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Simon Property Group Inc (NYSE:SPG)
Q2 2019 Earnings Call
Jul 31, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to the Second Quarter 2019 Simon Property Group, Inc., Earnings Conference Call. [Operator Instructions]. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions].

I would now like to turn the conference over to your host, Mr. Tom Ward, Senior Vice President of Investor Relations.

Tom Ward -- Investor Relations

Thank you, Crystal. Good morning, everyone, and thank you for joining us today. Presenting on today's call is, David Simon, Chairman, Chief Executive Officer and President. Also on the call are Rick Sokolov, Vice Chairman; Brian McDade, Chief Financial Officer; and Adam Reuille, Chief Accounting Officer.

Before we begin, a quick reminder that statements made during this call may be deemed forward-looking statements within the meaning of the Safe Harbor of the Private Securities Litigation Reform Act of 1995, and actual results may differ materially due to a variety of risks, uncertainties and other factors. We refer you to today's press release and our SEC filings for a detailed discussion of the risk factors relating to those forward-looking statements.

Please note that this call includes information that maybe accurate only as of today's date. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included within the press release and the supplemental information in today's Form 8-K filing. Both the press release and the supplemental information are available on our IR website at investors.simon.com.

For our prepared remarks. I'm pleased to introduce, David Simon.

David E. Simon -- Chairman and Chief Executive Officer

Okay. Good morning. We had a very productive quarter and are pleased with our financial results. Results in the quarter were highlighted by funds from operation of $1.06 billion or $2.99 per share. Adjusting for the prior year for non-cash investment gain of Aeropostale, IPCO, ABG exchange and the impact of external leasing costs, our FFO growth rate was 4.9% per share. We continue to grow our cash flow and report a solid key operating metrics, our comp NOI increased 2% for the second quarter and total portfolio NOI increased 1.6% for the quarter. Retail bankruptcies in the second quarter, impacted our comp NOI by over a 100 basis points. Year-to-date comp NOI has increased 1.8% and to put this in perspective, our comp NOI grew 3.6% in '16, 3.2% in '17, last year 2.3% and we continue to comping on it, NOI base of more than $5 billion.

Leasing activity remained solid, average base rent was $54.52 and our leasing spread was $16.53 per square foot, an increase of 32.3% and we are pleased that our sales and we're pleased that our sales momentum from our retailers continued in the second quarter. Reported retail sales per square foot for our malls and outlets was $669 per foot compared to $646 in the prior-year period, an increase of 3.5% and just to give you a fund [Phonetic] fact, we have over 77 properties, that's right, 77 properties. That if you average their total sales, will be over $900 a foot. So 77 over $900 a foot and you can see that clearly as I report retail sales on an NOI weighted basis of $852 compared to the $669 per foot, occupancy would be 95.5% compared to 94.4% and our average base minimum rent would be $73, a little over $73 per foot.

New development, we broke ground on a luxury outlet Normandy, which is our first designer outlet in Western Paris catchment area, and our third outlet in France. The center is projected to open in the second quarter of 2021. Construction continues on the three international outlets; Malaga, Spain, Bangkok, Thailand, West Midlands, England, all open in 2020. Queretaro, Mexico, opened and its full grand opening will be in the fall of this year. We continue to expand our international outlet presence in growing markets, adding to our overall franchise value with high rates of return and as I mentioned to you in the press release today, we have 42 international outlets after we finish the four that are currently under construction.

Redevelopment, just the highlights, a lot going on, as you know. So we have 30 properties across all of our platforms in the US and internationally with our share of net cost of approximately $1.7 billion. Our extensive identified pipeline is over $5 billion in new development and redevelopment across all our platforms. These significant redevelopments and transformations will continue to fuel our profitability. Importantly, we will fund these accretive projects to our internally generated cash flow and they'll continue to serve our communities. As you know our properties generate significant property taxes and significant sales taxes for their jurisdictions that fund the police, fire, schools, etc. So we continue to play a very, very important role in the livelihood of our communities that we operate in.

Now, going to liquidity, you'll be pleased to know that we have $6.8 billion of liquidity and that is net of our outstanding CP balance. During the quarter, we purchased 1.05 million shares of common stock. We continued in July to purchase another 630,000 shares. So, we have combined over the last, essentially four months, 1.68 million shares of repurchase and this further is represented by our strong balance sheet, which continues to be a far significant advantage in our area. We announced a dividend increase. We're now paying $2.10, that's an increase of 5% on a trailing 12 month basis. And in June 30 over the last three years, our dividends have grown at more than 8%. Another fun fact which I am here to supply to put our dividends and perspective as a public company, we have paid more than $30 billion -- three zero billion to our shareholders in cash in dividends, pretty good number.

As a reminder, our annualized current dividend yield of more than 5% is 300 basis points higher than the 10-year treasury and our dividend is more than 1.5 times covered by our annual FFO. We continue to reinforce our guidance of $12.30 to $12.40 despite some headwinds, which include lower lease settlement income, lower distribution income from our international investments, stronger dollar. Obviously all the redevelopment and that's going on with our anchors, accelerated redevelopment including say Northgate. Some of the unanticipated bankruptcies and some of our SPO costs which were now accelerating.

So to conclude, we produced another good quarter of results and operating metrics. There is no company in our industry that has the reach and impact on the communities that we have and we continue to focus on the long term. We'll continue to invest in our product and generate the kind of returns that will grow our earnings, cash flow and dividends. We're now ready for any questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Jeremy Metz with BMO Capital Markets.

Jeremy Metz -- BMO Capital Markets -- Analyst

Hey, good morning.

David E. Simon -- Chairman and Chief Executive Officer

Good morning.

Jeremy Metz -- BMO Capital Markets -- Analyst

Dave, I was wondering, if you could break it down for us, and then talk about what you're seeing on the mall front in terms of trends and traffic versus what you're seeing in the outlets. Anything that's going better than you expected so far this year, even lagging a bit? And maybe just as a follow-on what your expectations are that you have built-in for [Indecipherable]?

David E. Simon -- Chairman and Chief Executive Officer

Well I would say and Rick in the way, in the mall business sales are up, traffic is reasonably good. I'd say it's -- there's ups and downs, but overall it's up slightly. In the outlet business we are skewed a little bit more toward the tourism and because of the strong dollar and some of the implications of what's going on in the global environment. Traffic there is flattish, but sales are more flattish and that's really a function of the big tourist centers in the outlet business that are essentially flat where we would expect them to be up. Average [Phonetic] rents is up in the mall business. It's a little under planned in the outlet business. So I'd say generally, it's -- absent the strong dollar and absent with the decrease in overall tourism in the US, we would be performing well ahead of our plan. Obviously, the unanticipated bankruptcies is something we're dealing with. Yet even with that we produced the 2% comp NOI growth. And I missed your last -- what was your -- while [Indecipherable] is -- it is what it is. We'll see what happens, insignificant to us in the scheme of our operations. Rick?

Richard S. Sokolov -- Vice Chairman, President and Chief Operating Officer

The only thing that I would add is that the trends that David talked about are manifesting themselves in the interest that we're seeing from our retailers. There is still a steady stream of retailers that are seeking to find space in our properties and the properties continue to get better through the addition of retailers that are making the difference in our trade area presence.

Jeremy Metz -- BMO Capital Markets -- Analyst

I appreciate that. And David, could you just talk about the investment in Black Ridge and Allied Esports just what drove this and what sort of larger opportunity you possibly see here for that?

David E. Simon -- Chairman and Chief Executive Officer

Well, look, I think we do think, obviously there is a huge momentum going on about esports and venues and we have just like the exhibition theater business, I mean the mall is a great place to host those kind of events. In a setting like that, drives sponsorship income, drives traffic, reinforce the -- our real estate is kind of the place to be for the community. So we've got lots of options beyond just Allied about bringing those kind of those venues to our venues to our real estate. And in fact, I mean -- the whole -- the explosion in the location-based entertainment area's incredible from kind of where it was a decade ago to where it is today. So we have essentially a dedicated team that's looking at all sorts of operations in venues that we're going to be bringing into our real estate that will broaden the mix, invest in the community, increased traffic bring us sponsorship, opportunities, food and beverage. And given the Department Store Bill, getting those department stores back in a lot of cases or buying them back in some cases gives us the real estate that we've never had before to bring them into the mall.

So that's what's really exciting is that, yes, it's a lot of work. Yes, we have to be focused, but we now have the ability where we didn't have it before, to bring all sorts of those venues into our real estate. So we brought a team on essentially just to deal with the -- for no better word, the location-based entertainment concepts. Just to go through that so that we could bring them to the centers. And again, we now have and in some cases, the real estate to put them in where we didn't have it otherwise. And we can do it at accretive returns. Rick, would you like to add anything?

Richard S. Sokolov -- Vice Chairman, President and Chief Operating Officer

The only thing I would add is that, we've been doing this for over a decade, because we have a very large relationship with Merlin through our Mills portfolio and we've got a great set of experiences there that demonstrate the viability of our properties for these types to use. So we're building off of strength to implement the initiatives David just talked about.

Jeremy Metz -- BMO Capital Markets -- Analyst

Alright. And last from me and just thinking somewhat along that -- those lines, is looking back at the investment you made in Aero alongside ABG and your experience you've had since that time, how do you think about making similar investments? Would you do it? Would you -- what would you look for? Just given some of the distress out there, I wonder, if this is something we could see you guys do again here at some point in the near term.

David E. Simon -- Chairman and Chief Executive Officer

Well, look, I think you know it's very possible. Well, we are going to be very smart about it, Jeremy. You know, it's interesting because as you know we -- Authentic Brands Group just did a private placement where we decided to keep our stock, but certain shareholders sold and new shareholders came in, we decided not to keep our entire interest. So we didn't sell down, because we believe in the company. But that stake based on its current raise in terms of new shareholders coming in is worth $153 million and we basically put no money in it. We still have the Aero OpCo, which is, we own 44% and it's going to do $65 million EBITDA thereabouts.

So I think we're not too bad with this investment, we certainly as good as the private equity guys, when it comes to retail investment. And so, I wouldn't rule it out. But I mean, we've made a ton of money in Aero and we love being partners with Authentic Brands Group and we'll work together on other distress situations and let's face it, there are some out there. So -- but we're only going to -- we're only going to buy into companies that we think have brands and that have the volume that is worth doing it. So they just bought Sports Illustrated. I think they got a great intellectual property there. I think it's got a great future with a company like ABG to focus on. We may invest in that as an example, there could be Sports Illustrated, Esports, gaming, food and beverage and we'll be at the forefront of trying to be as creative as we can with our real estate that you cannot duplicate. And again what we do is we serve the community. We pay significant real estate taxes, significant -- our retailers and us pay significant sales tax. So -- and we're investing in our properties too. So obviously for our shareholders, but also for the benefit of these communities.

Jeremy Metz -- BMO Capital Markets -- Analyst

Thanks for the time.

David E. Simon -- Chairman and Chief Executive Officer

Sure.

Operator

Your next question comes from the line of Christy McElroy with Citi.

Christy McElroy -- Citi -- Analyst

Hi, good morning everyone.

David E. Simon -- Chairman and Chief Executive Officer

Good morning.

Christy McElroy -- Citi -- Analyst

Just off of Jeremy's last question, but maybe from a little bit of a different angle. Given that past experience with Arrow and Nautica and the insights that you've gained from these investments and you've also talked about being on many creditor committees in the past. How are you approaching retailer restructurings and bankruptcies differently than in the past? Or maybe differently than what some of the other mall REITs have the capability to do that maybe gives you a competitive advantage with kind of fall out in bankruptcy activity having picked up again this year?

David E. Simon -- Chairman and Chief Executive Officer

Well, that's a good question. I would say we have another what is it called quiver in my -- what is it, arrow in my quiver?

Richard S. Sokolov -- Vice Chairman, President and Chief Operating Officer

Arrow in your quiver.

David E. Simon -- Chairman and Chief Executive Officer

Arrow in my quiver. I always like inverse when I am speaking to it.

Richard S. Sokolov -- Vice Chairman, President and Chief Operating Officer

Robin Hood now [Phonetic].

David E. Simon -- Chairman and Chief Executive Officer

But now I would say we certainly have the ability to help beyond what you might do on the leases, become an investor in a distress situation. So we have the ability. I'm not sure we would do it alone, but with somebody like ABG. We've obviously worked well with historically General Growth and now Brookfield. So we have kind of a, the ability together or even individually or some combination thereof that look at becoming more than just a real estate player, but a buyer of these brands. And that's the difference. That's the majority difference.

We also have the ability to underwrite the business a lot better than we could have. So we're less in the dark about what the right rent should be in a work off scenario. And we have resources, I mean the folks at Arrow OpCo, the folks at ABG, our friends at Brookfield and our team can basically rapidly run through any kind of investment or retail scenario and find out -- get to the bottom of what the right fix is and. And I would say to you we were decent at it a few years ago, but now we're pretty good at it.

Christy McElroy -- Citi -- Analyst

Okay. And then just with the straight line rent adjustment elevated in Q2 and somewhat volatile in the last couple of quarters. Wondering, if you could provide some insight into what's driving that perhaps impacted by some of the lease accounting staff. And how we should think about the impact of GAAP, non-cash rent adjustments for the full year?

David E. Simon -- Chairman and Chief Executive Officer

Yeah. So what -- with the new adfree [Phonetic] pronouncements we -- historically we have never straight-lined our CAM. Even though, as you know, a lot of our CAM is not -- most of it -- 95% of it is, is fixed with the growth in it and I believe a lot of our peer groups historically have straight-lined that. So we have the straight line that because of the new pronouncements and that's really the change in that. Again our comp NOI, Christy as you know, takes out any straight line impact. So it's basically cash. And, but that's basically all there is to it. When you look at kind of the increase in straight line, less the -- now that we can't capitalize our leasing costs, I mean it's basically less than 1% differential in terms of our FFO per share, is one way to look at it. But the reality is if you look at the comp NOI, we strip it out in any event, but it's simply we never straight line CAM expense and now we have.

Christy McElroy -- Citi -- Analyst

Okay. So we should expect it to remain elevated going forward? Because of the straight line in there.

David E. Simon -- Chairman and Chief Executive Officer

Well, certainly this year, an then I think you will see it this year. Then, I think you'll see it more normalized. Now we also write-off. We've to write -- when you have a bankruptcy, we have -- we've had straight-line rent write-offs this year because if you have a tenant that goes in the bankruptcy and you certainly any straight-line rent or straight line CAM that you may have for that tenant is going to be written off. So we've had certainly some of that as well.

Christy McElroy -- Citi -- Analyst

Got it, OK. Thank you.

David E. Simon -- Chairman and Chief Executive Officer

Sure.

Operator

Your next question comes from the line of Steve Sakwa from Evercore ISI.

Stephen Sakwa -- Evercore ISI -- Analyst

Thanks, good morning.

David E. Simon -- Chairman and Chief Executive Officer

Good morning.

Stephen Sakwa -- Evercore ISI -- Analyst

I guess just a couple of questions. First, maybe to, just start on kind of the leasing environment. I mean you and Rick touched on it a little bit that there is good demand. I mean can you just elaborate a little bit more, you said you've been impacted about 100 basis points from bankruptcies this year. And I'm just wondering, David, as you sort of look at the tenant watchlist and the potential tenants that you're still kind of working with to restructure. Where do you sort of feel like we are in that kind of pendulum or timeframe of kind of getting to the end of that and does 2020 kind of begin to show a little bit of light at the end of the tunnel?

David E. Simon -- Chairman and Chief Executive Officer

Well, I still think there are couple out there without naming names, Steve, that we're monitoring and we'll have to see kind of where that goes. So it's hard for me to give you an exact response specifically to that question. Other than there are still a couple out there that we're monitoring and we'll see how it ultimately resides. I will tell you, not that this is of interest, but it's not a reflection of our business. Okay. And I know that's hard to say. It's hard to -- I know that's a statement that many don't believe, but if you look at the bankruptcies, each one of these folks there were -- there were things and decisions that they did that led them to that point as opposed to if this is our business. Okay. And I won't go through names, but lack of investment, too much leverage, opening two bigger stores, going international when they should stayed domestic, picking the wrong merc. It's not endemic of our business and that's the important point because the reality is, even with these bankruptcies that we've had to deal with we are comping up. Yeah, it's not where I'd like to see it, but it's still comping up a couple of percent and we would have really outperformed had we not had the unanticipated bankruptcies.

We are outperforming and overage rent in the Mall business, underperforming in the outlet business because of the tourism that I showed you. So there's pros in that and what we're seeing in sales there. The higher end continues to do well. As I mentioned to you we have 77 properties. In total, would get you over if you just took the top seven we'd be over $900 a square foot. So it's not endemic of our business or our industry, it's each one of these, you know, each one of these has a story and I could spend three hours going through pros and cons as to what decisions they made that led them to that problem and that's the most important message I can deliver to you today. It's not quote -- and again we're much more diversified than the Mall business. But let's talk -- it's not the Mall business, it's certain folks that ran their business not in the best way and yes we suffer while we recharacterize or release the space to better operators.

So I'll turn it over to Rick to add any amplification to your question.

Richard S. Sokolov -- Vice Chairman, President and Chief Operating Officer

And part of that is demonstrated by the fact that our occupancy trends have held up very nicely in spite of all that bankruptcy. And as we detailed in the past there is still a broader array of tenants that are seeking to come to our properties, whether they're new concepts, whether they are digitally native retailers, whether they are international retailers. We still have retailers that are traditional retailers like [Indecipherable] and American Eagle, that are still growing significantly. And we are adding a lot of fruit [Phonetic] to our property and all of that is contributing to the fact that you're seeing our sales growth and you're seeing our NOI growth.

Stephen Sakwa -- Evercore ISI -- Analyst

Okay. Appreciate that. Thanks. David just small point on the total portfolio NOI was up less than the comp, which is not normally the case and your share of NOI from investments was down. Is there anything kind of just for us to focus in on, as we think about the quarter or the rest of the year?

David E. Simon -- Chairman and Chief Executive Officer

No. While remember we sold our interest internationally in HPS that's the biggest reduction. In addition, we've got a lot of redevelopment going on. You could see that number. We have a number of properties that are basically taking a step back because of our redevelopment efforts, but that's -- those are the biggest ones that jump out at me. All right. So and Tom just mentioned to me FX as well. So when you put that -- I'd say those are the three things. So HPS is gone internationally, FX, currency and then the redevelopment as you can see, we have a number of properties that are kind of going down a little bit this year as we redevelop Burlington Mall, Ross Park Mall, a handful of these that are taking a step back to take several steps forward. So that's basically the math.

Stephen Sakwa -- Evercore ISI -- Analyst

Okay, thanks. And then lastly, I just noted, the average base rent per foot, which I know takes into a lot of things including lease restructurings and others, it was up a more modest, I guess 1.2% to 1.3%. Anything we should just be thinking about that number versus say the lease spreads you're getting and obviously the change in occupancy? I was curious on that trend.

David E. Simon -- Chairman and Chief Executive Officer

No, I'd say, it's basically a function of, some of the work outs that we are having to deal with.

Stephen Sakwa -- Evercore ISI -- Analyst

Okay, thanks a lot.

David E. Simon -- Chairman and Chief Executive Officer

Sure.

Operator

Your next question comes from the line of Craig Schmidt from Bank of America.

Craig Schmidt -- Bank of America/Merrill Lynch -- Analyst

Thank you. I wondered if you could categorize the store closings and the outlet space versus the mall space. Is it -- are they experiencing store closings to a comparable degree or are they more immune to the malaise?

David E. Simon -- Chairman and Chief Executive Officer

I would say they are -- they -- the last few bankruptcies have also had outlet exposure. So there are more comparable where a couple of years ago, it was more of the mall, than the outlets and now they're are similar. There is not a trend that outlets are better or worse than the malls and when it comes to the store closings due to bankruptcies, I'd say they're, they're more similar in terms of that pattern.

Craig Schmidt -- Bank of America/Merrill Lynch -- Analyst

Great. And then obviously very active in redevelopment. I wondered, if it's possible to categorize. What inning you think you are in terms of the major anchor reposition? I recognize you always are going to need to do it, but in terms of this major push for anchor repositioning maybe what inning we're in.

David E. Simon -- Chairman and Chief Executive Officer

Well I have never been much of a baseball player but I would say, what inning, I would say the third. Tom's gave me three so he got -- so he and I hit the number at the same time. I'd say the third inning.

Craig Schmidt -- Bank of America/Merrill Lynch -- Analyst

Okay, great, thank you very much.

David E. Simon -- Chairman and Chief Executive Officer

Thank you. Sure Craig.

Operator

Your next question comes from the line of Alexander Goldfarb from Sandler O'Neill.

Alexander Goldfarb -- Sandler O'Neill -- Analyst

Hey, good morning. Good morning out there.

David E. Simon -- Chairman and Chief Executive Officer

Out there is not that, it's not like we're in -- it's not like we're out of state. We are not on the moon. [Indecipherable] We are just kind of like Neil Armstrong. Okay. [Indecipherable] straightforward guy, go ahead.

Alexander Goldfarb -- Sandler O'Neill -- Analyst

Okay, perfect, perfect steady hand at the landing. Just two questions here. First, David, sort of following up to Christy's question the jump in, so two-part question on the leasing spreads and straight-line rent. So one, how much of the increase much of the increase is straight-line rent? Is any of that due to increased leasing activity, because looking at the leasing spreads, they've really jumped over the past year. So I don't know if that's purely mix or maybe this is the benefit of backfill. But if I look at your TIs over the past year, they've gone up a little bit, but nowhere near as much as the rent spreads have jumped. So just trying to understand, how much of the jump in rent spreads is purely just mix versus it's actually, you guys getting better tenants or maybe some of that is leaking into the higher straight-line rent?

David E. Simon -- Chairman and Chief Executive Officer

Well, we certainly continue to streamline our rental income beyond CAM. I don't have the breakdown for you, but it does add into that amount. We continue -- I mean our rent spreads continue to be healthy. Obviously a lot of that will be significantly enhances [Phonetic], we're getting back very cheap space that we can rent out, I mean that's going to be the future growth of the company and is taking back some of the bigger spaces and generating much greater rental income from them. And that's why we're spending the capital. So it all kind of feeds into each other in terms of generating our cash flow, future NOI growth, leasing spreads, and obviously that will be part of the straight line rent income as well.

Richard S. Sokolov -- Vice Chairman, President and Chief Operating Officer

And I would just confirm your observation that our tenant allowances have been very stable over the years. And there has not been a -- noticable increase at all. It's business as usual as it has been.

Alexander Goldfarb -- Sandler O'Neill -- Analyst

So then Rick, the rising releasing spreads it's just purely mix? Or we should expect these -- I mean, just wondering, next few quarters, are these going to go down to more in the mid teens or these going to stay elevated.

Richard S. Sokolov -- Vice Chairman, President and Chief Operating Officer

That's why you have a job. Okay. You'll see when it happens. Okay. But the bottom line is -- and that's why we have a job. The bottom line is, we are certainly one of the greatest opportunities we've had as a company and I can't underestimate, yet, some people could look at the demise of certain anchors as a sign of impending doom. We look at it in the complete reverse as a significant opportunity, because we are now getting the ability to take that space and redevelop it with accretive returns on investment and high rents. And so I do think that trend will continue, whether it will be up $5 or down. That's just, that's a quarter-to-quarter change. But that is -- that's why we're spending -- that's why we have a $5 billion pipe. I mean that is our business going forward. And it's important for the market to understand, I mean that's where we see great opportunity.

Alexander Goldfarb -- Sandler O'Neill -- Analyst

Great.

David E. Simon -- Chairman and Chief Executive Officer

[Speech Overlap]

Alexander Goldfarb -- Sandler O'Neill -- Analyst

David I just want to make sure, was it like -- this was it like a definitional change or something accounting change. I'm just trying to get to, because obviously it's impressive. So just want to understand if this is a definitional change or accounting change?

David E. Simon -- Chairman and Chief Executive Officer

Not at all, not at all.

Alexander Goldfarb -- Sandler O'Neill -- Analyst

Okay. And then the second question is just quantifying obviously got Forever 21 pretty small, but overall your comments about what your guidance has endured as far as headwind stronger -- stronger US dollar, tourism and all of this stuff. Where are you guys trending as far as your bad debt budget? So presumably your budget, whatever it is a 100 basis points or something like that for the year, where are you trending on whatever your budget is? Where you trending on that year-to-date?

David E. Simon -- Chairman and Chief Executive Officer

I would say we are higher, I mean I don't have a exact number but it's higher than what we -- certainly higher than what we budgeted. Because we had some unanticipated bankruptcies. Unfortunately, when we do our model, it's at the end of last -- basically November -- October-November, and you know what we're now in July and we've had a lot of stuff that we've had to deal with. So it's definitely higher than what we budgeted.

Alexander Goldfarb -- Sandler O'Neill -- Analyst

Okay, thank you.

David E. Simon -- Chairman and Chief Executive Officer

Sure.

Operator

Your next question comes from the line of Caitlin Burrows from Goldman Sachs.

Caitlin Burrows -- Goldman Sachs -- Analyst

Hi, good morning. Maybe on the leverage side. Net debt to NOI has been coming down to 5.1 times now and I think investors, do like to see this. So I was just wondering, what's driving this decision from the Simon side versus spending more on say development buybacks or something else.

David E. Simon -- Chairman and Chief Executive Officer

Well, I think we try to manage the balance sheet with great care. And so we do have a -- the pipe, we can -- if we -- we have not capital constraints on the pipe but really human resource and permitting constraints and obviously, we're very focused on supply and demand in those particular markets. Because as you know, a lot of the redevelopment efforts are going to be kind of mixed use element. So, but we can only go as fast as the permits and our human resources can do it. And it does take in certain markets, especially California where we have a pretty big pipe and in Seattle with Northgate, a huge development there -- a development that's based on phasing, but -- and over a period of time and the approval process there is going very well. But that's a spend that could approach $1 billion, given the opportunities we see with that site. So, yeah, but we got -- unfortunately we got to tear the mall down first, which we are -- I think we start in 8 days, right.

So I think that to get back to your question, I think the biggest constraint is really just human resources and permit. And so it's not, listen, we don't want to be cavalier with the balance sheet. And as Rick mentioned, I mean we're very -- every once in a while will take a flyer on a development or redevelopment. But we certainly when it comes to 10 allowance times the capital as you can see over the history of the company we're very, very, very thoughtful on that. I mean we don't bat a 1,000 we see. I'm using these based on logistics, but we're -- so we're very thoughtful on that.

And then I think the buyback look we're going to be opportunistic. You know REITs will always be and I think I read, not to quote Steve Roth, because I don't want to give a big head. But, I do think REITs are always going to be somewhat limited on buybacks compared to industrial America. Because of our need to pay out our taxable income, obviously to maintain the REIT status. And that's why if you leave with anything in this call is we have paid out $30 billion that would be dividends in the history of this company, which is pretty damn remarkable, I think. Tom, you agree?

Tom Ward -- Investor Relations

I agree.

David E. Simon -- Chairman and Chief Executive Officer

Okay. And so it will always be something nice to do, but we're always going to be somewhat constrained just because we're paying out so much capital in dividends. Now, the reality is we would buy -- if we didn't have to pay out our taxable income then we'd be a cash flow machine, we'd buy a tremendous amount of bad debt. So there will always be there for us to be opportunistic, but we can't overwhelm given our payout on the dividend side.

Caitlin Burrows -- Goldman Sachs -- Analyst

Got it, OK. And then maybe just you do have a history of raising FFO guidance, the vast majority of quarters in the past. So just wondering, if you could give some detail on how maybe results played out during the quarter. How that related to your own budget and what prevented you from raising the full-year guidance? I know in the previous set of questions, you did mention potentially that bad debt was trending a little higher than you had originally.

David E. Simon -- Chairman and Chief Executive Officer

So yeah, I probably bored you, but the reason we haven't raised guidance this year is a few things and I'll just A few things and I'll just restate, what I have said. We have lower lease sell -- lower lease settlement income than we had budgeted. We have lower distribution income from our interest essentially in value retail. We don't equity account for that as you know, cash account, cost accounting, not to bore you I don't know what your background is but cost accounting -- cost accounting still exists. Correct.

Richard S. Sokolov -- Vice Chairman, President and Chief Operating Officer

It kind of.

David E. Simon -- Chairman and Chief Executive Officer

Okay. Let's say see how old I am. But cost of CAM, basically we only booked with what cash we get. So we anticipate a little bit higher distribution income from our investments in value retail, we haven't gotten that we had the stronger dollar. Obviously, we had unanticipated bankruptcies, we didn't budget SPO though we kind of knew that we might do it, we just, you know, it's kind of out there and we decided, well it's out there. And then, obviously we anticipated bankruptcies. On overage rent we're trending above in the mall business, but below in the outlets and I've explained that basically, it's not a function of the business, it's a function of tourism and a strong dollar being basically reduced in the country, and we're not the only company in America that's telling you that you can see that from a number of different ways.

Caitlin Burrows -- Goldman Sachs -- Analyst

Got it. Okay.

David E. Simon -- Chairman and Chief Executive Officer

That's basically, so that's -- what's been going on and why we haven't raised guidance this year.

Caitlin Burrows -- Goldman Sachs -- Analyst

Okay, thank you.

David E. Simon -- Chairman and Chief Executive Officer

Sure.

Operator

Your next question comes from the line of Rich Hill from Morgan Stanley.

Richard Hill -- Morgan Stanley -- Analyst

Hey, David. Good morning. First of all, thanks for reporting prior to the open, it's nice and refreshing to have a mixed up from dilution companies reporting after the close. I appreciate the color on FFO guidance. But I wanted to also maybe talk about retail overall and maybe how you're thinking about some of your investments. So maybe first, could you maybe give us an update on your Klepierre stake? And if you would ever think about increasing that it looks like that's been a pretty good investment. And then maybe also an update on the fifth consumer phasing platform as well.

David E. Simon -- Chairman and Chief Executive Officer

Okay. So I mean, [Indecipherable] just did at a Board meeting last week. I think they are doing an excellent job, they are very well positioned. Their balance sheet is -- continues to be much better than their peer group, and their cash flow the like-for-like, I don't remember exactly what the number was. But I thought it was pretty good given what's going on. We continue to sell assets, shore up the business. And what we've seen is a company that continues to operate better and better over the years that we've invested. I would say to you it's unlikely we would ever -- I mean, if we go over 30, I don't know if you know the rules, we probably have to -- we have to offer the whole company. I would say it's not in our plans ever to do that right now. But, I mean it's certainly isn't an option that we would have down the road, but it's not in our plans at all.

So with that said, and then our SPO, we have -- we're still in beta. We've got 12 retailers, 3,000-ish brands online. We're going through kind of the kinks. So you can have access to it, if you're one of our loyalty members. We've got another 15 or so that's in the process of coming on board. And our plan is to make it public some time in the third quarter. And I'd say to you, we've got a lot of interesting things going on with that platform beyond just that, but I can't really share much beyond that other than stay tuned. I do think we can have a -- I do think we can create a real, real business opportunity for us in this area.

Richard Hill -- Morgan Stanley -- Analyst

Got it. That's it from me. Thanks for the transparency and thoughts, David.

David E. Simon -- Chairman and Chief Executive Officer

Sure, no problem.

Operator

Your next question comes from the line of Nick Yulico from Scotiabank.

Nick Yulico -- Scotiabank -- Analyst

Thanks, David. I just wanted to go back to the topic of redevelopment and also tied into questions about total portfolio NOI growth. I think we can appreciate how redevelopments had disruptive NOI process with some attractive pay-off down the road. But could we get a sense of the timing of when this will start to benefit overall portfolio growth, because it's not showing up in the numbers this year and if you mentioned you're -- your guess is that we're in the third inning of this process, I mean, does this mean that it's going to be ongoing drag on total portfolio NOI growth or is this change at some point in the next year or so?

David E. Simon -- Chairman and Chief Executive Officer

And just to be clear, there are three major elements on that. One is the, that's where the currency stronger dollar has hurt us. Number two is we sold an asset, but when you sell an asset you don't have the income. Okay. So, and then the third element is our redevelopment. So the REITs that -- the properties there are relatively flat and normally, we would see growth there. So I just want you to put that in perspective. So with that said, I'll address your question. Look, I think you'll start to see benefits in 2020 later, but you know it takes time. I mean that's the reality. From a new development point of view, we don't have a lot. So a lot of the driving as a new development was through that line. We did decide to more or less buy the land in Tulsa [Phonetic] to build Premium Outlets, yesterday and the outlet there. So that's a go project. We still have some hurdles to do, but that's pretty much so.

And that's open in 2021 and we've got a lot of the international outlets that really open in late '20 and early '21 . So you know, it's going to take time now. Nick, here's the important thing, you will never hear from this company, we will have a throwaway year. Okay. So even with our [Indecipherable] not that exciting we're not going to tell you wait for next year, we don't wait for good, though. Okay, not here. So yeah, it's going to accelerate but we are worried about '19 and '20 and '21. So we don't have throw away years.

Nick Yulico -- Scotiabank -- Analyst

All right. Appreciate. That's helpful. Thanks David.

David E. Simon -- Chairman and Chief Executive Officer

Yeah.

Operator

Your next question comes from the line of Linda Tsai from Barclays.

Linda Tsai -- Barclays -- Analyst

Hi, your weighted average interest cost is pretty attractive at 3.49% and then in 2020 you have some higher rate debt maturing for both consolidated and JV debt. With the 10 year having trended lower do you think you'll achieve some interest rate savings on these upcoming maturities?

Brian McDade -- Chief Financial Officer

Hi, Linda, it's Brian. Yeah, look, as we look out into the future and looking at it sort of respective in today's current interest rate environment, certainly, there would be some pickup if we stay in this environment for a longer period of time.

Linda Tsai -- Barclays -- Analyst

Thanks. And then hopefully I heard this correctly. The bankruptcy impact on SS NOI year-to-date was 100 bps, but then given some subsequent comments about fallout being higher. Does that mean that the full-year impact on SS NOI would be greater than 200 bps?

David E. Simon -- Chairman and Chief Executive Officer

No, I think what we have said to you, so far the -- let me restate what you just said so there is no ambiguity. We had capital NOI growth of 2%, we generally based on our budget, would have been a little over 3% had it not been from the unanticipated bankruptcies. We're still -- our goal for this year is still 2%.

Linda Tsai -- Barclays -- Analyst

What's the overall impact of bankruptcies on same-store for 2019?

David E. Simon -- Chairman and Chief Executive Officer

We just told a year-to-date, it's around 100 basis points.

Linda Tsai -- Barclays -- Analyst

Okay. Thanks. Thanks.

David E. Simon -- Chairman and Chief Executive Officer

Sure.

Operator

Your next question comes from the line of Derek Johnston from Deutsche Bank.

Derek Johnston -- Deutsche Bank -- Analyst

Good morning, everyone. Thank you. You've covered a lot. So just one for me, if you don't mind. David, look I like malls. Okay. But acknowledging that sentiment our malls have been pretty poor so far in 2019, frankly worse than the fundamentals and clearly nobody knows your business better than you guys . So when you look past 2019 with 2020 and beyond fast approaching what is the management team most excited about, opportunity wise or strategically speaking?

David E. Simon -- Chairman and Chief Executive Officer

Well, thank you. And a very great, great question. So I would say the most exciting, the most difficult things that we have -- I mean in terms of exciting but difficult in terms of work and execution is the ability to redevelop our centers and what we're doing with the Tiffs of the world, the Northgates of the world, pray [Phonetic] that all down the line is -- for me really, really exciting. I mean, yes, it's a lot of work. I'd rather have my feet up on the desk. But, that's the most exciting. So it's -- we have been constrained, Derek, on how to redevelop a lot of these centers, because we had to run through all these routes [Phonetic] with the department stores as well. Yes, we've got the space that we have their acreage. Then we -- then the only think constraining us is our imagination and our ability to get permits and obviously you got to be grounded by supply and demand.

So that to me is the most exciting opportunity ahead of us, is to really reimagine the center. Now you're right about the mall business [Indecipherable]. Rick and I are old enough. Rick a little bit older to know that people have been trying to kill off the malls for 50, 60 years, right. So, was that I was the town centers. It was power centers. It was Walmart, it was Amazon, it was this guy who was that guy look we're resilient. Rick and I are all like cockroaches. Okay. We're going to still hanging around. So, but I do think that, it doesn't mean that we've got a -- we can't keep reimagining our places and I would say that's the most exciting. The other thing I would say to you, Derek, that is as exciting to us is because of our high quality portfolio, our high quality balance sheet, the stability of our cash flow even with all the turmoil going on in our the retail world. We have lots of opportunities beyond what we do today and we evaluate those with keen interest.

Derek Johnston -- Deutsche Bank -- Analyst

Thanks, David.

David E. Simon -- Chairman and Chief Executive Officer

Sure.

Operator

Your next question comes from the line of Michael Mueller from JP Morgan.

Michael Mueller -- JP Morgan -- Analyst

Yeah, hi. David, you mentioned you have 77 assets that generate more than $900 a foot in sales, can you give us a sense as to what portion of your pro rata NOI those assets represent?

David E. Simon -- Chairman and Chief Executive Officer

No, that will all -- let me think about whether I should give that to you as well. I'm worried what you might do with that, Michael, you may tell somebody.

Michael Mueller -- JP Morgan -- Analyst

Okay. I know I got it.

David E. Simon -- Chairman and Chief Executive Officer

It's well over 50%, it's probably 70-ish, give or take.

Michael Mueller -- JP Morgan -- Analyst

Got it, OK . And then maybe, push it a little further at the opposite end of the spectrum how small is the contribution from the assets doing say less than kind of $500 a foot?

David E. Simon -- Chairman and Chief Executive Officer

I don't have those number off the top my head.

Michael Mueller -- JP Morgan -- Analyst

Okay. 70% is helpful. Okay, thank you.

David E. Simon -- Chairman and Chief Executive Officer

Sure.

Operator

Your next question comes from the line of Wes Golladay from RBC Capital Markets.

Wes Golladay -- RBC Capital Markets -- Analyst

Hey, good morning everyone. I'm looking at the international properties in the total NOI bucket and I've seen that that's been growing about 4% year to date. First question is that largely comparable and what is driving that strength?

David E. Simon -- Chairman and Chief Executive Officer

Well, it's largely comparable other than and there may be an expansion here or there, but remember, that's also being impacted by FX. So it's actually probably would be higher than that had we compared to last year. Most of that -- most -- the dollar has been obviously significantly stronger. And we had budgeted to be not as strong and certainly year-over-year comparison, stronger than where it was last year. And we think that majority of that is comparable.

Wes Golladay -- RBC Capital Markets -- Analyst

Would you ever consider putting that in the total bucket, it may be adjusted on a constant currency basis?

David E. Simon -- Chairman and Chief Executive Officer

I thought about it and we should do it because it would, it would demonstrate the -- I mean the fact is, I think a lot of people forget about the diversity and the high quality portfolio we have. By the way than the 77 assets that would average over over $900 is not -- has nothing to do with our international assets. They all I'd say by and large are well over a $1,000 a foot. So we thought about it, but then I don't know we are just -- I don't know, we decided not to. But I know I we thought about it would certainly generate higher comp NOI growth and I know others do, do that. They love it in there. So maybe one day, but then you would ask what the domestic business is and we'd be back to where we are today.

Wes Golladay -- RBC Capital Markets -- Analyst

No. We will keep them at separate lines, but yeah that's like that. Thank you.

David E. Simon -- Chairman and Chief Executive Officer

Yeah. No worries.

Operator

Your next question comes from the line of Christy McElroy with Citi.

Michael Bilerman -- Citigroup -- Analyst

Hey, it's Michael Bilerman here with Christy. David, I wonder if you can step back and think about the mall or the retail competitive landscape from a landlord perspective and you talked about the turmoil in the retail industry is clearly affecting different of your peers in different ways, especially those that don't have the cost of capital or balance sheet. I was wondering if you can talk a little bit about perhaps your market share of retail leasing and whether you believe you're getting a disproportionate share of retailer store openings or a lower share of retailer store closings given that relationship and where you stand relative to all the other mall peers?

David E. Simon -- Chairman and Chief Executive Officer

Well, I actually don't think Michael that I actually referenced any of our peers in this call, other than to say, we do have some expertise that maybe others don't when it comes to -- when it comes to looking at opportunities or restructures as a retailer. So look, I would say to you. So I don't really think I referenced peers all that much.

Michael Bilerman -- Citigroup -- Analyst

No you did not. I'm asking the question about whether you running the company, our feeling is though you are getting a disproportionate share of leasing or a lower share of closings given retailer's desire to be in your portfolio given a lot of the other things that go along with Simon, including the balance sheet and all the other variabilities are retailers more accurate?

David E. Simon -- Chairman and Chief Executive Officer

No, I got the question I would say -- I would answer it this way. And Rick can add and embellish on it. I would say simply, we've always -- we've kind of always had that position, frankly, because of the quality of our real estate and the fact that the quality of our real estate, the organizational strengths and so on. So maybe on the margin it's even more important today, but I think that you know the stability of that organization and the quality of the real estate and the fact that people And the fact that people know we're going to invest in our real estate certainly helps, and certainly shouldn't be overlooked. And I will say anecdotally without numbers and whatever that's worth. I mean landlords do matter. You know historically maybe in a go-go time period maybe they matter less. And I'm hopeful that as retailers look at, whether it's in downsizing or restructuring or growing, whatever that scenario is they do take into account who their partners. But you know I think we've always been in that spot maybe its slightly enhanced and I do think the landlord -- the ability to invest, I mean, Rick and I run around, we talk to people. They say, yeah, we know you're going to take care of your properties, maybe there is a few retailers that want to put in what I'd call, the clause where that we don't own it. They can do whatever the hell they want. They can leave. We try not to do that, but I mean we hear stuff like that, but I'd say that's kind of on the margin. Rick please embellish.

Richard S. Sokolov -- Vice Chairman, President and Chief Operating Officer

The only other thing that I would add is that, our portfolio creates a lot of profit for these retailers, they are not charitable institutions. I think they do hold us in high regard with just our results. But the reason we have an ability to interact with our retailers in a productive way is because they make a lot of money in our properties. And when they think about their business, it's in their best interest you do business with us and that's a function of all the things that David's been talking about the entire call about reinvesting in the properties, having a stable balance sheet, having all these inventive and innovative plans. It all comes down to having more productive properties, and that's what gives us, I think an edge.

Michael Mueller -- JP Morgan -- Analyst

David, can you talk a little bit about sort of all the fifth platform initiatives, you've obviously had the the outlet online business. You've done that Esports and the CBD shops. There's a lot of other little bets you're placing in a lot of different ways. I guess how should we think about how you're spending your time on all of those initiatives? And how should we think about the capital that you may put forth to additional programs to drive more earnings to your assets?

David E. Simon -- Chairman and Chief Executive Officer

Well, I think you'll see more and more of it Michael. And can't really quantify it because it is opportunistic, but look all of this is kind of return based. I mean it's not money that we are willy nilly just telling they're hoping it sticks. It's not spaghetti up against the wall, but I do think we're going to be as creative and as innovative as we possibly can be with the guard rails that we have historically used, which is making sure that's a good return on investment, making sure that it's synergistic to what we do, making sure that we're betting on the right people and on the right product and the right vision. But you will absolutely see more from us in this area. And I'm hoping from that -- look, we've been fighting the fight for years that we are more than a mall company. We've always defined ourselves as a retail real estate company from the get go, even when we went public, we were more than a mall company, we've morphed into retail real estate, we've morphed into outlets, we've morphed into the mills, we've morphed into international.

So we are densifying our business in terms of -- so you -- I am hopeful that with time even though we are categorized as a mall company, again, I'm not running from the mall business and someone asked earlier, what one of our most exciting things we have is redeveloping all this anchor space. But we are much different than that and that process and evolution we will continue and we're hopeful that we will be profitable in it like we have in our other ventures out of our traditional business. Not our core business, our traditional business.

Michael Mueller -- JP Morgan -- Analyst

Just last one kind of strategically, as part of when you spun-off WPG which in hindsight I think those assets clearly would have been a little bit more of an anchor to your growth. You did spin off the open-air shopping center business, I guess as being a retail landlord does that business and the potential to maybe reaggregate in that space or that's not on the table at all?

David E. Simon -- Chairman and Chief Executive Officer

I don't think it's on the table. If I understood the question, I don't think it's on the table. I think there is a lot of opportunities ahead of us and I just wouldn't rank that as high up there.

Michael Mueller -- JP Morgan -- Analyst

And then how does the UK which is obviously going through -- the stocks there obviously having a lot of difficulties given their leverage position. You had Klepierre, try to do something. Does that rank high on your list?

David E. Simon -- Chairman and Chief Executive Officer

I'm more worried about my -- the season is about to start for team Crystal Palace. I'm more worried about, and I have another event, I want a solid year this year. I'm tired of watching the relegation there. Fine. So I'm more worried about that right now.

Michael Mueller -- JP Morgan -- Analyst

Thanks for the time, David.

David E. Simon -- Chairman and Chief Executive Officer

Sure.

Operator

I am showing no further questions at this time. I would now like to turn the conference back to Mr. David Simon.

David E. Simon -- Chairman and Chief Executive Officer

Okay. Thank you and have a great rest of your summer and we'll talk to you soon.

Operator

[Operator Closing Remarks]

Duration: 71 minutes

Call participants:

Tom Ward -- Investor Relations

David E. Simon -- Chairman and Chief Executive Officer

Richard S. Sokolov -- Vice Chairman, President and Chief Operating Officer

Brian McDade -- Chief Financial Officer

Jeremy Metz -- BMO Capital Markets -- Analyst

Christy McElroy -- Citi -- Analyst

Stephen Sakwa -- Evercore ISI -- Analyst

Craig Schmidt -- Bank of America/Merrill Lynch -- Analyst

Alexander Goldfarb -- Sandler O'Neill -- Analyst

Caitlin Burrows -- Goldman Sachs -- Analyst

Richard Hill -- Morgan Stanley -- Analyst

Nick Yulico -- Scotiabank -- Analyst

Linda Tsai -- Barclays -- Analyst

Derek Johnston -- Deutsche Bank -- Analyst

Michael Mueller -- JP Morgan -- Analyst

Wes Golladay -- RBC Capital Markets -- Analyst

Michael Bilerman -- Citigroup -- Analyst

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