Simon Property Group (SPG) Q3 2022 Earnings Call Transcript

Simon Property Group (SPG 1.04%)
Q3 2022 Earnings Call
Nov 01, 2022, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the Simon Property Group third-quarter 2022 earnings conference call. [Operator instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tom Ward. Thank you.

Mr. Ward, you may begin.

Tom Ward -- Senior Vice President, Investor Relations

Thank you, Erin, and thank you all for joining us this morning. Presenting on today's call is David Simon, chairman, chief executive officer and president. Also on the call are Brian McDade, chief financial officer; and Adam Reuille, chief accounting officer. A quick reminder that statements made during this call may be deemed forward-looking statements within the meaning of the safe harbor of the Private Securities Litigation Reform Act of 1995, 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 within the press release and the supplemental information in today's Form 8-K filing. Both the press release and the supplemental information are available on our IR website at investors.simon.com.

Our conference call this morning will be limited to one hour. For those who would like to participate in the question-and-answer session, we ask that you please respect our request to limit yourself to one question. I'm pleased to introduce David Simon.

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

Good morning, and I'm pleased to report our third quarter results. Third quarter funds from operations were $1.1 billion or $2.97 per share prior to a noncash unrealized loss of $0.04 and from a mark-to-market in fair value of publicly held securities. Let me walk you through some of the variances for the quarter compared to Q3 2021. Our domestic operations had a very good quarter.

We contributed $0.05 of growth driven by higher rental income. Our international operations posted strong results in the quarter and increased $0.05 despite the negative currency impact of $0.05, given the strength in the dollar. These positive contributions were partially offset by an $0.11 lower contribution from our other platform investments, which reflects costs associated with the JCPenney launch of new beauty brands, Reebok integration cost, and some softening of sales compared to 2021 from our 2 value-oriented brands. Domestic property net operating income increased 2.3% for the quarter and 4.4% for the first nine months of the year.

NOI growth for the quarter was negatively impacted by approximately 100 basis points due to the write-off of outstanding receivables from Regal theaters upon its bankruptcy filing. Portfolio NOI, which includes our international properties, at constant currency grew 3.2% for the quarter and 5.5% for the first nine months of the year. Occupancy ended third quarter, 94.5%, an increase of 170 basis points compared to the prior year and an increase of 60 basis points compared to the second quarter. TRG was 94.5%.

Average base minimum rent increased for the fourth quarter in a row and was $54.80, an increase of 1.7% year over year. Leasing momentum continued. We signed nearly 900 leases for more than 3 million square feet in the quarter and have signed over 3,100 leases for more than 10 million square feet through the first nine months of the year, and we continue to have a significant number of leases in our pipeline. The opening rate on our new leases has increased 10% since last year, roughly $6 per lease.

Reported retail sales momentum continued. Our shopper remains resilient. We reported another record in the third quarter of $749 per square foot for the malls and outlets, which was an increase of 14% year over year. Mills ended up at $677 per square foot, a 15% increase.

TRG was $1,080 per foot, a 25% increase. Our occupancy cost is at 12%, which is a level not seen since early 2015. We opened our 10th premium outlet in Japan and started construction on a significant expansion at Busan in South Korea. Our redevelopment pipeline is moving forward with more accretive projects.

Turning to our other platform. Our investments in the third quarter contributed $0.17 in FFO per share, as compared to $0.28 in the prior year period. After cash distributions received, we have approximately $475 million of net investment within our other platform investments, primarily in ABG and RGG. We expect to generate approximately $300 million in FFO from OPI.

That is, for those of you like math, is a 60% return on investment. We believe the value of our investments in OPI is over $2 billion. We recently announced our strategic partnership with Jamestown, a, global real estate investment and management firm. We see great opportunity with this investment to capitalize on the growing asset and investment management businesses.

The Jamestown team, our experienced, mixed-use operators, developers, property managers, and asset managers were pleased to expand our investment platform with this best-in-class operator, and we expect to grow their asset management business and accelerate our densification opportunities. We anticipate this accretive transaction to close prior to the end of this year. Turning to the balance sheet. We completed the refinancing of 16 property mortgages during the first 9 months of the year for a total of $1.8 billion at an average interest rate of 4.78%.

Our balance sheet is strong, with approximately $8.6 billion of liquidity. Net debt to EBITDA is at 5.7 times, and our fixed charge coverage is over 5 times. Today, we announced a 9.1% increase in our common stock dividend, and we will pay $1.80 per share for the fourth quarter. The dividend is payable on December 30.

Since May, we have purchased 1.8 million shares of our common stock at an average price of $98.57 per share. Given our current view for the remainder of the year, we are increasing our full year 2022 comparable FFO guidance from $11.70 to $11.77 per share to $11.83 per share to $11.88 per share, compared to $11.44 last year. So that's an increase of $0.13 at the bottom end of the range and $0.12 at the midpoint, and an increase of $0.26 at the midpoint compared to our initial guidance for the year. This guidance comes -- increase comes in the face of a strong U.S.

dollar, rising interest rates and inflationary pressures. Now just let me conclude by saying we had another impressive quarter. And before we get to questions, I would like to share some thoughts with you. For nearly 30 years as a public company, like many companies and industries, we have dealt with significant shifts within our industry.

In our case, we embrace these challenges and are better operators and more thoughtful and astute capital allocation allocators. Many have tried to kill off physical retail real estate, and in particular in closed malls. And I need not remind you when physical retail was closed in COVID, all the naysayers saying that physical retail was gone forever. However, brick and mortar is strong, brick-and-mortar retailer is strong, and e-commerce is flatlining.

And importantly, over this period of time, we have paid out $39 billion in dividends to shareholders as we have become stronger and more profitable. And why do I bring this up constantly? Well, because, hopefully, this will put in into the so-called negative mall narrative as you can't pay those dividends without a strong underlying business. Now operator, we're ready for questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question is from Steve Sakwa of Evercore ISI. Please go ahead.

Steve Sakwa -- Evercore ISI -- Analyst

Thanks. Good morning, David.

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

Good morning.

Steve Sakwa -- Evercore ISI -- Analyst

It's nice to see the occupancy continue to climb, and I know minimum base rents are up 1.7%. And you did mention in your comments that new lease rates were up 6% -- or $6, sorry, per foot. Can you just kind of provide any color on how leasing spreads are trending? And do you envision bringing that metric back perhaps early next year? Just any thoughts around that?

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

Yes. They are -- when you do comparable space, they're wildly positive.

Steve Sakwa -- Evercore ISI -- Analyst

Can you just provide any more color?

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

Well, I just -- we don't report spreads, but they're wildly positive when you focus on comparable space.

Operator

Our next question is from Alexander Goldfarb of Piper Sandler. Please go ahead.

Alexander Goldfarb -- Piper Sandler -- Analyst

Good morning. Good morning, out there, David. Hey, so, one, appreciate the continued disclosure of the different platforms, the core, the international Klepierre, and the brands. But my question is, just given continued inflation, obviously, energy growing more of a concern, can you just help us understand when we hear or see like retailer brand earning contribution is down or we read about different retailers having issues, how that translates, if at all, to their leasing? Because I think one of the questions that certainly comes up is, hey, retailers have a bad print.

Oh, that's negative for the landlords. But that doesn't seem to be the case of accepting maybe certain circumstances? So is there a general insight that you can help us understand that when the retailers have a bad quarter or a bad print, what the impact, if at all, that you see on the leasing side?

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

Sure. I would say this is something we monitor every single day in good times, bad times, mediocre times. We have yet to see any pullback in opening new stores or renewals, so there's been absolutely no impact. And you're always going to have a deal here or there that falls apart for all sorts of different reasons, but nothing based upon the macro conditions.

And I would tell you, Alex, that where they're seeing most of the pressure is in the e-commerce business, so the flight toward bricks and mortar is real. It's going to be sustained. And if they're in the retail business and they want to grow, they're going to open stores, and it's that simple because the returns on e-commerce just aren't quite what everybody talks about. And so I think you've seen that, and we've seen no slowdown whatsoever.

There's always going to be a deal here or there, but if they're a growing retailer, they have to put the money in bricks, highest return on investment. We understand it as well as anybody because we see the e-commerce business not just in the brands that we own with ABG, but also at Penney, and RGG. And it's been a difficult year for e-commerce, and bricks is where the action is.

Alexander Goldfarb -- Piper Sandler -- Analyst

Thank you.

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

Sure.

Operator

Our next question is from Derek Johnston of Deutsche Bank. Please go ahead.

Derek Johnston -- Deutsche Bank -- Analyst

Hi, everybody. Good morning. David, you've been doing this a long time.

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

Yeah. You're right about that. You're right about that.

Derek Johnston -- Deutsche Bank -- Analyst

Yes, sir. But how do you and the team feel headed into holiday? The consumer seems OK. But certainly, we're facing a slowdown high inflation, it's hitting interest rates. So I mean what really keeps you optimistic on your retail investments? And then also on the holiday overall and it being a solid season?

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

Well, look, you're always -- as any kind of CEO, you're always worried about the macro the macro environment. But I will tell you what gives me unbelievable confidence going into the next few years is the realization that -- what we have been saying is that don't underestimate physical retail. And it's kind of repetitive what I said earlier, but I'll just reinforce. We feel really good because physical retail is where the action is.

That's where the return on investment is. And so even though if we may slow down next year or even into the holiday season, I don't think the growth from our existing business is going to slow down because the demand for new deals and space is there. On the retail side, I -- we're trying to -- one is I don't want to make a huge deal out of it. Two is I want people to understand we've made an unbelievable investment.

So we're getting a 50% return on our net investment there. So if it goes to 70% or it goes to 50%, it's -- we are going to have volatility, but it's still a hell of an investment. Still be a great thing for us to do to not only understand but what it takes for retailers to be successful, but kind of where the future is. So there will be volatility in that, but our are better brands in there like Brooks Brothers, Lucky Jeans, Nautica really doing well.

I said to you on the last call, the lower income consumer is tightening their belt, and we do have a few brands that are affected by that. But even with that said, we have an unbelievable return on investment after tax from the earnings that those businesses throw off, and we're also making investments in that -- in those businesses. So I expect those investments to pay for future earnings growth, but the macro is concerning. But look, rates will have an impact.

It's probably the most direct impact that we'll have next year, but I still feel like demand and bricks and mortars where the action is going to be. Thank you.

Operator

Our next question is from Ronald Kamdem of Morgan Stanley. Please go ahead.

Ronald Kamdem -- Morgan Stanley -- Analyst

Hey, quick ones if I can sneak them in. The first is just on the occupancy gain is pretty impressive this quarter. I think you talked about maybe getting to precut occupancy 2023. Just how are you thinking about sort of the upside on occupancy in this portfolio at this point? The second one was just on the new disclosure in the supplemental is really helpful on the fixed versus variable.

Just any color or any comments as you're converting these variable leases to fix? How is that going? How much is left to go? What's the economic look like would be helpful. Thank you.

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

Sure. Let me -- I'll take the last one. I mean we expect to garner a lot of the percentage and overage rent to minimum rent as these leases roll, but they take time to roll over. And our average lease term is probably 7 years.

So it's not going to happen overnight, but it will happen over time. And remind me your first question. Occupancy. Oh, thank you.

So look, I think we're still on track to achieve our goal. I mean I -- frankly, I think we've done an unbelievable job in increasing our occupancy and increasing our cash flow since the shutdowns. So hopefully, in '23, we'll get back to pre-COVID levels.

Operator

Our next question is from Vince Tibone of Green Street. Just go ahead.

Vince Tibone -- Green Street Advisors -- Analyst

Hi. Good morning. Could you elaborate on how you expect to grow Jamestown's asset management business? And could you see that platform being acquisition vehicles or U.S. malls or Simon as the operating partner and how minority stake in the fund or investment?

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

It's really in the asset management business, so I don't see it buying -- I don't see buying malls in that platform under any circumstance, but they have a lot of institutional relationships as do we. And we think our working together, we'll be able to get separate account money to invest in kind of the opportunities that exist in real estate. They're great place-making real estate. So there'll be some of those opportunities.

They are also historically a big German fund operator. We expect them to continue that. And they look for opportunities both internationally and domestically, not in our core business, but in other forms of real estate. So I think between essentially kind of the historical separate account business, they have their premier fund, plus their German fund business, and then our adding to that platform in terms of owning 50% of the business, I think it will be attractive for institutional and retail investors, not retail real estate investors, but retail investors to potentially want to want to have Jamestown invest in real estate for them.

Vince Tibone -- Green Street Advisors -- Analyst

That's helpful color. Thank you.

Operator

Our next question is from Floris Van Dijkum of Compass Point. Please go ahead.

Floris Van Dijkum -- Compass Point Research and Trading -- Analyst

Thanks. David, that was heartening to hear you talk about the benefits of physical real estate over e-commerce. Your perspective is always much valued on those. You have better insight call on that than anybody in the industry.

And obviously, sales records, tenant sales records, leasing remains strong. I guess the question I have for you is, last quarter, I think you said your SNO pipeline was around 200 basis points. Is that still the case? Because you're signing new leases as well as opening stores. And then when do you think you're going to be able to achieve '19 levels of NOI on a same-store basis?

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

Well, look, I -- we're pushing the group to achieve that next year. OK? And Floris, I would say to you the biggest issue for us next year will be just getting our pipeline opened. And a lot of these are really good retailers with really good stores, and it takes time to build them and open them, so that will be our challenge. That will be our primary challenge to reach next year's -- to get back to '19 levels.

But I'm hopeful that we can do it, and we are pushing very hard to do that, which is, I think, pretty much ahead of schedule. It's a very fair and good question to ask that because I ask that every single day, so you and I are in sync. On the pipe?

Brian McDade -- Chief Financial Officer

Yes. Floris, it's Brian. We're still running about 200 basis points. We've added stuff, and we've taken stuff out as we opened, but we're running around 200 basis points consistently.

Floris Van Dijkum -- Compass Point Research and Trading -- Analyst

The malls and the outlets relatively unchanged?

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

Yes. Very consistent.

Floris Van Dijkum -- Compass Point Research and Trading -- Analyst

Thanks.

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

Sure.

Operator

Next question is from Craig Bilerman of Citi. Please go ahead. 

Nick Joseph -- Citi -- Analyst

Thanks. This is Nick Joseph here with Craig. Just on the Jamestown strategic partnership. What was the price and valuation for the deal? And then do you expect to move more into asset management? And if so, how large could that platform become?

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

The first part was, what, how big was the -- what? I'm not sure. What did you -- you broke up there. Can you repeat your question? Hello?

Nick Joseph -- Citi -- Analyst

For the Jamestown deal?

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

Yes. We're not disclosing the private company, and we both chose not to disclose it. So I think you asked the size of the deal. I'm sorry, Craig, but you're breaking up, so I'm guessing that's what you've asked.

They manage roughly $13 billion of assets across their various funds, and we are hopeful that over time, it's not just quantity, but there is quality involved, but there's no reason why we can't turn that into one of the bigger asset management players. With their expertise and our expertise combined, their reputation and our reputation combined, we think it will be an attractive platform to raise additional funds to invest in real estate. And I am hopeful that we can more than double it. I'm not going to put a number out there, but we didn't do it to be flat.

We did it because we expect to grow their assets under management. And given the existing size, we think we can grow it with time pretty significantly. Thank you.

Operator

Our next question is from Mike Mueller of JPMorgan. Please go ahead.

Mike Mueller -- JPMorgan Chase and Company -- Analyst

Yes. Hi. David, on your comment about wildly positive leasing spreads, I guess, how recent of a dynamic is that where you would I guess, describe them as being wildly positive?

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

I would say it really started at the beginning of this year. So look, we -- again, spreads ultimately, you see it in our minimum base rent growth, right? So -- but that's a -- that's everything, so it takes time. But if you -- and again, we want you to focus on cash flow growth as opposed to spreads. But if we were to track comparable space, i.e.

space leases to same space, it would be wildly positive, more than a $6 per foot that I mentioned. But we don't want you to like be obsessed with that either. So we're trying just to focus everyone on occupancy, minimum rent growth. We've outlined kind of where we get to variable income, where we get our contractual income.

It's all in the 8-K, and it all manifests itself in the NOI, and that's what we want you to focus on. But if you were to take the subset, which is space for space that's like it's pretty damn impressive, and our renewals are positive overall, and so that's changed. That -- you're right, over the last -- certainly in COVID, we got -- those renewals were tough that happened to show up during COVID. But I am happy to report renewals generally and new deals with ending space and new space is wildly positive, and that's manifesting itself in our comp NOI growth.

Then you add that to the pipeline, and that's why we feel good about next year. But unfortunately, the only negative next year will be getting stores open, getting this 200-basis-point pipe open and operate. And that takes time because the retailers that we're doing business with want to have the proper looking, they want to have a proper looking store, but we are very pleased to see the spread story change.

Mike Mueller -- JPMorgan Chase and Company -- Analyst

OK. Thanks, David.

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

Sure.

Operator

The next question is from Craig Schmidt of Bank of America. Please go ahead.

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

Great. Thank you. Will Simon's total investment and redevelopments and developments grow in 2023? Or might macro events like a potential recession cause a pause in new projects?

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

Yes, a good question, Craig. Right now, we think the -- if we do run into a recession, actually, from the standpoint of new projects, actually, we see a slight benefit. I may sound counterintuitive, but construction pricing for new projects is higher than what we want to see. So I'm hopeful that any slowdown will demonstrate -- will reduce cost of new construction, which we will then want to like move forward more aggressively.

So it's kind of counterintuitive. But again, I'm not looking forward. I don't want a recession. I hope there's not a recession.

But from the standpoint of redevelopment and new development, we actually counter -- the countercyclicality of cost of construction may actually be one of the side benefits that we can take advantage of.

Operator

Our next question is from Juan Sanabria of BMO Capital Markets. Please go ahead.

Juan Sanabria -- BMO Capital Markets -- Analyst

Hi. Good morning. I was just looking at the lease income disclosed in the supplemental for the consolidated properties, and it seems like that was up 60 basis points year over year, but your domestic NOI was up 2, 3. So I'm just -- and at the same time, it was -- at least income was down modestly sequentially.

So just talk to me for a little bit more of an explanation, I guess, or tie the loose ends as to the difference between the lease income and then the NOI reported. And is it cost controls or any other kind of unusual items that kind of drove that disparity between the lease income growth, and cash flows, and NOI?

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

Yes. I think you had less. We had a reduction in overage rent, right, would be one of the reasons.

Brian McDade -- Chief Financial Officer

Reduction in overage rent. Juan, don't forget, we mentioned that we took a charge for the legal write-off and to reduce that line item as well in the current quarter. And then we do have certainly cost containment, as you can see through the P&L. So all of that mixed together drove the levers to higher NOI growth.

Juan Sanabria -- BMO Capital Markets -- Analyst

Thank you.

Operator

The next question is from Greg McGinnis of Scotiabank. Please go ahead.

Greg McGinniss -- Scotiabank -- Analyst

Hey. Good morning. If you could just please touch on the reduction in overage rent again. And how much of that is driven by, one, reduced sales despite kind of tenant sales being up 14% year over year? And then otherwise, the conversion of pandemic leases back to fixed? And then maybe how much more of that kind of conversion we expect to see this year and into next year?

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

Well, we -- look, I mean strategy-wise, we always try to convert our overage rent into minimum rent. So you -- certainly, some reduction is associated with it. And then it usually -- '21, obviously, on sales was pretty strong. And in certain cases, percent rent where we -- it's not so much the overage, I'd say.

The percent of rent, we have some tenants that are just purely percent rent. They've had slower sales since '21, and that's showing up in the numbers. But we're still very pleased with the results, so I think those are kind of the big picture. We'll continue to reduce percent and overage rent as leases roll over.

On the other hand, our sales are rising, and the retailers focused on the higher-income consumer continue to spend, and that's good for us as it shows up in our cash flow.

Operator

The next question is from Michael Goldsmith of UBS. Please go ahead.

Michael Goldsmith -- UBS -- Analyst

Good morning. Thanks for taking my question. The domestic property NOI increased 2.3% in the quarter. The portfolio increased 3.2%.

That's a deceleration from last quarter, about 130, 140 basis points. But it sounds like there's a offset of 100 basis points from the Regal write-off, so maybe like a 30 to 40 basis point slowdown, so from the last quarter. So I guess the question is, is this like the right rate of portfolio NOI growth that we should expect kind of going forward? Or is there an expectation that things kind of continue to moderate from here?

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

Well, again, I wouldn't focus too much on quarter over quarter. There is volatility in our numbers because of overage rent and other factors, write-off like Regal, which is highly unusual that it would manifest itself in a material number, but it's important to point out. So look, I think you have to go back to the beginning of the year where we thought because '21 was a really banner year. And we were very conservative in our comp NOI estimate of 2%.

We're blowing through that number. We'll see what the fourth quarter brings. But it's -- our comp NOI growth is going to be really strong, and we continue to expect it to grow next year as well. So you've got to look at this over a two- or three-year period as opposed to quarter over quarter or even year over year, and we're making a tremendous amount of progress.

Remember, we were one of the few industries that were literally mandated the shutdown, and we're kind of back up and running and producing results. that are pre-pandemic, which is very good to see. And we'll expect to see comp NOI growth next year even in the face of a potential recession.

Michael Goldsmith -- UBS -- Analyst

Thank you very much. Good luck in the fourth quarter.

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

Thank you.

Operator

Our next question is from Linda Tsai of Jefferies. Please go ahead.

Linda Tsai -- Jefferies -- Analyst

Hi. Good morning.

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

Good morning.

Linda Tsai -- Jefferies -- Analyst

In terms of the write-off from Regal, is this for all your Regals? And are they rent reductions or rejected leases?

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

This is all of our Regal. We took a reserve against outstanding receivables.

Linda Tsai -- Jefferies -- Analyst

So what would happen with -- it's still going to operate as Regal? Or...

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

Well, we don't know. I mean they're in bankruptcy. We've -- my guess is they'll come out of bankruptcy as it's an ongoing business, but we have to wait and see. I'm sure they're going to restructure their debt.

We're experts in understanding bankruptcies. But I would imagine they'll reorg, and some of this may come back as it's prepetitioned. So in order for them to assume a lease, they have to clear up their pre-petition rent. So it gets very technical and complicated.

There's trade-offs. We'll just have to see how it goes through bankruptcy at this point. But I expect them to continue to operate. There could be a couple of theater closures in our portfolio, some of that will be fine.

And -- but we have yet to have a -- I think their debt and financing is, I think, just about approved or was approved, so it's going to go through a process that we have seen hundreds of times.

Linda Tsai -- Jefferies -- Analyst

Thanks.

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

Sure.

Operator

Our next question is from Ki Bin Kim of Truist Securities. Please go ahead.

Ki Bin Kim -- Truist Securities -- Analyst

Thanks, and good morning. I just want to go back to your comments about the lease spread is looking pretty positive this quarter. If you take a step back to look at -- and look at it from a kind of net economic basis, meaning regardless of is it minimum rent or income from percentage deals, as you're signing new deals, how does the net economic kind of it look like versus the comments you made about the lease spread looking positive? And what do you think that looks like going forward?

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

Ki Bin, can you repeat your question? You're breaking up a little bit.

Ki Bin Kim -- Truist Securities -- Analyst

Sure.

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

Yeah, it was really -- sorry.

Ki Bin Kim -- Truist Securities -- Analyst

So talking about the lease spreads -- yes, is this better?

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

Yeah. Thank you. Yes.

Ki Bin Kim -- Truist Securities -- Analyst

Yes. So just talking about the lease spreads, you guys mentioned that the spreads were pretty positive this quarter. I'm just curious about the net economic impact of the renewals or new leases. Meaning as you convert some of the percentage deals into fixed, is the net economic benefit you're getting as good as the comments made about spreads looking pretty positive?

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

Well, sure. I mean it's -- yes, because we obviously take into account our existing income stream from that space, which includes if we have overage or percent rent. And we're -- we look at it in totality, but we expect the total income stream to go up, and coding tends to be minimum rent increase and some assumption on overage. That's why rent spreads are kind of have whatever you want it to be.

OK? That's why we chose not to do it. So as an example, when we disclosed it historically, we included everything. We had minimum rent against minimum rent. We did not factor in overage.

Well, Taubman as an example, when they did their rent spreads, they included some assumption on overage. Well, when -- they disclosed it to their rent spreads. Is that beneficial or not beneficial? I mean the -- so to me, it's like, hey, it all shows up in cash flow, and so you see the cash flow, you see the NOI. So that's why you got to be very careful with rent spreads.

That's why they're more manufactured than they should be. They're -- in some cases, take assumptions and whether you want assumptions or not. We'd rather not have assumptions, so we just say here's the math. Minimum rent, you see our overage, you see the NOI, next question.

So -- but when we look at our -- when we go lease by lease, space by space, we're looking at the total income stream before and after the renewal, or in the case of a new tenant, to see whether we're going up or down or it's flat. And what I'm telling you is the trend is up, pretty straightforwardly.

Ki Bin Kim -- Truist Securities -- Analyst

OK. Great. And you guys mentioned that the lease percentage for your portfolio is about 200 basis points higher than that 94.5%. I'm just curious if you look at the forward leasing pipeline of new deals that you're looking at as we head into next year.

What does that picture look like compared to maybe a couple of quarters ago? And tied to that, I also noticed your 2023 lease expirations didn't really budge all that much quarter over quarter. Just any kind of preliminary thoughts on that role?

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

Yeah, there's good stuff out there. We're very close to it. Some of the larger accounts just takes time to do renewals, paper and all that stuff. So that's all moving, not real -- no real concerns there.

Go ahead, Brian.

Brian McDade -- Chief Financial Officer

And Ki Bin, you said about the 200 basis points. Let me just clarify. That is included within the current occupancy level. It is space -- it is leasing that has been done but hasn't commenced paying rent.

So that is next year -- effectively, will be partially next year's growth.

Ki Bin Kim -- Truist Securities -- Analyst

Thank you.

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

Thank you.

Operator

Thank you. Our last question is from Haendel St. Juste of Mizuho. Just go ahead.

Haendel St. Juste -- Mizuho Securities -- Analyst

Hey, there. Good morning.

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

Good morning.

Haendel St. Juste -- Mizuho Securities -- Analyst

I have a question, a follow-up for you on leasing. The occupancy is up 170 basis points year over year, but your lease income is only up about 60 basis points. My question is, when are we going to see the impact of that occupancy gain? Is that part of the cautious optimism embedded in your thinking for next year and your hopes for getting back to 2019 at levels? Or that'd be more of a full year '24 impact? Thanks.

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

Well, I think you've seen it, and you'll continue to see it. So our comp NOI growth the first nine months is...

Brian McDade -- Chief Financial Officer

4.4%.

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

4.4% So you've seen it for the first nine months, 4.4% growth. And then as Brian mentioned earlier and I have mentioned throughout the call is we had this other pipeline that's basically leases that will open and starting -- commencing rent in 2023. And that's why we're positive about the feeling that we'll continue to have future comp NOI growth for next year, even in the face of potential recessionary environment. OK?

Haendel St. Juste -- Mizuho Securities -- Analyst

Fair enough. And I guess as a follow-on to that. If we assume expenses have to go up given what's going on with inflation and operating expenses, personnel, is it your expectation that you can grow NOI between the fourth quarter year and middle of next year?

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

Absolutely. That's what I -- yes, we said we expect comp NOI growth next year. And obviously, that includes the expense side as well.

Haendel St. Juste -- Mizuho Securities -- Analyst

Right, right. I was thinking more than six months, but never mind. One more if I could squeeze in for Brian. Maybe it's a bit far off, but the $600 million unsecured maturing next June, bearing interest at 2 and 3 quarters, what's the early thinking there? And where do you think you could issue 10-year unsecured today?

Brian McDade -- Chief Financial Officer

Sure. Look, we actively monitor markets at all times, and you've seen us numerous times react ahead of maturities or at maturity, so we would expect to continue to keep our pulse on the finger of the market. Unsecured today is approximately 6% plus.

Haendel St. Juste -- Mizuho Securities -- Analyst

Great. Thank you.

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

All right. You sneaked in a few extra questions there. I think that was it on the question side. So thank you.

It's a change of pace in the morning, but we did it in hopes that you got home early not to trick or treat. And hopefully, you have a great Halloween. So thank you, and we'll talk to you soon.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Tom Ward -- Senior Vice President, Investor Relations

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

Steve Sakwa -- Evercore ISI -- Analyst

Alexander Goldfarb -- Piper Sandler -- Analyst

Derek Johnston -- Deutsche Bank -- Analyst

Ronald Kamdem -- Morgan Stanley -- Analyst

Vince Tibone -- Green Street Advisors -- Analyst

Floris Van Dijkum -- Compass Point Research and Trading -- Analyst

Brian McDade -- Chief Financial Officer

Nick Joseph -- Citi -- Analyst

Mike Mueller -- JPMorgan Chase and Company -- Analyst

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

Juan Sanabria -- BMO Capital Markets -- Analyst

Greg McGinniss -- Scotiabank -- Analyst

Michael Goldsmith -- UBS -- Analyst

Linda Tsai -- Jefferies -- Analyst

Ki Bin Kim -- Truist Securities -- Analyst

Haendel St. Juste -- Mizuho Securities -- Analyst

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