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Simon Property Group (NYSE:SPG)
Q2 2021 Earnings Call
Aug 02, 2021, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Thank you for standing by, and welcome to the Q2 2021 Simon Property Group earnings conference call. [Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I would now like to hand the conference over to your host, senior vice president, investor relations, Tom Ward. You may begin.

Tom Ward -- Senior Vice President, Investor Relations

Thank you, Ateef, and thank you all for joining us this evening. Presenting on today's call is David Simon, chairman, chief executive officer, and president. Also on the call are Brian McDade, chief financial officer; and Adam Reuille, chief accounting officer. 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 may be accurate only as of today's date. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included in 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.

Please note, our 8-K filing is still in process with the SEC. However, it has not yet been accepted to it. In the meantime, as I mentioned previously, the 8-K has been posted to our website. Now, for those of you who would like to participate in the question-and-answer session, we ask that you please respect our request to limit yourself to one question and one follow-up question so we might allow everyone with interest the opportunity to participate.

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

David Simon -- Chairman, Chief Executive Officer, and President

Good evening. I'm pleased to report our business is solid and improving. Demand for our space and our well-located properties is increasing. I'll turn to some highlights.

Our profitability and cash flow have significantly increased. Second-quarter funds from operations were $1.22 billion or $3.24 per share. Our domestic operations had an excellent quarter. Our international operations continue to be affected by governmental closure orders and capacity restrictions, which cost us roughly $0.06 per share for this quarter compared to our expectations due to the equivalent of a two-and-a-half month of closures.

As we said in the press release, our quarter results included a noncash gain of $118 million or $0.32 per share from the reversal of a deferred tax liability at Klepierre. We generated over $1 billion in cash from operations in the quarter, which was $125 million more than the first quarter. And additionally, compared to the second quarter of last year, our cash flow from operations was breakeven due to the lockdown. Domestic-international property NOI combined increased 16.6% year over year for the quarter and 2.8% for the first half of the year.

Remember, the first quarter of 2020 was relatively unaffected by the COVID-19 pandemic. These growth rates do not include any contribution from the Taubman portfolio or lease settlement income. Malls and outlets occupancy at the end of the second quarter was 91.8%, an increase of 100 basis points compared to the first quarter. We continue to see demand for space across our portfolio from healthy local, regional and national tenants, entrepreneurs, restaurateurs and mixed-use demand ever so increasing day by day.

Our team is active in signing leases with new and exciting tenants. Average base minimum rent was $50.03. Our average base rent was impacted by the initial lower base rents we agreed to in addressing certain tenant COVID negotiations in exchange for lower sales breakpoints. The variable rents that were recognized in the first half of the year were included.

It would add approximately $5 per foot to our average base minimum rent. Leasing spreads declined again due to mix of deals that are now included, as well as the activity that had fallen out of the spread given its rolling 12-month nature and metric. New leasing activity that has affected the spread include large footprint entertainment, fitness and large-scale retailers, big boxes. Big box deals reduced our opening rate as they're all included in our spread metric.

As a reminder, the opening rate included in our spread calculation does not include any estimates for percentage rent-based income based on sales, as I mentioned just recently. Leasing activity accelerated in the quarter. We signed nearly 1,400 leases for approximately 5.2 million square feet and had a significant number of leases in our pipeline. Through the first six months, we signed 2,500 leases for over 900 -- I'm sorry, 9.5 million square feet.

Our team executed leases for 3 million more square feet or over approximately 800 more deals compared to the first six months this year, as well as -- I'm sorry, compared to the first six months of 2019. We have completed nearly 90% of our expiring leases for 2021. We recently had deal committee, and what I'm told by my leasing folks is that that was the most active deal committee that they've had in several years. Now, retail sales continued to increase.

Total sales for the month of June were equal to June 2019 and up 80% compared to last year and were approximately 5% higher than May sales. If you exclude two well-known tenants, our mall sales were up 8% more than compared to June of 2019. Multiple regions in the US recorded higher sales volume in June and for the second quarter, compared to our 2019 levels. We're active in redevelopment and new development.

We opened West Midlands Designer Outlet, and we started construction in the Western Paris suburb for a third outlet in France. The end of the quarter, new development/redevelopment was underway across all our platforms for our share of $850 million. Our retail investments posted exceptional results. All of our global brands within SPARC Group outperformed their budget in the quarter on sales, gross margin and EBITDA, led by Forever 21 and Aeropostale.

SPARC's newest brand, Eddie Bauer, also outperformed our initial expectations. We're also very pleased with JCPenney results. They continue to outperform their plan. Their liquidity position is growing, now $1.4 billion, and they do not have any outstanding balance on their line of credit.

Penny will launch several private national brands later this year, as well as their new beauty initiative. Taubman Realty Group is operating their 2021 budget at a level above that and above our underwriting. And their portfolio, our portfolio shows resilience as sales are quickly returning to pre-pandemic levels. Year to date through June, retail sales are 13% higher than the first half of 2019.

Balance sheet. As you would expect, we've been very active in the capital markets. We refinanced 13 mortgages in the first half of the year for a total of $2.2 billion in total, our share of which is $1.3 billion at an average interest rate of 2.9%. Our liquidity is more than $8.8 billion, consisting of $6.9 billion available on our credit facility and $1.9 billion of cash, including our share of JV cash.

And again, our liquidity is net of $500 million of US commercial paper that's outstanding at quarter-end. Dividend. We paid $1.40 per share of dividend in cash on July 23 for the second quarter. That was a 7.7% increase sequentially and year over year.

Today, we announced our third-quarter dividend of $1.50 per share in cash, which is an increase of 7.1% sequentially and 15.4%, 15.4% year over year. The dividend is payable September 30. You will know that going forward, we are returning to our historical cadence of declaring dividends as we announce our quarterly earnings. Now, guidance.

Given our results for the first half of the year, as well as our view for the remainder of 2021, we are increasing our full-year 2021 FFO guidance range from $9.70 to $9.80 per share to $10.70 to $10.80 per share. This is an increase of $1 per share at the midpoint, and the range represents approximately 17% to 19% growth compared to 2020 results. Before we open it up to Q&A, I wanted to provide some additional perspective. First, we expect to generate approximately $4 billion in FFO this year.

That will be approximately 25% increase compared to last year and just 5% below our 2019 number. To be just 5% below 2019, given all that we've endured over the last 15, 16 months, including significant restrictive governmental orders that forced us to shut down unlike many other establishments is a testament to our portfolio and a real testament to the Simon team and people. Second, we expect to distribute more than $2 billion in dividends this year. Keep in mind, we did not suspend our dividend at any point during the pandemic.

And in fact, we have now increased our dividend twice already this year. Now, just a point on valuation. And I tend to never really talk about it, but I thought it was appropriate today. Our valuation continues to be well below our historical averages when it comes to multiple -- FFO multiples compared to other retail REITs, retailers and the S&P 500.

And our dividend yield is higher than the S&P 500 by more than 250 basis points, treasuries by 325 basis points and the REIT industry by 150 basis points. And as I mentioned to you, our dividend is growing. Our company has a diverse product offering that possesses many, many multiple drivers of earnings growth, accretive capital investment opportunities and the balance sheet to support our growth. We are increasing our performance, profitability, cash flow and return to our shareholders.

And we're ready for questions.

Questions & Answers:


Operator

Thank you. [Operator instructions] Our first question comes from the line of Steve Sakwa of Evercore ISI. Your line is open.

Steve Sakwa -- Evercore ISI -- Analyst

Thanks. Good afternoon, David. I guess, I wanted to just start on the occupancy trend, which was up pretty nicely from 1Q to 2Q. And you talked about the leasing activity that you had in the quarter in the pipeline.

Could you just maybe share with us what your expectations are for occupancy by the end of this year? And what's sort of embedded in the guidance?

David Simon -- Chairman, Chief Executive Officer, and President

Well, the guidance is affected by the continuing uptrend. We expect our occupancy by year-end to increase from the levels that we have right now. I don't have a number that I'm going to give to you specifically. But as I mentioned to you, Steve, in talking to my heads of leasing, I mean, we are -- maybe this is an overstatement, we're tickled pink by the demand by the new retailers and tenants that are surfacing the many, many opportunities that we have in the -- with restaurants, with mixed-use development.

And I mentioned to you our deal committee had more deals than it's had in a few years. So look, we still have a hole to dig out of because of the bankruptcies that we had to confront with the pandemic. But I'm very pleased with the activity, the mojo that we have in leasing, the work that our personnel are doing there and creativity. It's pretty encouraging.

Steve Sakwa -- Evercore ISI -- Analyst

OK. And maybe just as a follow-up, just on the leasing commentary. I know that you guys had to make some accommodations to the retailers, and you lowered the base rent and took more percentage rent. Given that sales seem to be coming back very quickly, do you sense that that dynamic is changing at all as you're having these current discussions about future leasing? Or do you still anticipate having to have kind of lower base and take more upside going forward?

David Simon -- Chairman, Chief Executive Officer, and President

Look, it's tenant by tenant. The strategy we adopted in the height of the pandemic is playing out better than we could have expected. We made the right move. We got the renewals done.

We accommodated the vast majority of retailers, assuming they were reasonable in their approach. We got the job done. We kept our properties functioning. We bet on the rebound.

And we're seeing the benefits of that. And as I look back, I'm not certain I would change a lot. And the reality is there's always going to be a few -- a handful of situations where we'll bet on the come, bet on retailers because we have confidence in our properties. We have confidence in the retailers that we're doing business with.

And I think physical retail, when I listen to the pundits and they're throwing it out -- they're throwing the baby out with the bathwater, read my lips, physical retail is here to stay and people really like to shop in the physical world. So don't believe everything you hear on TV. We've got the evidence.

Steve Sakwa -- Evercore ISI -- Analyst

That's it for me. Thanks.

David Simon -- Chairman, Chief Executive Officer, and President

Thank you.

Operator

Thank you. Our next question comes from Alexander Goldfarb of Piper Sandler. Please go ahead. 

Alexander Goldfarb -- Piper Sandler -- Analyst

Hey. Good afternoon, David. And hope -- I guess, you guys have had a really good -- not I guess. You guys have had a really good quarter.

Just amazing to see guidance up by a buck. But continuing on Steve's question there. Amazing on the dividend rebound, amazing on the guidance, on the leasing activity you guys talked about, and everything is good. But when you think about people pulling out the negative, and believe it or not, David, people do look at some things in a negative limelight, they'll see negative 22% releasing spreads, and that negative spread is widening.

I understand that you did deals to get the company through makes sense. But from an expectation standpoint, what would you think the cadence is over the next few quarters of the spread? And how do we sort of relate to that versus the cash flow growth and everything else that's going on? Because clearly, there's a disconnect between your cash flow recovery and just negative spread metrics.

David Simon -- Chairman, Chief Executive Officer, and President

Yeah. Look, Alex, stats don't mean as much to me as they do to you because I look at cash flow growth because there's a lot that goes into cash flow growth, a lot more than spreads. Now, the sole reason that the spread is down to 22% is because of mix and the COVID deals that we did. The mix is that we -- the spread probably was higher because we had a lot of boxes that rolled out that were low rents.

And so, we got the benefit of that. And now, as we -- and those are out of our 12-month numbers. And now, kind of the new leasing that we're doing is in it, and that's the sole -- that's the sole thing. So I would encourage our investors that know what we're all about to understand that it's a mix.

If I do a deal with Dick's or an entertainment box and they pay $15 a foot but the expiration of that box was 15 months ago with $3 a foot, I still may have made a $15 spread. But because it was in our rollout 15 months ago, you don't see it. It's not space by space. If I did space by space, the trend would not be -- the percentage would not be anywhere near that.

So do you understand what I just explained? Remember, we had a lot of boxes that were pre-COVID at low rents, but we didn't do box leasing for the last 12, 14 months because of the pandemic. So that's the sole reason. You follow what I'm saying? Right, Alex?

Alexander Goldfarb -- Piper Sandler -- Analyst

Yeah. Yeah, I do. I do. I wasn't about to volunteer Tom rehash for a space by space.

But I do understand what you're saying.

David Simon -- Chairman, Chief Executive Officer, and President

This is not a space by space. But the reality is if I add boxes that were -- the space that I got back that was at low numbers, but they were 15 months ago, those closings is gone. So that really jerks up the number. And then, I have the new lease at a low number that jerks it down.

But if you really compare it over a longer period of time, we've got a positive spread. Follow me?

Alexander Goldfarb -- Piper Sandler -- Analyst

Yeah. It makes total sense. The next topic, David, obviously --

David Simon -- Chairman, Chief Executive Officer, and President

It should make more than sense. It's the math.

Alexander Goldfarb -- Piper Sandler -- Analyst

No. I could see the math as evidenced in the earnings growth and cash flow growth. You've explained it well so that when understanding that explanation that it's not based on space by space makes it crystal clear what's going on. The next question is on the rising of COVID, Delta and whatever other variants are out there, obviously, fact of life.

But you're seeing tremendous leasing demand, restaurant demand, et cetera, your malls and outlets are throughout the country. Is it your view and what your managers -- mall managers are saying, and tenants are saying, is that most people just accept COVID is part of life and therefore it doesn't interfere with their shopping or their restaurants or their activity? Or is there a concern that people may start to pull back from some of the increasing activity that we've seen this year?

David Simon -- Chairman, Chief Executive Officer, and President

Well, it's a very good question. I'm only going to give you my personal opinion, which could be long. But it's an opinion, so I guess technically it shouldn't be wrong. But I would say this.

I think the most important -- this is factual, and I actually checked it. So as you know, Delta -- there are Delta hot spots. We actually have malls in some of these hotspots. So the land of the Ozarks is in Springfield, Missouri.

You only know that through the Netflix show, right, the Ozarks, because you haven't been there. But I've been there and it's a wonderful place. But I checked, have we seen in our Battlefield Mall, which is in Springfield, Missouri, have we seen an uptick in COVID cases at the mall, and we get the report from all the retailers and our staff, and the reality is we haven't. The mall is safe, OK? And so even though we're starting to see counties talk about indoors, there's no science about the mall.

I underlined that we've been mistreated in this whole 18-month ordeal, but it is what it is. I personally think -- now going back to your question, and we -- I checked it. Like in Florida, where there's some upticks, we have not seen in an enclosed mall an uptick in COVID cases for the people that are in the mall, the staff, whether it's a retailer or a management team, period, end of story, no question about that. So I personally think that people are just going to deal with Delta.

I'm hopeful that people will get vaccinated. We're not going to mandate vaccines. We're going to encourage them. And I think we've got to keep being safe as possible, going on with our life.

And where we need to mask up, we're going to mask up. And I think the consumer and the -- and the folks are -- have all just kind of dealt with it and are moving forward in that environment right now. So I'm hopeful that as a country, we don't get into these lockdowns. They have produced -- I studied Sweden.

I studied France. COVID reverts to the mean. Sweden did not lock down. France did.

And if you look at the chart on COVID cases, it all reverts to the mean, lockdown, no lockdown. So let us do our business, mask up if you need to, the mall is safe. Next question.

Alexander Goldfarb -- Piper Sandler -- Analyst

Thank you, David.

Operator

Thank you. Our next question comes from Rich Hill of Morgan Stanley. Your question, please.

Rich Hill -- Morgan Stanley -- Analyst

Hey. Good afternoon, David. I want to just focus on maybe just some of the numbers and specifically the income from unconsolidated entities. If I'm looking at the numbers right, you had a pretty healthy increase in that line item, which obviously includes Taubman along with the retailers.

I think it went to around $348.5 million versus $15 million in the last quarter, despite depreciation and amortization looking like it's approximately flat year over year. So that suggests to me something pretty healthy is happening in those line items. I was hoping you could maybe just give us a little bit more transparency in what you're seeing there and what's driving that beyond what you said in the prepared remarks.

David Simon -- Chairman, Chief Executive Officer, and President

Well, I mean we're always transparent. That will be in our Q. But we have our Klepierre deferred tax gain running through that, we have our retail investments running through that are the two major pieces of that increase, and then obviously positive operations in all of our joint venture properties. And that's really at Taubman because we've had -- that runs through that as well, but we also have increased depreciation and amortization associated with it.

So that's kind of not overly material in that big increase. Fellas, what else do we want to say? That's it? OK. That was agreed with my assessment.

Rich Hill -- Morgan Stanley -- Analyst

I'm sure I'll follow up off-line with Brian and Tom on that. I do want to come back to, my words, not yours, soft guidance on core NOI. I think you've said in the past it was maybe going to be 4% to 5%, closer to 5% if I'm reading the transcript from last quarter correctly. You obviously just had a really big quarter.

How do you feel about that now? And do you see potential for upside from that 5%?

David Simon -- Chairman, Chief Executive Officer, and President

Yeah, we should outperform that.

Rich Hill -- Morgan Stanley -- Analyst

OK. That's my two questions. So I will get back in the queue. Thanks, David.

David Simon -- Chairman, Chief Executive Officer, and President

Thank you.

Operator

The next question comes from Michael Bilerman of Citi. Please go ahead.

Michael Bilerman -- Citi -- Analyst

Great. Just two quick ones. Well, one quick one, maybe one a little bit longer. The first one, just on the dollar increase, can you just break that down into just some major buckets? The $1 increase, the guidance about $380 million, I would assume part of it is $0.32, the deferred tax liability that you booked this quarter, which leaves another $0.68 unaccounted for.

Maybe if you can just bucket it into like maybe retailer investments, core and other would be helpful.

David Simon -- Chairman, Chief Executive Officer, and President

You're right. You're right. $0.32 of that is because of the deferred tax. And then, $0.68 plus is from just core plus retail.

But we're not going to break out which is which. But the good news is we've got our core beating our initial budget, and retail, the same -- were in the same spot.

Michael Bilerman -- Citi -- Analyst

Yeah, because your original retailer investment was like $0.15 to $0.20. It would appear that you may have blown through that just in this quarter. So that's why I was just trying to get a little bit of a -- that one is a lot more volatile --

David Simon -- Chairman, Chief Executive Officer, and President

It's entirely a fair and legitimate question, and so there's no qualms on that. It's just we don't really -- we're not breaking out the beat or the increase, I should say, other than the $0.32, which is right. And then, the other $0.68, and I hope it will be plus than that, will be -- is retail and core. I mean I said retailer multiples, maybe retail is core.

I don't -- what's core, what's non-core, OK?

Michael Bilerman -- Citi -- Analyst

That's a longer discussion. The second question, David, is given your perspective now as a -- obviously, you've been a landlord forever, but you're increasingly now getting your hands dirty at being a retailer. I'm curious what you're seeing from the retailers that you own and sort of dealing with this environment and turning it around relative to what you are as a landlord, right? Because I think you said your tickled pink. If you're sitting as a retailer, that must be a different description that you would use.

So maybe you can talk a little bit about what you're doing on the retailer side to bring people into the assets. What type of promotions are you trying to lure people to bricks and mortar and just the whole omnichannel world with the retailers you own? Just trying to understand that relative to your time as a landlord.

David Simon -- Chairman, Chief Executive Officer, and President

Well, that's -- you're right. It's a long -- that's a long -- if I did that question justice, it would be a long answer. So let me just say this, and this is really important. The retailers that we bought, if we didn't buy them, they would be gone.

So I'm most proud -- forget about the numbers and what it's meant for us financially. But we're most proud because we basically kept companies alive that otherwise would be dead, buried and liquidated. And what we found out is, you know what, if we just focus on the business, focus on cash flow, focus on the consumer, we could stabilize the business, have patient money, patient -- not worried about comp from 1 quarter to the next. We could turn those around.

And I'm most proud because I should know maybe buying those, but our SPARC operations employ thousands of people. And then, when you add Penny, you've got well over 50,000, 60,000 people. So don't underestimate what we've done. I mean we're not -- these were companies that were, frankly, roadkill and we saved them.

And for that, I'm very, very thankful for. So that's one. And then, I'd say, Michael, generally -- and I can get into this in more detail. It's just too much to tell you now.

I'd say two things. One is the store is accretive -- if you talk to the retailers that run these businesses, and in our case in particular, because most of these companies didn't have the capital to invest in the Internet and the omnichannel, we're taking at the store level, OK? So these are really -- turned in to be good physical store operators. Now, Eddie Bauer is more sophisticated on the e-commerce than some of the other ones that we got when we bought them. But the store is a really, really important component that gets -- in today's world, for what -- it is what it is, gets overlooked.

And I'd say we've also had a great partner in ABG that adds a lot to the marketing and know-how about sourcing that was very important to what we have. And then, Brookfield has been a terrific partner as well and adds a lot of value. They're in some deals. They've been converted in others.

But they've been, like us, what do we do that's right through the business, how do we keep these companies alive and prosper, level-headed, quick decisions, all the rest of the stuff. So omnichannel clearly is very important to the future. But these companies are basically surviving and prospering because of their physical footprint, not because of e-commerce.

Michael Bilerman -- Citi -- Analyst

Right. And I'd say if I have a vote, I know you probably wouldn't give me a vote, but on the retailer versus core Simon earnings, I do think there's a difference. The market can describe what multiple they want, you're in a -- you have leases and contracts, retailers on the other hand of just a different business model.

David Simon -- Chairman, Chief Executive Officer, and President

Traditionally, you're right in that. But if you look at where the retailer multiples are compared to ours, you would argue the reverse.

Michael Bilerman -- Citi -- Analyst

Like I said, that's why I said I don't want to -- the market is going to tell us where, but at least having all the details of the components, I think it's just a very helpful piece of information that The Street can then -- and then we can get into an argument about how things should be valued, but not having the individual pieces in a clear and concise way, I don't think, allows to have that conversation. It becomes a little bit more adversarial.

David Simon -- Chairman, Chief Executive Officer, and President

Well, we got it. We understand the issue, but at the end of the day, we'll see the level and the materiality to it. And we'll see if it makes sense. We've got partners in there as well.

But I don't think -- well, the market is the market. I have to respect it. So we hear what you're saying.

Michael Bilerman -- Citi -- Analyst

OK. I appreciate the time, David.

David Simon -- Chairman, Chief Executive Officer, and President

Thank you.

Operator

Thank you. Our next question comes from Caitlin Burrows of Goldman Sachs. Your question, please.

Caitlin Burrows -- Goldman Sachs -- Analyst

Hi, everyone. I was just wondering maybe if we could talk a little bit about the conversations you're having with retailers. I think in the past and even last quarter, it sounded like there were still retailers that were maybe giving you a hard time about rent payment or rent negotiations. Wondering if you can give an update on how those conversations with the retailers are going and also whether that is impacting the lease termination fees.

David Simon -- Chairman, Chief Executive Officer, and President

I would say we're really down to a couple of folks, and it's really, Caitlin, way, way down. I mean everybody's lived up to their basically COVID deal. And I would say right now, it's -- other than one or two folks, it's really kind of business as usual and how do we do business better, how do we grow our business, how do we do things more strategically. So I think -- I'm hopeful that that's -- that whole unfortunate -- it was tough for us.

It was tough for them. We were all dealing with unprecedented sequence of events. I think it's all behind us. Our collection rates are in the -- back to normal.

And yeah, we've got two or three folks that are still out there. But if we -- if they stay out there, it is what it is, and we can't -- we're moving forward. So it's all pretty much behind us, assuming there's no -- nothing that we had to deal with like we did last year.

Caitlin Burrows -- Goldman Sachs -- Analyst

Got it. OK. And then, maybe just a quick one on the other income. Both the lease settlement income was up decently in the quarter and also the bucket for other income.

So I was just wondering if you could give some detail on those two line items.

David Simon -- Chairman, Chief Executive Officer, and President

Yeah. I remember lease settlement income was up a few million dollars, not much, maybe a couple of cents. And we sold one residential property at a gain. And we also had -- which is -- we had a significant increase in our Simon Brand Venture business, which is probably the bigger grower of that number.

Brian McDade -- Chief Financial Officer

Yeah, absolutely. Caitlin, this is Brian. If you -- we saw a pretty substantial increase in Simon Brand Venture and our gift card business in some of our kind of mall food operations, which obviously in the second quarter of last year were non-existent.

Caitlin Burrows -- Goldman Sachs -- Analyst

Got it. OK. Thanks.

Operator

Our next question comes from Derek Johnston of Deutsche Bank. Your line is open.

Derek Johnston -- Deutsche Bank -- Analyst

Hi, everybody. Good evening. What do you need to see in order to greenlight additional transformational mixed-use projects, especially the Taubman assets, which we think make a lot of sense? I mean clearly, Northgate never skipped a beat, and now Phipps Plaza really looks like it's back on track. Maybe I missed it earlier, David, but I recall the office component being temporarily shelved.

But what do you need to see to ramp additional transformational-type projects? And is there a laddered development program in place or any material ongoing, in process entitlement requests you can share?

David Simon -- Chairman, Chief Executive Officer, and President

Sure. You're right about Phipps. We're basically all systems go there. We expect to finish everything by the end of '22, which would be the new Class A office, Nobu Hotel, Life Time Athletic.

So it's all going back. You're right, we did shut it down during COVID. We commenced -- we restarted this, I don't know, two, three months ago. We weatherproofed some of these stuff earlier, but we really are finishing the project.

So that will be really -- I'm really excited about that. So hopefully, we'll be able to show you that and be something really proud of. And I would say we're really kind of -- we took a hiatus of 12 months, more or less, Brian, right? 12, 14 months. So we're back at it.

I think I mentioned in the last call we're probably, in some cases, decreasing the amount of maybe new retail space. But we're back at it, and it's more mixed-use than ever. The demand on the mixed-use front has been really, really nice to see. And just to name a few that were in the permitting process would be Brea in Orange County.

We've got Stoneridge in the Northern California area just to get the permitting process going -- restarted. Some of those things we have to kind of start again because the plan is different, but the idea to redevelop -- a lot of them are the old department store boxes that we got back or that we ended up buying. We're going. The plans may be a little less grandiose, so to speak, but it's very active on that front across the board.

So look for more and more of our pipeline to increase as we go through the vetting process. And I think with the Taubman portfolio, you're right, there's a lot to do there. They -- I keep saying they, but we don't have a lot of empty boxes there. So that was -- so there's not like a plethora of opportunities that you might otherwise think, but there are some, and we're working those as well.

And it's great real estate, great location. And I think I mentioned last call, I mean I do think not that there's really a silver lining in any of these, but I do think our properties, both by the communities and maybe the general movement there, the suburbs are -- especially in markets that we're in, are going to be really appreciated. And I think we're going to be the center of activity.

Derek Johnston -- Deutsche Bank -- Analyst

OK. Great. And I guess just my follow-up will be a quick follow-up to this question. Is the 13-story Class A office building, is Life Time co-work an anchor tenant there? Did you sign them? Or have you pre-leased any of this space that gave you confidence to move ahead? Or are you just moving ahead because you feel better in general?

David Simon -- Chairman, Chief Executive Officer, and President

Let me be clear. So Life Time is its own separate building. It's actually built on top of a world-class food hall that we're doing with C3. And inside Life Time Athletic, they will have their own co-working.

The office building is on its own -- it's not -- there's no leasing to Life Time on that. It's 13 stories. We're building it spec, but we just signed our first 90,000 square foot lease. So the short answer is yes, we are going.

Derek Johnston -- Deutsche Bank -- Analyst

Thank you.

Operator

Thank you. Our next question comes from Craig Schmidt of Bank of America. Please go ahead.

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

Thank you. Looking at the guidance for 2021, you'll have recovered half of the loss from your previous peak on FFO per share. I'm wondering, as we work to create the income to get you back to the second half, is that going to be harder than the first half? Or could that be easier?

David Simon -- Chairman, Chief Executive Officer, and President

Just quarter over quarter?

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

I'm just thinking --

David Simon -- Chairman, Chief Executive Officer, and President

I didn't really -- I don't think anybody understood -- your connection is not that good, Craig. So maybe can you restate it, please?

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

Sorry. Can you hear me now?

David Simon -- Chairman, Chief Executive Officer, and President

Yes.

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

OK. Your guidance for 2021 already brings you halfway back to your peak FFO per share. Thinking about the second half, is that going to be harder to recover or easier?

David Simon -- Chairman, Chief Executive Officer, and President

Well, if you go quarter over quarter, I would just say, and I'll let Brian and Adam weigh in, but we had the brunt of COVID abatements and relief defaults in Q2 and 3, if I remember correctly. So the comparison to Q3 of '21 compared to '20 should be a pretty big gap. By Q4, we had dealt with most of the stuff. So if that's your question -- I'm not sure I really maybe comprehended it completely.

But I think if that's your question, I think, hopefully, that answers it.

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

Great. And then, just do you see -- foresee any changes in the REIT rules that might allow you to grow your retail and some of your other businesses beyond previous limitations?

David Simon -- Chairman, Chief Executive Officer, and President

Well, that's hard to know, Craig. I'm hopeful. I mean we're -- there are limitations, you're right, 100% right. There are limitations.

And I'm hopeful that the folks that do legislative stuff will understand the benefit that we've provided to basically working families because we've saved these retailers. So yeah, there are rules that make it complicated. They should be less. Remember, our retail investments are in a taxable REIT subsidiary.

If you look at our P&L, you'll see a big tax expense, correct? Gentlemen, that's associated with the fact that our TRS is taxable, and we're paying the corporate tax rate at its full level. And then, when you look at the, hopefully, the benefit of what we've done for these companies that otherwise would -- may not exist, frankly, that the folks that write legislation will see that this is really an arcane rule that was around a long time ago, and there's a real benefit to trying to keep retailers and others alive to try and create employment and all the good stuff that they do in the community. So I am hopeful, but there's no certainty on that.

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

Understood. Thank you.

David Simon -- Chairman, Chief Executive Officer, and President

Thank you, Craig.

Operator

Thank you. Our next question comes from Floris Van Dijkum of Compass Point. Your line is open.

Floris Van Dijkum -- Compass Point -- Analyst

Thanks for taking my question. David, I have a feeling of sort of deja vu. We've seen this picture before, following the great financial crisis. Obviously, things are different, of course.

But it seems like we're reliving those times a bit. Maybe if you can -- my question to you is regarding tenant sales. Again, the key lifeblood to your malls and the key to the -- obviously, to the retailer profitability too. Very encouraged by your statement of retail sales in June equaling -- in your portfolio, equaling '19 levels and up 5% from May.

Maybe if you can give some more breakdown in that, particularly as it comes out of the first quarter. And also, did I hear you correct? Did you say that Taubman sales were 13% ahead of '19 levels?

David Simon -- Chairman, Chief Executive Officer, and President

Correct.

Brian McDade -- Chief Financial Officer

Yes.

David Simon -- Chairman, Chief Executive Officer, and President

I mean, it's a good number. I mean look, I do think we all deal force in a very tough -- it's really hard to be -- to make any predictions. But I think what it should tell all of us is that -- and I said it a little bit earlier. I mean physical shopping is -- people like to physically shop, OK? And we are, by no stretch of the imagination, hitting on all cylinders.

We still have tourist centers that don't have tourists other than domestic. We have parts of the region that were slower to open up, i.e., California, than others. And I just think the most important point is that people like physical shopping. And I mean, listen, you hear it all the time.

And I'm sure you get -- your clients ask you, well, nobody shops physically anymore. And you try to defend it or you say, yes, but what about this? What about that? I think we're just showing that it matters to the consumer and to these communities, and hopefully, that will continue. And it is -- I will say this, and maybe getting to your question, it is across the board. So yes, it's the luxury retailers, but it's also Aeropostale, which the AUM is -- I won't tell you.

I'm not allowed -- I don't know if I'm allowed to tell you, but the AUM is lower than what it might be for a luxury retailer, OK? So it's Forever 21, which has a low AUM. So I think that's just encouraging. Hopefully, the trend will continue, but I think the consumer likes the idea that they can go to a physical shopping place.

Floris Van Dijkum -- Compass Point -- Analyst

Great. And if I can follow up, I guess, I wanted to -- you talked about the fact that your lease spreads are not comparable -- they're not space for space, like-for-like. I wonder if you had that. And also, what is the impact if you have -- if your average sales get to '19 levels, what's the impact on the effective rent that you would be getting relative to the reported rents that you've talked about?

David Simon -- Chairman, Chief Executive Officer, and President

Well, I think the easiest way to do that, I mean that's -- it's a complicated number because you got to go retailer by retailer. We did it for the first six months. And our estimate of what our base rent would be based upon kind of -- we got the benefit. There's $5 more base rent had we not lowered our break points due to the COVID relief.

So that gives you an indication of kind of an interesting stat, if that's maybe it's of interest to you. So I don't -- so I can't really give you a number off the top of my head. It would just be a guess, and I really don't want to do that on what it might be. And then, again, on the spreads, it's not space by space.

A lot of people -- and I know the burdens on you and the analytic community, but I'd really encourage you to -- very few people do it the way we do it. Most people do it space by space. Some people also include their estimate of if they have a base rent of X and they think they're going to be in percent rent, they include that in their spreads. We just -- it's all in and all out.

Mix matters because of these boxes I explained to you. And you know what, it will manifest itself in the cash flow. And the big cash flow growth story that we have going forward is sales growth and put sales growth and occupancy growth and SBV growth, getting that back to normal. That's the big story.

And then, lease -- so the spreads, I could do a bunch of boxes, the spreads could look not as good as you have looked historically, but the reality is my cash flow went up because that was vacant space, and it's already out of the spread calculation. So focus on cash flow growth is the bottom line.

Floris Van Dijkum -- Compass Point -- Analyst

Thanks, David. Appreciate it.

David Simon -- Chairman, Chief Executive Officer, and President

Sure.

Operator

Thank you. Our next question comes from Mike Mueller of JPMorgan. Your line is open.

Mike Mueller -- JPMorgan Chase & Co. -- Analyst

Hi. So Q2 looks like it was about $2.92 without the reversal. And if you look at the $10.75 guidance, it implies about a $2.50 a quarter average for the balance of the year. What was the level of number -- of income that won't recur in the back -- sorry, what was the level of income in 2Q that won't recur going forward?

Brian McDade -- Chief Financial Officer

Say that one more time, Michael. Can you go through that question again, please?

Mike Mueller -- JPMorgan Chase & Co. -- Analyst

Yeah. It was about $2.92 without --

David Simon -- Chairman, Chief Executive Officer, and President

Let me say it this way. The only thing that's not going to recur is the Klepierre deferred tax gain. I mean again, I can't tell you exactly what retail sales are going to be -- retailer sales. I can't tell you what our retail investments is going to be.

So there's -- but the only thing that's kind of nonrecurring -- we always have certain nonrecurring things every year, lease settlement income, sale of an income-producing property. These things always kind of ebb and flow. But the only thing that is not going to recur is the deferred tax. That's a onetime gain, clearly articulated in our press release of $0.32.

Mike Mueller -- JPMorgan Chase & Co. -- Analyst

What about prior period collections? Were there any in there that were significant?

David Simon -- Chairman, Chief Executive Officer, and President

No, they wouldn't come through the P&L either.

Brian McDade -- Chief Financial Officer

We don't know recovery, Michael.

Mike Mueller -- JPMorgan Chase & Co. -- Analyst

Got it. OK. Thank you.

Operator

Thank you. Our next question comes from Vince Tibone of Green Street. Your line is open.

Vince Tibone -- Green Street Advisors -- Analyst

Hi. Good afternoon. It seems clear that variable rent is growing in the portfolio. Like I'm just -- could you help frame how much this is shifting? Like for the leases you're negotiating today, what is the split contractual rent and the expected variable rent component? And how is that different from before the pandemic?

David Simon -- Chairman, Chief Executive Officer, and President

Well, look, I think the answer -- the simple way to say that, Vince, is that if we are willing to bet, in some cases, on the prospects of our property and our retailer and to the extent that they are cautious because of what they had to deal with as well, we're willing to accept a lower base rent in some cases if we get an artificial upside in other cases. And it's not anywhere near the majority. It's only dealing with certain cases, certain lease rollovers. And again, those lease rollovers happen.

Let's say, on average, we had 12% a year that rolls over. Now, last year, we had more only because we dealt with bankruptcies, which in theory when you're in a bankruptcy, all of your leases roll over because you have the right to reject leases. So we did a little bit more last year with some of the brands that went through bankruptcy because it was in the height of the pandemic. And they were cautious with their plan, but we made artificially low break points to make some of the income back up of the sales.

I would say going forward, we're pretty much back to the normal way to do it, which is trying to get the appropriate base rent and a natural break over that to generate percentage rent.

Vince Tibone -- Green Street Advisors -- Analyst

Got it.

David Simon -- Chairman, Chief Executive Officer, and President

And I will say this, we are still -- really important. We're still not -- we used to have big, big overage rent numbers from our outlet portfolio because of the foreign tourism. We're still not seeing that. Obviously, tourism dropped during the last couple of years, pre-pandemic, strong dollar relationships with countries, et cetera.

I won't go through all that stuff. Then we had the pandemic and the restriction. So one of the unique things that I think and I hope -- not knowing Delta or anything else, how it's all going to play out, but at some point in the not-too-distant future, we're going to see really good growth in our high-quality tourism centers that should manifest itself in additional percentage rent. We have yet to see that for primarily our outlet but also our Vegas properties as well.

We're like a forum shops.

Vince Tibone -- Green Street Advisors -- Analyst

Yeah. No, that's really helpful color. I mean it sounds like the lease structure is more temporary versus a secular shift toward more billable rent. So I appreciate the color there.

One more for me, maybe shifting gears. I mean you were fairly active in the mortgage market in recent months. Just was hoping you could provide some color on the recent trends there and just the ability for both you and other than the industry to get nonrecourse financing on high-quality malls today.

David Simon -- Chairman, Chief Executive Officer, and President

I'd say it's significantly improved but not easy. But not easy. Not a day at the beach. Retail is still -- look, I think a quarter like this, a couple of other quarters, pandemic in the rearview mirror.

I expect it to get back to normal, but it's still not -- that market is still difficult. The unique thing about us is we have the unsecured market for us, and we don't necessarily need the mortgage market. Sponsorship is really, really important, but it's dramatically improved, but it's not where it needs to be, where it should be and where it has been.

Vince Tibone -- Green Street Advisors -- Analyst

Yeah, that makes sense. If you had to draw maybe a line in the sand for sales per square foot or quality in terms of being able to get debt, is there anything you want to throw out there?

David Simon -- Chairman, Chief Executive Officer, and President

Well, I think we've done like the Pentagon cities of the world. We've done those in a really good, solid mall in a not sexy town is tougher, and it shouldn't be because the stability of that cash flow is frankly pretty good under our management and ownership. So -- but often -- like we did Domain, we had an old real estate parlance. We over-financed it.

The Pentagon cities of the world are fine. But if you have a traditional mall in a smaller market, even though it's really good, really solid, really stable, still is more difficult than it should be in my opinion.

Vince Tibone -- Green Street Advisors -- Analyst

Interesting. Well, thank you for the time.

David Simon -- Chairman, Chief Executive Officer, and President

Sure.

Operator

Thank you. Our next question comes from Ki Bin Kim of Truist. Your line is open.

Ki Bin Kim -- Truist Securities -- Analyst

Thanks. Good afternoon. Can you talk about the retailer investments, the $195 million of NOI? I would have thought you would have gotten that type of level of income toward like the fourth quarter just given the seasonality that's inherent in retail. So I'm just trying to think about that compared to your previous guidance of $260 million of EBITDA.

And I mean should we expect a similarly strong quarter in the fourth quarter? Or is there something unique that happened this time around?

David Simon -- Chairman, Chief Executive Officer, and President

Well, again, remember, this is all -- so you're 100% right in that like traditional retailers, a lot of it's back-end weighted. So we budget the same way. So we way outperformed our first six months. Hard to know exactly what it will be the next six months, but we budget the ramp-up, too, Ki Bin.

So we'll see whether we're on budget, above budget, below budget. I mean, it's -- but we budget that ramp-up as well.

Ki Bin Kim -- Truist Securities -- Analyst

OK. So there wasn't anything unique to this quarter that there was like a onetime item or anything like that?

David Simon -- Chairman, Chief Executive Officer, and President

Other than dramatic outperformance. That was what's unique about it.

Brian McDade -- Chief Financial Officer

Yeah, no onetime item, Ki Bin.

Ki Bin Kim -- Truist Securities -- Analyst

All right. And what are your latest thoughts on acquisitions? Is the bid-ask out there, how that compares to your kind of internal hurdles? Just any kind of color you can share on that.

David Simon -- Chairman, Chief Executive Officer, and President

Well, we really -- it's really -- there's no action. We've got -- I mean, I don't know if I should say this publicly, but it's a little late now. I mean, there's -- we're really not looking at anything that I know of. There's really no action.

So it's really hard for me to comment on it because there's just not much happening.

Ki Bin Kim -- Truist Securities -- Analyst

OK. Thank you.

David Simon -- Chairman, Chief Executive Officer, and President

Sure.

Operator

Thank you. Our next question comes from Linda Tsai of Jefferies. Your line is open.

Linda Tsai -- Jefferies -- Analyst

Hi. With the pandemic driving more buy online and pick up in store, how do you think retailers are considering their occupancy cost ratios? And is this a similar approach to the way the retailers you've invested in also approach occupancy cost ratios?

David Simon -- Chairman, Chief Executive Officer, and President

Well, I mean, that's like there's no standard answer other than to say we are -- if they buy online and pick up in store, that sale goes through our -- in our leases. That sale goes into our sales calculation, so it's not like it's excluded. So that's going to be part of our occupancy cost discussion.

Linda Tsai -- Jefferies -- Analyst

Got it. And then, any sense of how the comps have trended for your retailer investments over the past couple of months as maybe it relates to 2019 levels?

David Simon -- Chairman, Chief Executive Officer, and President

How the -- how our retail investments did to '19?

Linda Tsai -- Jefferies -- Analyst

Yeah. Like same store sale.

David Simon -- Chairman, Chief Executive Officer, and President

Yeah. I would say, generally above '19, except for JCPenney because they really were not in bankruptcy in '19. So we're still having the bankruptcy. They went into bankruptcy in 2020, early 2020.

So they had a lot less unaffected year. So we're still below '19 levels, but the rest of them are above '19 levels, pretty handsomely.

Linda Tsai -- Jefferies -- Analyst

Thanks.

Operator

Thank you. Our next question comes from Haendel St. Juste of Mizuho. Your line is open.

Haendel St. Juste -- Morgan Stanley -- Analyst

Hey. Good evening. So I wanted to come back to leasing for a second. Clearly, the industry has gone through some changes here in the last year, a few more shorter-term deals being done.

Percentage rent deals are a bit more prevalent. I guess I'm curious, as you look at the US mall business here over the next year or two, and more especially, in the period from '23 to '25, I'm thinking about how do you assess the likelihood that leases perhaps don't necessarily go back to being long-term with fixed rate, contractual rent bumps or maybe they become more like in Asia where they are more percentage rent and perhaps the leases are shorter in nature. And so, I guess, I'm curious if you're seeing what you're seeing, the tone of the conversation, what your thoughts are on there. And maybe some color on the average change in lease term here being signed in the portfolio the last couple of months.

David Simon -- Chairman, Chief Executive Officer, and President

Yeah. The term hasn't changed all that significantly. I would -- look, I would say that I don't think there's a big fundamental shift when you tend to go short term. It's because you can't agree on what you think the fair market value is.

And so, you kind of do a short-term deal. And again, there's some cautiousness from the retail community because of the pandemic. But I think assuming we get over this, I think it's -- we're going to see long-term deals. We also use short-term deals to our advantage because one is we may be testing a new concept.

One is we don't like the rest of the retailer's offering. So let's keep that retailer in there while we go find a better long-term tenant. There's a redevelopment. We want to move people around.

There's all sorts of strategic reasons to do short-term leasings. But I think that the simple straightforward answer is I don't think that the fundamental nature of our business has changed in terms of long-term leases. Listen, the retailers, if they're investing in the store, the better retailers want long-term leases because they want the right -- they want the store to look good. They want their personnel to be there.

They don't want to go through different personnel. Personnel at the store levels know when leases are short. And when leases are long, they're more committed to that company. So they're as motivated in many, many cases as we are to have long-term leases.

So I really don't think other than because of the nature of the pandemic that short-term leases are de facto the new industry. I just don't see it. No retailer is going to invest in a store without the long-term leases and all the better retailers all want a good physical plan, all want to put in their omnichannel capabilities, and they're not going to do that on a short-term lease.

Haendel St. Juste -- Morgan Stanley -- Analyst

Got you. And I appreciate those comments. I was just trying to understand that -- if there is any concern on your part by perhaps the lease expiration schedule that's building up here over the next couple of years with some of the shorter-term leases that have been signed in the last year or two adding on top of the normal lease expiration schedule, especially in that 2023 to '25 period in which you'll be anniversary-ing again, I think, some tougher comps from leases signed seven to 10 years ago.

David Simon -- Chairman, Chief Executive Officer, and President

I think, again, because of the quality of our portfolio, I'm not concerned about that. The reality is we may be negotiating from a position of better position because our properties look great. Sales are great. People -- a lot of the physical retail has dissipated in the markets where the action is.

So we've made those bets all the time that we're going to bet on the future. And if we don't -- we can't make a long-term deal, we make it short because we're betting on the future. And we've been right more than we've been wrong in those bets, but we're not always right. But that's the judgment that we have to make, and we make it reasonably well, in my opinion.

Haendel St. Juste -- Morgan Stanley -- Analyst

OK. Fair enough. And a follow-up, if I could, on the leasing spreads, understanding that that's been impacted by some of the leases you're doing with the lower percentage rent thresholds. I guess, I'm curious --

David Simon -- Chairman, Chief Executive Officer, and President

There's a little bit of that, but it's primarily the mix as I've stated. And again, it's not space by spreads.

Haendel St. Juste -- Morgan Stanley -- Analyst

Understood. Understood. I was just curious if you were able to provide a figure net of these newer leases that have been done here with the lower percentage rent thresholds.

David Simon -- Chairman, Chief Executive Officer, and President

I mean, we could -- let me just say this. We could paint an unbelievably good picture there, but we just put all the stuff in and the number is the number. So if we went space by space, if we did it over a certain period of time, if we -- there's all sorts of ways you could create the number we would want you to focus on. But it's just a number to us.

It's not what's driving our business.

Haendel St. Juste -- Morgan Stanley -- Analyst

All right. Thank you.

Operator

Thank you. Our next question comes from Greg McGinniss of Scotiabank. Your line is open.

Greg McGinniss -- Scotiabank -- Analyst

Hey, David. I think one of the key concerns for investors today is the potential longer-term drag from lower-quality assets, maybe at least not if they remain primarily retail. How are you thinking about investing or maybe not investing in the different quality bands within your portfolio to extract the most long-term value from those assets?

David Simon -- Chairman, Chief Executive Officer, and President

Really not much of an issue for us. It's a de minimis number. And we -- it's like any other company. If you have a profitable business, maybe you don't invest in it, if you don't think the growth is there and you milk the cash flow.

But if investors are concerned about that, my initial reaction is we should do a better job of explaining the quality of our portfolio and the depth and breadth of our business. So we'd encourage you to have them call us. We'd be more than happy to walk through the portfolio, answer any questions that they have on it. But I don't think, after that, they would come away with that being a real concern.

If that does happen, it's on the margin, $0.03, $0.05, something like that. So anybody that's concerned about that, please call me, Brian, Tom. Or you can set it up and we'll walk them through the asset base.

Greg McGinniss -- Scotiabank -- Analyst

All right. Appreciate that. Could you possibly touch on maybe how the operating performance differs between the higher end and the lower end? You used to give those NOI-weighted numbers, which were helpful, but just curious how that performance is going today.

David Simon -- Chairman, Chief Executive Officer, and President

I have them. They're pretty -- I have them somewhere. Yeah, let's see. Basically, occupancy and the EBITDA weighted is 93.2 to 91.8, OK? And the average base minimum rent is higher, obviously, but the spread is about the same and the total rent is about the same.

And sales, rolling 12, are pretty consistent on a percent basis. But the rolling 12, and you can't -- remember, rolling 12, we have three months of downtime, so it's kind of irrelevant. But the most important number is occupancy, and it's a little bit better.

Greg McGinniss -- Scotiabank -- Analyst

OK. So I guess really, what I'm trying to understand, I think what others are trying to understand is whether or not there's any need for a higher level of dispositions post pandemic or maybe just as the retail market evolves, right, how the portfolio is coming to --

David Simon -- Chairman, Chief Executive Officer, and President

We've got -- we've always been selling. We just sold the residential thing at like a low sub-4 cap rate. There are a couple of retail properties that we've earmarked for sale. Mark is not quite there.

We'll see what happens.

Greg McGinniss -- Scotiabank -- Analyst

Thank you.

David Simon -- Chairman, Chief Executive Officer, and President

All right. Thanks.

Operator

Thank you. Our next question comes from Juan Sanabria of BMO Capital Markets. Please go ahead.

Juan Sanabria -- BMO Capital Markets -- Analyst

Hi. Just wanted to hit on the guidance question again. It seems like you guys have outperformed expectations on the retail side and your investments, but the guidance implies a decel kind of ex the onetime from Klepierre. Should we just think of that as this conservatism built in for the second half given the volatility on the retail side? Or is there another reason for the sequential implied decline in the back half from a clean second quarter run rate number?

David Simon -- Chairman, Chief Executive Officer, and President

Well, look, I think all I can tell you is that we've beaten first quarter or second quarter. We hope to beat third, and we hope to beat the fourth. But we're in the midst of the third, and then we're in the midst of the fourth, and we'll see how it shakes out. But we feel -- as I mentioned to you earlier, we feel pretty good as to where we're positioned.

Juan Sanabria -- BMO Capital Markets -- Analyst

And just my follow-up is just in terms of mall operating hours. Are those back to pre-pandemic levels? And if not --

David Simon -- Chairman, Chief Executive Officer, and President

Yeah, that's a good question. They're inching back toward it more or less. We may be an hour short on -- excuse me, we may be an hour short on like Monday through Wednesday. But basically, Thursday, Friday, Saturday, we're pretty much back to normal.

Juan Sanabria -- BMO Capital Markets -- Analyst

And is that just a lack of availability of labor issue, or is it something else at this point?

David Simon -- Chairman, Chief Executive Officer, and President

No it's pretty back to normal. I think that in some cases, the retailers like it. It's something we're always monitoring. And there is -- it's a very interesting subject because some retailers love it, somewhat more hours to go back.

It gives me a headache when I think about all the different opinions. But it's pretty much back to normal, maybe an hour short in the early part of the week. But it's something -- the important point, it's something we monitor and manage daily, weekly in significant consultation with our retailers. And it has increased materially since the early days of reopening.

Juan Sanabria -- BMO Capital Markets -- Analyst

understood Thank you.

David Simon -- Chairman, Chief Executive Officer, and President

Thank you.

Operator

Thank you. At this time --

David Simon -- Chairman, Chief Executive Officer, and President

No, go ahead. I would -- go ahead, operator.

Operator

Yes. At this time, I would like to turn the call over to David Simon for closing remarks. Sir?

David Simon -- Chairman, Chief Executive Officer, and President

All right. Thank you. Have a great rest of your summer, and we'll talk soon. Thank you.

Operator

[Operator signoff]

Duration: 89 minutes

Call participants:

Tom Ward -- Senior Vice President, Investor Relations

David Simon -- Chairman, Chief Executive Officer, and President

Steve Sakwa -- Evercore ISI -- Analyst

Alexander Goldfarb -- Piper Sandler -- Analyst

Rich Hill -- Morgan Stanley -- Analyst

Michael Bilerman -- Citi -- Analyst

Caitlin Burrows -- Goldman Sachs -- Analyst

Brian McDade -- Chief Financial Officer

Derek Johnston -- Deutsche Bank -- Analyst

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

Floris Van Dijkum -- Compass Point -- Analyst

Mike Mueller -- JPMorgan Chase & Co. -- Analyst

Vince Tibone -- Green Street Advisors -- Analyst

Ki Bin Kim -- Truist Securities -- Analyst

Linda Tsai -- Jefferies -- Analyst

Haendel St. Juste -- Morgan Stanley -- Analyst

Greg McGinniss -- Scotiabank -- Analyst

Juan Sanabria -- BMO Capital Markets -- Analyst

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