do the Southwest Corridor entrance. So there's a lot we're finishing the office rental. So it is a property that where a lot is going on. But I'd say the sales office would be probably roughly a year from now.
Okay. And then last question. I mean you mentioned all of the major projects you've got going on in the U. S. Here.
I'm just curious how do you feel about sort of the international investment opportunities versus domestic?
Well, with the outlet business, we've got our merchant in my call, we have 3 that we think we're going to start this year. We have a great outlet in Provence partnering with MGE, MacArthur Glen. We've got a new site with a fantastic developer in Mexico, Sorto, which has built some of the best malls, who's our partner in Mexico City. We expect that to start this year. And then we've got with Genting Group, we're very close to finalizing the deal to start our second outlet in Malaysia.
And I mentioned to you, we just finished Yeoju and Sichui expansion. So that's a lot of activity internationally. We're also working on a couple of other opportunities in the outlet with some new joint ventures And then we've got another site 2 sites in Canada. So internationally on the development front with the outlet premium outlet product, we are busy. And then again with Klepierre, we helped do this huge deal that here domestically people don't think about, but it was a €7,400,000,000 deal.
They just closed March 30 one. They also bought a great asset in Spain shortly thereafter. There is a tremendous amount going on with the integration and the portfolio review of the long term assets. There's a lot of development work going on as well within the total combined portfolio. So that to us is kind of we view that as our full price retail entity going forward in Continental Europe and I expect that company to continue to grow.
We're active internationally. I don't see us buying full price retail in Asia or other parts. I mean, I think right now it's kind of finding new markets for our premium outlet product.
Okay. Thanks.
Sure.
Your next question comes from the line of Haendel St. Joseph with Morgan Stanley. Please proceed.
Hey, good morning. Thanks for taking my questions.
Can you guys I guess,
first question just the factors behind your higher FFO guidance. Curious if there's any changes to your FX outlook in the new guidance? And if there's any level of perhaps share repurchase baked into the full year revised outlook?
The answer is no on the share buyback. And no and we've factored in the currency where it is today. So we have a few cents Last quarter, quarter 1 of 2014, the euro was $1.37 average. Yes. This year was $1.13.
So that's a pretty big gap. Now it's at 108%. It's roughly 21%, right. So we're pretty proud that we took a $0.03 hit in our Q1 2015 and still beat consensus pretty good. It's in our numbers.
It's clearly going to affect our total. We had $0.10 roughly year over year. It's in that range. We have a little bit exposure if it drops further, but nothing that we can't deal with.
Okay. Fair enough. And follow-up on the Miami project with Swire. I just want to clarify first, the 25% ownership that's just of the retail or is that the entire project?
Just the retail.
Okay. And then the strategic decision to get involved with the project now. Why now? Did you approach them? Did they approach you?
And then how should we think about the project in terms of merchandising mix? It looks like GGP, their nearby design district has a bit of a stranglehold on luxury. How much of a challenge do you think that might present in your ability to attract higher tier tenants retailers?
Well, they approached us. And look we have been involved in this for a while. We feel unbelievably confident we're going to deliver. Obviously, they designed it and they've done the most of the work. But we feel together we're going to deliver a great product that I think is going to allow the marketplace.
There's no question that this is going to be a unique terrific long term mixed use retail asset. I think it'll blow I think it's going to blow people's minds away. And the leasing, we've made a lot of progress on leasing and we're very, very confident about our ability to deliver a very, very compelling mix.
The only thing I would add is that this project in and of itself has a hotel, 2 condo towers and 2 office towers. And surrounding it, there's another 8 or 9 residential office and hotel projects going on in the heart of Brickell. So it's a very dense, very sophisticated and very wealthy submarket inside of the Dade County overall market. We're very excited about it.
Too early to talk about target yields?
Yes. Look since we have partners in there, I mean it'll be put in our 8 ks, but that kind of stuff is probably not going to be singled out out of respect for our partners, but we think it's an attractive investment. We wouldn't make it otherwise. And as I said, this will be produced at a very high level. Swire and the Whitman family are 1st class operators.
You couldn't pick better partners. We all know Bal Harbour for sure and we all know what Swire has done in China and Hong Kong. They've built some of the most amazing stuff So to be associated with those kind of folks on a long term basis, we couldn't be more pleased. And we will make money in this investment otherwise we wouldn't do it.
Could there be more? Are you contemplating additional investments with Swire? Or is it again too early to talk about that?
Well, I think there we're not in Hong Kong and this is their big investment in the U. S, but we certainly have a lot of respect for that organization.
Okay. But just to be clear at this point there's nothing talked about perhaps overseas with them in Asia, Hong Kong or China? No. All right. Thank you, guys.
Sure.
Your next question comes from the line of Andrew Rosivant with Goldman Sachs. Please proceed.
Sorry guys. I tried to get out of the queue. It's running late. But really quick, you guys have listed amazing metrics, especially on a relative basis, especially when you take into account leverage. And unfortunately, you can go through quarters where that actually doesn't influence your share price.
And I'm just curious just in terms of unfortunately my clients have tried to get right in discussions over the last couple of quarters. When you bid for another company that your shareholders don't own, you can actually harm the relative performance of your supporters. And I'm just wondering like when is that part of the decision making process? Do you kind of know it will hurt and you make the call that the long term gain actually offsets the short term pain? Or is it not in the calculus?
Well, we always want feedback from our shareholders and we always take that into account. But hopefully they have confidence in us that we're making right decisions that will add to the value of their investment. And we always we're always confronted whether it's an M and A deal or new development or redevelopment to weigh short term pain for long term gain. We thankfully, hopefully, will continue. But certainly historically, we've made pretty good decisions on that front.
We certainly haven't batted $1,000 But where we've been made risky investments, we've done it on a low key basis, a small basis compared to the enterprise. And I go back to 2 that jump out at me. 1 was in China. The other was in I call it my blue period when we were doing all the technology in the late whenever it was I try to forget about it, the late '90s, early 2000s. I would say to you with this last situation, I mean, the shareholders that we spoke to, at least what they told me they were supportive of what we were trying to accomplish.
That's what they told me. And again, I mean, we never got to the point where we were able to lay out all that we could do there. But we certainly always factor that in. We do know that sometimes doing these things is not the easy road. The easy road is to just I don't know do what a lot of other folks do which is not a lot, okay?
But this company is all about not doing what's easy. And it's easy just to I don't know redevelop a thing here build something there. But that's not what we're about. We're about trying to make this company unique. And when you do that, sometimes you do create short term confusion and or short term underperformance.
We hope all we can do, we hope is that people look at the track record and look at dividend growth. I mean 15% dividend growth at a company our size.
David, no pushback on that. No pushback that you're actually great at doing M and A. It's just when it goes on for a quarter and most of my clients are based on 1 year performance on a relative basis after a while it starts to hurt. And I even got the impression when you wrote your March 2020 final offer, I got sense when you were saying not to go through a multiyear proxy battle that I think you were starting to notice the pain it was creating with your share price.
Well, look that's a whole different subject that's probably better off. I'm happy to have with you or anybody else, but it's probably better off to have that not necessarily in this kind of format. But we look short term we're all about short term gain if there's a long term play there. But it's important to have support from our shareholders. And I can say to you that they were the ones that I talked to were relatively supportive of what we tried to accomplish.
But on the other hand going through a multiyear proxy fight etcetera, If we had done that that's when we might have lost support. That's a judgment call I have to make and I made the judgment call that I did. I think the support would have been there had we on the deal whether the support would have been there on a long drawn out battle, I don't know. But I decided not to ask for it.
Thanks for your comments, sir. I appreciate
it. Sure. No problem.
Your next question comes from the line of Vincent Zhou with Deutsche Bank. Please proceed.
Hi. Good morning, everyone. Just wanted to go back to the FX discussion a little bit. I appreciate the comments on the earnings side of things. Just curious last quarter we talked a little bit about the impact on some of the tourism driven markets.
I was just wondering if you could give us an update on what you're seeing in those markets as it pertains to FX and back end?
Yes. In the U. S. Side with the strong dollar.
Right.
Yes. Okay. Fair enough. We are seeing a little bit I would tell you that it's just really volatile right now on some of those tourist markets where there's a good month, a good week and then there's a bad month and a bad week. So it kind of balances out.
But I would say it's safe to say that the strong dollar is affecting extent sales in some of the really highly international assets that we have. But nothing that's going to change our financial profile or earnings or any of that. But it is a lot more volatile. You hear occasionally in South Florida a little bit, you hear we haven't seen anything at Woodbury, but I've heard a lot in New York City Now we have no exposure there. But you hear and then when I say hear, I'm hearing it from the retailers.
But so it's something to pay attention to. Okay.
Thanks. And then just more domestically, given the drop in oil prices, it seems like there was expectations that that would flow into the economy, but it seems like it's being saved. Just curious if you're seeing anything different from that in your own mall traffic and that kind of thing?
I'd still say generally we are still dealing with a cautious consumer. It's safe to say and it's volatile. So the tourism also applies to just the domestic consumer as well where the patterns the consumer are tougher to predict right now. I still think there's a confidence is getting better, but there's still a lot of debt being reduced. And it's still there's a good month or good week and then a bad month, a bad week.
And there's the pattern is sloping up, but it's not it's certainly not gangbusters. And look we had 2% comp or a total sales increase from quarter over quarter 2014% to 2015%. That's the kind of world we're in right now. We did get unbelievably so. We did not mention this.
Now I'm mentioning it, so I probably shouldn't mention it. But we had another awful winter in Northeast. For those of you in Boston only we have a lot of exposure in Northeast. Believe it or not our snow expense was higher this year than last year across the portfolio. So we still had to deal with a little bit of the weather, but we are dealing with the cautious consumer.
And we're delivering the good news is we're delivering results in that environment.
Kimpel with Hilliard Kippel with Hilliard Lyons. Please proceed.
Good morning. Thinking about the premium outlet pipeline out there, how much room do you think there is for premium outlets of Simon's quality to be built in the U. S? Can you quantify a number? Are there 20 possible sites left in the U.
S? Or where do you think that number would be?
Well, I think that would be a real challenge of our kind of quality to produce right now the way we look at it the 20 additional outlets. I still think it's a handful. We are going through the industry is going through a little bit of a growth spurt. But I Carol, I would say 2020 would be a stretch. I'm going to this is so hard to give you a real number, but I would say of as we look at the stuff that we might see building, we've got 3 now that will start maybe another 2 or 3 next year.
But from our standpoint, I would see under 10 over the next 3 to 5 years domestic starts within our portfolio.
The one thing I would say to you Carol is when you think about growth please don't forget about the expansions that David mentioned earlier. They're almost the equivalent in terms of productivity of a new outlet. We're adding a lot of square footage at Chicago and at Woodbury and at San Francisco. And all of that is adding mass and that's absorbing demand in the most productive way that could possibly happen. And I encourage all of you to go out and see what we just opened at Desert Hills.
And if you're out in Las Vegas, what we're opening at Las Vegas North, the week of the ICSC Convention, these things are dramatic expansions with great retailers that are highly, highly productive. Okay.
Thanks. And then this question is for Rick. We've heard a lot about store closings. I know you love to give your list of who wants space. Do you have any new names for us?
I can't wait. Well,
you have to relax and stretch. I think one thing that I'd like to point out to everybody as we talk about all this, the tenant that has the broadest footprint in our portfolio is L Brands with Victoria's Secret and they're doing great results. And they're growing and they're expanding and they're adding pink to their Victoria's Secret stores. But we're doing with a lot of international retailers that people have and David's Tea has come down. We're growing Uniqlo.
We're growing H and M. We're growing Sephora. And we're growing Altered State, which is a great retailer that has got a significant growth platform. And frankly, as David said, the ones that left are low productivity, over size. So that gives us the opportunity to bring in higher productivity retailers that are just going to increase the market share of our properties.
Okay. Thank you.
Thank you.
Your next question comes from the line of Michael Mueller with JPMorgan. Please proceed.
Yes. Hi. Just a quick one. It sounds like a lot could be going on at Syosset. So how much of that project would you actually do yourselves?
Yes. In terms of the mixed use, we haven't gotten to that point, Michael. We probably when it gets to the office, we'll probably sell the office. We might partner on the residential. But again, there is roughly $400,000 of retail.
So that will do with our partner. The other joint venture. We'll probably won't do the office. We might sell or joint venture the other uses.
Got it. Okay. That was pretty much it. Thanks.
Sure. No worries.
Your next question comes from the line of Linda Tsai with Barclays. Please proceed. Hi. When people talk about omni channel, my sense is that they think of traditional mall based or full price stores. To what extent are you seeing omni channel
capabilities incorporated into the premium outlet model? Do you think this is
something that makes sense? Premium outlet model? Do you think this is something that makes sense for you and the retailers?
Well, I think the retailers as they bring in the omnichannel world to their physical stores will certainly apply it to the outlet world as well. And again, they're all at different degrees of that integration. But I don't think outlets would be ignored on that front at all. So I would Your
Your next question, we have a follow-up from the line of Christy McElroy with Citi. Please proceed.
Hey, it's Michael Bilerman again. David, I'm just curious to get your thoughts a little bit on land and buildings and Orange Capital's proxy campaign post them rebuffing your offer? And at least in John's letter, he references a conversation that he had with you. And obviously, I don't know if that conversation is done verbatim, but it implied what you had told him was based on where Simon stock is currently almost $200 that that would imply $100 from ACERISH. So I'm just curious how you think about that as well as their campaign?
Well, look, I'm not put it this way, I'm not surprised by land and buildings and oranges that they might pursue something like this or others. But as you can see from their proxy materials, we are not participating or providing any financial support in their proxy. But I'm not surprised that someone like them would take up this particular issue. And but again, we're not this is not us. This is them.
And I said to you, you can see it from their preliminary proxy stuff that we're not supporting or involved in that at all. And as a shareholder, we'll wait and see what happens.
Right. And I guess as a shareholder, when they came out after rebuffing your offer for the final time and they put out their presentation of the plan forward, I guess, as a shareholder, would you have wanted to know how they achieve a price equal to or greater than the offer that you would put on the table? And I guess did that surprise you that that wasn't in there?
Well, look that's up for Macerich to respond to. I mean, I can only tell you what I told you earlier, which is I think we put a hell of a deal on the table. And I was looking to engage with relationship. People say hostile offer. I don't let me give you my thinking on this.
Anytime somebody offers a lot of money to somebody, I never consider that hostile, okay? Now it may not be it may be unsolicited,
but it ain't hostile. 30% premium no less.
Okay. It ain't hostile. So I hope Art and the Board realizes that I didn't view it as hostile. I view it sure it was unsolicited, but it was a hell of an offer done in the spirit of trying to negotiate a deal at a big number. And I'll leave it at that.
It's yesterday's news, but I'll leave it at that. But it was not hostile. Unsolicited? Absolutely. But again, anytime, I think a simple thing when it comes to this, but any time you offer a big number to somebody, I don't view that as hostile.
I just view that as the way of the world I guess.
Okay. Thanks, David.
All right. No worries.
There are no further questions in queue. I'll now turn the call over to David for closing remarks.
All right. Thank you everyone and take care and we'll talk to you soon.
Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.