Simon Property Group (SPG) Q4 2023 Earnings Call Transcript

Simon Property Group (SPG -0.26%)
Q4 2023 Earnings Call
Feb 05, 2024, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the Simon Property Group fourth-quarter and full-year 2023 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Tom Ward, senior vice president, investor relations. Thank you. Tom, you may begin.

Tom Ward -- Senior Vice President, Investor Relations

Thank you, Paul, and thank you all for joining us this evening. Presenting on today's call are David Simon, chairman, chief executive officer and president; and Brian McDade, chief financial 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 that the 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 these forward-looking statements.

Please note that this call includes information that may be accurate only as of today's date. Reconciliation 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 evening 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 evening. Thanks, Tom. Before turning to the results, I would like to provide some perspective on our company as we celebrated our 30th anniversary as a public company mid-December of last year. We have grown our company into a global leader in premier shopping, dining, entertainment, and mixed-use destinations, managing through and, in some cases, very turbulent times.

Over the last three decades, from our base of 115 properties in 1993, we have acquired approximately 300 properties, developed more than 50, and disposed of approximately 250, resulting in our current domestic portfolio of about -- of 215 assets. We expanded globally and today have 35 international outlets, including world-renowned outlets in Asia. And our portfolio is differentiated by product type, geography, enclosed and open-air centers located in large and dense catchment areas. Our portfolio is supported by the industry's strongest balance sheet and a top management team.

We are the largest landlord to the world's most important retailers and not by accident. Our diversified tenant base has solid credit, and our mix is always changing and adapting, best illustrated by the fact that, compared to 30 years ago, only one retailer is still in our current top tenants. Our team's hard work has resulted in industry-leading results, including some of the following: Our annual revenue increased 400 and -- from 424 million to nearly 5.7 billion. Annual FFO generate -- our annual FFO generation increased 30 times from approximately 150 million to nearly 4.7 billion, a 12% CAGR. Total market capitalization has increased from 3 billion to 90 billion.

We have paid over $42 billion in dividends to shareholders. We have assets in our portfolio that have been in business for more than 60 years. Those assets are still growing today with many generating 100 million in NOI. These assets are in great locations, have a loyal and large customer base that are where the retailers want to be.

No other asset type has the longevity, including the NOI generation and embedded future growth that these assets have. Yes, they change; yes, they evolve; yes, they adapt, but yes, they also grow. Our collection of assets cannot be replicated, and there are hidden -- always hidden opportunities within them -- within them. I want to thank the entire Simon team who have contributed to 30 years of success as a public company. And now, let me turn to our fourth-quarter '23 results.

We generated approximately 4.7 billion dollars in funds from operation in 2023, or $12.51 per share, and returned $2.9 billion to shareholders in dividends and share repurchases. For the quarter, FFO was 1.38 billion, or $3.69 per share, compared to 1.27 billion, or $3.40 per share. Let me walk you through some of the highlights for this quarter compared to Q4 of 2022. Domestic operations had a terrific performance this quarter and contributed $0.28 of growth, primarily driven by higher rental income with lower operating expenses.

Gains from investment activity in the fourth quarter were approximately $0.07 higher in a year-over-year comparison. Other platform investments at $0.03 lower contribution compared to last year. FFO from our real estate business was $3.23 per share in the fourth quarter, compared to $2.97 from last year. That's 8.7% growth and $11.78 per share for '23, compared to $11.39 last year. Domestic property NOI increased 7.3% year over year for the quarter and 4.8% for the year.

Continued leasing momentum, resilient consumer spending, operational excellence deliver results for the year, exceeding our initial expectations. Our NOI ended the year higher than 2019 pre-pandemic levels. Portfolio NOI, which includes our international properties at constant currency, grew 7.2% for the quarter and 4.9% for the year. Mall and outlet occupancy at the end of the quarter, fourth quarter, was 95.8%, an increase of 90 basis points compared to last year.

The mills' occupancy was 97.8. Occupancy is above year-end 2019 levels for all of our platforms. Average base minimum rent for malls and outlet increased 3.1% year over year, and the mills rent increased 4.3%. We signed more than 960 leases for approximately 3.4 million square feet.

in the fourth quarter. For the year, we signed over 4,500 leases representing more than 18 million square feet. Approximately 30% of our leasing activity for the year are new deals with going-in rents of approximately $74 per square foot. And renewals had going-in rents of approximately $65 per square foot.

Leasing momentum for the last couple of years continues into 2024. Reported retail -- retailer sales per square foot in the quarter was $743 for malls and outlets combined and 677 for the mills. During the quarter, we sold a portion of our interest in ABG for gross proceeds of $300 million in cash and reported pre-tax and after-tax gains of $157 million and $118 million, respectively. We opened our 11th outlet in Europe last year. Construction continues on two outlets, yes, one in Tulsa, Oklahoma; and yes, one in Jakarta, Indonesia.

We completed 13 significant redevelopments and will complete other major development projects this year. In addition, we expect to begin construction this year on five to six mixed-use projects representing around $800 million in spend from Orange County to Ann Arbor to Boston to Seattle to Roosevelt Field or some of the ones that are planning to start this year. And we expect to fund these redevelopments and mixed-use projects with our internally generated cash flow of over $1.5 billion after dividend payments. During 2023, we completed $12 billion in financing activities, including three senior note offerings for approximately $3.1 billion including the Klépierre exchangeable offering. We recast and upsized our primary revolver credit facility to $5 billion and completed $4 billion of secured loan refinancings and extensions.

Our rated -- A-rated balance sheet is as strong as ever. We have approximately $11 billion of liquidity. During 2023. we paid, as I mentioned earlier, $2.8 billion in common stock dividends.

We repurchased 1.3 billion shares of our common stock at an average price of just over $110 per share in 2023. And today, we announced our dividend of $1.95 per share for the first quarter, a year-over-year increase of 8.3%. The dividend is payable on March 29th of 2024. Now, 20 -- moving on to 2024.

Our FFO guidance is $11.85 to $12.10 per share. Our guidance reflects the following assumptions: domestic property NOI growth of at least 3%; increased net interest expense compared to 2023 of approximately $0.25 to $0.30 per share, reflecting current market interest rates on both fixed and variable debt assumptions; and cash balances contribution from other property -- other platform investments of approximately $0.10 to $0.15 per share; no significant acquisition or disposition activity; and our current diluted share count of approximately 374 million shares. So, with that said, it's safe to say we're excited to enter year 31 as a public company. Thank you for your time, and we're ready for Q&A.

Questions & Answers:

Operator

Thank you. We will now be conducting a question-and-answer session. [Operator instructions] Our first question was from Steve Sakwa with Evercore ISI. Please proceed with your question.

Steve Sakwa -- Evercore ISI -- Analyst

Thanks. Good evening, David. I was just wondering if you could maybe talk a little bit about kind of the leasing pipeline and where things stand today versus maybe a year ago. And -- and, you know, what sort of conversations are you having with the tenants, and maybe how was the pricing dynamic change given that you're now kind of 95% leased and pretty full in the portfolio?

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

Well, I mean, Steve, we're always adjusting our mix. We're always trying to. So, even though we're 96% thereabouts, we're always looking to improve our -- you know, our retailer mix, and you know, obviously that's been beneficial to our NOI growth. I would say, just generically, you know, and obviously I spent a lot of time on my cellphone leasing, and with my team on leasing, demand remains very strong.

And there is a real interest by all sorts of retailers and, you know, people that populate our shopping centers to be part of what we're doing. So, I think as you probably saw, our new deals or $74 a foot thereabouts, our renewals are $65 a foot, our expiring leases this year in the 56, 57 range. So, you know, we're seeing generally positive spreads. Supply and demand is in our favor. Historically low supply in big properties across the -- across the country.

I mean, there used to be 40 million square feet of retail real estate built every year, now there's essentially, you know, less than a few million here and there. So -- and then, there's been obsolescence too, which makes the supply shrink as well. So -- and, then there's just great new retailers that we're very excited to do business with. I was on the West Coast seeing some of them. The importance of bricks and mortar has never been higher.

And, you know, the cost of -- all of the things that we said about -- you know, don't -- don't get me wrong e-commerce is critically important, but -- but all of this stuff about e-commerce, cost of customer acquisition, returns, you know, stickiness, etc., all is -- continues to be a challenge. If you've looked at the marketplaces, that pure online, they've run into problems. So, you're really -- they really need to be connected to a bricks and mortar for -- for, you know, survivability. So, all of those -- all of those things are pointing to a positive picture. It's a function of execution; a function of, you know, being first; a function of continuing to improve our properties, you know, which we're very focused about.

But, you know, even though we've bounced back and had a couple of really good years in terms of lease up, you know, from the depths of the pandemic, we're not finished. And retail demand, you know, continues and it's strong, and it's across the board. I mean it is not one category, one retailer, but -- you know, but pretty much across the board.

Steve Sakwa -- Evercore ISI -- Analyst

Thanks. That's it.

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

Thank you, Steve.

Operator

Thank you. Our next question is from Caitlin Burrows with Goldman Sachs. Please proceed with your question.

Caitlin Burrows -- Goldman Sachs -- Analyst

Hi, good evening, everyone. David, could you give us some more detail on the ABG sale that you referenced, maybe how much you still own, how much you think you're remaining OPI could be worth, and whether you plan to monetize more in '24, or maybe what could influence that decision?

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

Sure. Well, let me just -- we sold about 2% of our ABG stock. So, we essentially went from just under 12 to just under 10. And, you know, we'll continue to look to monetize these investments.

They've been, by and large, very good investments across, you know, not just the big ones, but the smaller ones as well. You know, obviously, there's a number of them that are synergistic to us, but you know, we have a strict adherence to creating value. And if we think we can deploy that capital into kind of what I'd call the mothership and -- and get better growth from that, then that's where our No. 1 priority will be.

So, it wouldn't surprise me, Caitlin, for us to continue to, you know, monetize. Obviously, the -- you know, some of these are, you know, bigger value -- bigger investments. So, it's not, you know -- not easy to, you know, to do it in one big swoop. But we're very focused on portfolio management of those assets. And if we can monetize them, are we going to get a better return, plowing it back into our core business.

Caitlin Burrows -- Goldman Sachs -- Analyst

Got it. Thanks.

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

Yeah, thank you.

Operator

Our next question is from Jeff Spector with Bank of America. Please proceed with your question.

Jeff Spector -- Bank of America Merrill Lynch -- Analyst

Great. Thank you. And first, congratulations on the anniversary. David, there's a lot -- a lot of initiatives.

So, as you think about the next five years, I know it's probably a difficult question, but is there one or two key initiatives that you're most excited about as you think about the next five years?

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

Well, you know, look, I'd say a couple of things. On the property level, there's no question that all of the mixed-use stuff that we're bringing in, plus the redevelopment of our department store boxes, are probably the most, you know, interesting and exciting things that we're doing on the ground well. And so, that would certainly be number one. Number two is we're very excited about growing our outlet business in Southeast Asia.

It's an incredibly -- it's an incredible -- incredibly robust market, young -- a young population and a growing -- and I'm not -- when I say Southeast Asia, I'm not -- you know, like in Jakarta, places like that where, you know, it's not China; it's -- it's places like that where we -- we see kind of what we can do in Japan and in Korea on the outlet side. Jeff, you're -- you -- you probably know that better than anybody based on your -- your -- your -- your previous history with -- with -- you know, in terms of that. So, we -- that's very exciting. I'd also say we still are in the pursuit of bringing technology to our loyal consumers that allow them to enhance and -- their shopping experience with us. So, we've got a lot of initiatives on the marketing, loyalty. Now, Simon Search is a great example where, you know, our consumer, either in-property or pre-visit, can search our -- our -- our -- our tenant base for what -- if they're looking for a black dress, where in the center can I buy it, at what retailer.

Obviously, that ties into the marketplace we're building with premium outlets. There'll be some news there this year on that front. So, that whole -- you know, that whole echo -- that whole system about customer interaction, reinforcing their shopping behavior, rewarding loyalty, expediting their trip, and making it more useful, you know, is -- is a big focus. And then -- and then -- and then, as important, I think this is number four, really, is just we've got to do a great job of continuing to evolve our retailer mix. The -- the exciting thing is, you know, there are more and more entrepreneurs, there are more and more exciting retailers that are coming up with great concepts, proving them out and then -- and then realizing that, you know, our centers are a good place for them to do business. So, those to the -- those are the ones that come to mind, but I'm certain there'll be ones that I haven't even thought of.

Jeff Spector -- Bank of America Merrill Lynch -- Analyst

Very helpful. Thank you.

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

Thank you, Jeff.

Operator

Our next question is from Alexander Goldfarb with Piper Sandler. Please proceed with your question.

Alexander Goldfarb -- Piper Sandler -- Analyst

Hey, good evening. Good evening out there, David . So, I think at the opening, you mentioned that NOI is now exceeding pre-pandemic, the dividend is within less than 10% of pre-pandemic. And sort of, you know, thinking about Jeff's and Steve's questions on reinvestment, as you think about getting back to that pre-pandemic dividend level, given the investment opportunities, especially lack of supply, growing demand, you know, people are once again really engaged in physical retail, does that change your trajectory as you think about getting the dividend back to pre-pandemic? Meaning are there better investment opportunities with that capital, or is the delta really a function of rising interest rates that's, you know -- meaning that the surpassing pre-pandemic NOI versus the dividend is really Just a function of the higher interest expense now?

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

Well, I mean, Alex, look, our yield is ridiculously hot, OK? So, that's really -- I mean we could financially pay 2 10 tomorrow, right? So, we have 1.5 billion of free cash flow after our dividends. So, it's nothing to do with financial wherewithal. You know, I mean we'd like -- we would like -- you know, we don't like trading at this higher yield. So -- so, I think -- I think that's kind of how we look at it. We still think as we have these, you know, additional capital events, we still are, you know, anxious to continue to -- to -- to buy our stock back.

And I -- and again, when I look at either the S&P 500, I look at the REIT peer group, I look at, you know, what the strip center rates are, you know, our yield is plenty high for investors. So, I tell all of my investors I could pay 2 10 tomorrow evening, OK, per quarter without -- without a blink. But our yield is too high. And, you know, it'll be there before you know it.

But we would like to trade a little lower yield because, you know, we think -- you know, you -- certainly, if you look at it on that basis, you know, our yield is -- is higher than it should be. I mean the S&P is under 2%. Our REIT strip centers, Tom, are in the 4s. You know, we're close to seven, right, 6.5, seven?

Tom Ward -- Senior Vice President, Investor Relations

Yeah.

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

So, I mean, you know, Alex, you should be pounding the table.

Alexander Goldfarb -- Piper Sandler -- Analyst

Yes, unfortunately, I'm a nonpaying customer. The real customers are the ones listening to the call. We're just asking the questions.

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

No, I'm kidding. So, by the way, we are -- just so you know, we like -- you're, you know, welcome out there. We are west of the Hudson, but we're not going to tell you exactly where we are, OK? Somewhere in Indiana tonight. We may not be in Indiana tonight, but we are west of the Hudson.

Alexander Goldfarb -- Piper Sandler -- Analyst

I assume you'll be in Las Vegas this Sunday.

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

Well, I can't tell you my schedule.

Alexander Goldfarb -- Piper Sandler -- Analyst

Thank you.

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

Sure.

Operator

Our next question is from Michael Goldsmith with UBS. Please proceed with your question.

Michael Goldsmith -- UBS -- Analyst

Good afternoon. Thanks a lot for taking my question. David, base minimum rents are up healthily in the low single-digit range year over year, while your tenant sales per square foot are down slightly. So, can you just talk a little bit about these dynamics? Is that a reflection of your rents kind of catching up to some of the strength the tenants have experienced before their sales have started to come down? And just how long are these dynamics kind of sustainable like this? Thank you.

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

Sure, a good question. So, I will say this, I think the rent -- going into rents, renewals, or new leases are very much sustainable. If you look at our occupancy costs, they're still, you know, at the low end of our historical range and we're at 12.6, and you know, we have run up to 14-plus percent before. And I would also use -- I would also caution, you know -- report -- you know, these are the sales that our tenants are reporting to us, but they are somewhat affected by, you know, returns they get and so on.

We actually think our sales per foot are higher than this. Some cases, they have the ability to -- to offset returns, and most cases, they don't. So, I just put that out there. So, I wouldn't -- you know, and I mentioned this maybe two or three years ago, probably certainly pre-pandemic. But we reported, I know the market likes it, we actually think our sales are higher that come from our properties and then there's somewhat affected by returns.

And we think some of -- a lot of those returns are internet sales returns. So, they don't even come from our properties. And so, again, when we look at it, we feel like supply and demand, low occupancy cost, high retail sales, and just overall demand will be able to generate kind of the -- the -- the new leasing and renewal spreads that -- that we've seen over the last couple of years.

Michael Goldsmith -- UBS -- Analyst

Thank you very much.

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

Sure.

Operator

Thank you. Our next question is from Floris van Dijkum with Compass Point. Please proceed with your question. Floris, I guess your line's on mute.

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

Floris? Looks like we lost Floris. Why don't we go forward on the call? Thank you.

Operator

Our next question is from Craig Mailman with Citigroup. Please proceed with your question.

Craig Mailman -- Citi -- Analyst

Hey, guys. Just -- sorry. Just going back to maybe the reinvestment theme here. You know, you guys have plenty of cash after the dividend.

And I'm just kind of curious, at this point, what is the level of anchor box reinvestment that you guys need to do just given what may be vacant today? And, you know, after you guys were spared kind of some of the recent Macy's closings, but just as you look at the portfolio today, kind of what do you think over the next two or three years you guys can ultimately get back from your tenant? And just, you know, you've talked a lot about how the leasing environment is good. Just what's the -- the outlook for retaining those boxes today? What's the -- the targeted kind of make-up there? And is luxury still doing enough to be able to be the primary kind of backfill option?

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

Well, on the -- on the -- on the -- on -- Craig, on the -- on the department store boxes, I do not have it on top of my head, but the ones we own, we basically are -- don't have a ton of work to do. We have a handful of boxes that we own that -- that are in, you know, process like, for instance -- and I mentioned Brea just briefly on the call, you know, we're -- that was a former Sears store. We tore it down and it's in development now -- under construction now. So, the actual stores that we own are not many, probably under 10 at this point that are either currently under construction or in process. So, you know, very small amount of, you know, kind of, you know -- less of an opportunity than you think.

The ones that we transform, co-own -- still owns some boxes. And -- and so, so does [Inaudible] so, you know, we'll -- in our property. So, we'll see how that evolves. I mean, eventually, some of those could be opportunities for us to buy and redevelop.

We haven't made deals on those just because bid and the ask has been, you know, too great. But we -- we find -- and I don't -- I don't think luxury is really going to be the dominant theme on a lot of these mixed-use -- or I'm sorry, on these, you know, boxes. I think a lot of it will be -- continue to be the mixed-use development that we're doing. And, you know, and obviously opening up -- if it's an enclosed mall, opening the center up with restaurants and entertainment and so on has worked very well. So, we have -- we have a number under construction or about to be under construction.

But we don't really have that existing pipe that -- until we make more deals to buy some of the boxes back. It's not as big as you might think. and it's only a handful. Now, Macy's, you know, right there, they announced some store closings, none of which are ours.

So, you know, we'll -- we're always very focused on knowing exactly where we might be at risk. Though -- and I would point out, very importantly, when Sears went out of business, the whole market said, "How are you going to survive, you know, Sear's is going out of business?" You know, the 800 department stores at that time. I think, frankly, they're down to, believe it or not, operating maybe five, six, seven, eight. I think we actually have the most between us and the Italian portfolio, but how are you going to survive it? The fact of the matter is it was a nonevent to the mall customer. And if anything, as we've gotten those boxes back, we've made the center better.

So, as we look -- we don't look at box, you know -- the changes in box as a concern. We view it really more aggressively and progressively as something that will enhance the properties portfolio. And -- and the -- and the assets that we were worried about that couldn't survive that basically don't exist in our portfolio anymore. So, if you ask me that question 10 years ago, I might have a different answer.

Craig Mailman -- Citi -- Analyst

Great. Thank you.

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

Craig, I hope you get better prior to the Citi conference. I'm sure you will, but you sound like you've lost your voice.

Craig Mailman -- Citi -- Analyst

Yeah, I'm hoping to be on the mend by then. Thanks, David.

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

All right. You will.

Operator

Our next question is from Vince Tibone with Green Street. Please proceed with your question.

Vince Tibone -- Green Street Advisors -- Analyst

Hi, good evening. Could you help me better understand how much incremental FFO we should expect in '24 from development or redevelopment projects that stabilized either later in '23 or slated to be finished in '24? Just any color to help us better understand the timing of incremental NOI and FFO from, you know, all the development activities would be -- would be helpful.

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

Yeah, in fact, it's -- it's interesting you -- you actually take us -- I think, in '24, we're taking a step back because I'll just give you a -- you know, a trivial example. I mentioned that for the third time. But you know, we have a whole wing that's connected to the former Sears department store that we're redeveloping. We'll have some outdoor shops. We're building, you know, a Dick's Sporting Goods.

We have a Life Time Fitness resort and then we'll do roughly 300 -- 350 apartments or so. But that wing leading to Sears, we've had to delease it to ultimately put in -- I'm not sure if I'm allowed to say it, but I'll say it anyway, Zara and Uniqlo, and they won't open until end of '24, best case. So, that's, by and large all, of this stuff in the U.K. that we've listed, and I don't -- I don't believe is in there.

If it is, it just -- it'll be in there shortly. None of that is -- really affect -- it really gets in '24. You know, we do have Tulsa opening in late summer. That'll have a marginal impact. Leasing there is going well.

But with all the redeveloping, you know, this is really more of a '25, '26 story. And, you know, the one that will see the benefit of this year, and I don't have a number handy, is Phipps, you know, which we opened you know, in '23. You know, that's -- that's kind of the one that I would see most, you know -- most meaningful of it, but most of the redevelopment is a '25, '26 story.

Vince Tibone -- Green Street Advisors -- Analyst

No, that's really helpful. I mean is there any like -- for just in terms of, you know the -- I guess the 1.3 billion that's active today, plus the 800 million you're going to start, I mean what's a fair assumption for '25, '26 in terms of level of maybe spend stabilizing? I mean at the lowest, how we model it. Like, is 500 million stabilizing annually, you know, let's call it 7%, 8% yield, a fair assumption? Or -- and that's what I'm trying to get at, like, how quickly [Inaudible]

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

Yeah, no, I appreciate -- I appreciate that. If you don't include what I saw ground-up, new development, I would say probably about between 600 million and 800 million a year. And our goal would hopefully be, you know, to bring that in at north of eight. Obviously, if -- if it is multifamily, you can still create value at a lower -- at a lower yield than that. And in some cases, you know, we're building at a lower yield than that, like for instance, Brea's apartments and the ones that we're building at the former Northgate Mall.

We're -- we're basically about to start construction there, you know, will be sub-eight. So, it may -- it may -- you know, may round down that 8%. But if you're talking kind of everything else, we would hope to be north of that.

Vince Tibone -- Green Street Advisors -- Analyst

Thank you. That's all really helpful color. Appreciate it.

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

Sure.

Operator

Our next question is from Ron Kamden with Morgan Stanley. Please proceed with your question.

Ronald Kamdem -- Morgan Stanley -- Analyst

Great. Just a two-parter really quickly. Starting with the core NOI, just in '24, can you just touch on the tourist centers and how much recovery there is and how much upside is providing them to '24, as well as the variable to fix conversion? Just trying to get a sense of how much of a tailwind that is to the core. And then, on the sort of other platform investment, maybe could you just touch on what seasonality should we be thinking about between sort of the first part of the year and 4Q? Thanks so much.

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

Sure. So -- and Brian, chime in here. I'll just give you some thoughts off the top of my head, and then Brian, hopefully, will correct me. So, I would say, we saw in '23 a really decent bounce-back from the tourist centers.

Now, I gave you a great example, so. And I was just happy to look at this for -- you know, I must have been probably doing my job, but -- but I noticed in Q4, Q4 as an example of the bounce-back, Woodbury Q4 sales were around $350 million, OK, which to me is a real good indicator of bounce-back and, obviously, the highest fourth-quarter sales we've had there in -- you know, in quite some time. So, I'd say, generally, we're seeing a – a -- a really good bounce-back in the tourist centers. You know, I don't think we're -- you know, the one area that -- you know, the US overall and obviously we'll, you know -- we'll -- we'll -- will, you know, have an impact on us. I do not think we'll see the Chinese -- we do not expect the Chinese to come back, you know, the way they have -- had before pandemic.

And -- and our -- our -- and just our tourist centers did outpace our sales for the portfolio for '23 on average. So, good -- good bounce-back across the board. And then, I would say on your -- on your variable rent, we continue to see that as a lower percent of revenues, both you know -- the vast majority, I think we -- we increased our -- you know, the way to think about it -- that's interesting is and again, hopefully, Brian won't need to correct me, but Brian's available to correct me. Our domestic operations had $0.28 of improvement Q over Q, that's $0.28 And within that $0.28, our variable income went down. So, I think that gives you a kind of a leading barometer.

We're still working that way down, and we're -- we're getting that into kind of our -- our base rent. So -- and then your final, on OPI, lost Q1; relatively flat Q2, Q3; and then, most of it in Q4. Q2 is a little better than Q3 usually, but on the margin, and it's only -- we're only projecting this year $0.10 to $0.15. Brian, how did I do?

Brian McDade -- Chief Financial Officer

You got it.

Ronald Kamdem -- Morgan Stanley -- Analyst

Thanks so much.

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

Sure. Thanks, Ron.

Operator

Thank you. Our next question is from Greg McGinnis with Scotiabank. Please proceed with your question.

Greg McGinnis -- Scotiabank -- Analyst

Hey, good evening, David. I just want to dig into the guidance a bit, in that OPI that you just cited, in particular. Is it fair to assume that the $0.10 to $0.15 includes gains or monetization similar to last year, or operations expected to improve from the minus $0.02 contribution to FFO in 2023?

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

Yeah, thanks -- thank you for that question. And the answer, no, that's pure operations. And no, you know, one time, or you know, sale gains or any of that in there. And yeah, I mean just -- just by -- I mean we had a -- you know, we had -- we had a tough '23 in OPI.

You know, we saw -- we didn't meet our -- both our budgeted expectations and our -- you know, our expectations kind of midyear when we recalibrated it. The team in OPI, you know -- again, we're partners with -- so, it's not just us, you know. We're partners -- our making significant efforts within their own business to improve performance. And again, the overriding thing was, you know, the -- and you know, we should be sensitive to this across the board.

The overriding theme was the lower income consumer still -- and, you know, with inflation and embedded, even though inflation has subsided, they're still dealing with things that cost a lot more money than they used to. And the -- the good news is their income is increasing, but it's still not in a position that they have -- the discretionary income that they need and they deserve. And, you know, we need to figure that out as a country.

Greg McGinnis -- Scotiabank -- Analyst

So, just to clarify --

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

So, no -- so, no -- yeah, so I hopefully I answered -- so, no one-time gains. Hopefully, we're being conservative and that's kind of where the numbers are. And, you know, just to take a step back, we're kind of getting OPI in this level where it was pretty extraordinary year of '21, '22. If you go back in time, this is kind of where the number was, nobody cared.

You know, we had -- we really outpaced ourselves and had extraordinary '21 and '22. And I think now we're kind of getting back to more -- you know, a kind of a more stabilized number.

Greg McGinnis -- Scotiabank -- Analyst

Mm hmm. So, just to clarify, so there's going to be some improvements in operations, I guess, that are going to be kind of driving this year-over-year growth. But what do you think that implies in terms of the operational standpoint and the customer for your other tenants in the portfolio? How are those retailers performing? And are they going to be able to make the same sort of operational changes to -- to benefit income?

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

Well, you're just talking about our tenant base now, is that the question, or -- or [Inaudible].

Greg McGinnis -- Scotiabank -- Analyst

JCPenney, plus your other tenants, yeah.

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

OK, OK. Well, like I said, the ones in -- in -- you know -- and the ones in SPARC and Penny I really spoke to. I mean I think, you know, generally, the plan that would -- that they have in place, you know, we're -- you know, we think we're on the right track and we're, you know, all working very hard to produce these results and -- and hopefully, we'll do better than that. And again, I mentioned to you we're kind of getting back to where we used to be. And if you looked at it in -- in conjunction with pre-pandemic '18, '19, that's kind of where the number was.

And, you know, we really outperformed in '21, '22, and we really underperformed in '23, simple as that. Brands are good. Businesses are -- have the right game plan, and we're moving. I would -- so, that's -- SPARC, any -- any questions on that? No. I'll move to the -- your -- your other questions.

I mean, you know, retail is very specific. So, you know, I think our retailers, the -- they're -- generally, the credit is in really good shape. There's always one or two or three tenants that we are somewhat nervous about, but you know, they're -- they all understand the importance of bricks and mortar. They're reinvesting in their stores. They're spending less on, you know, technology, which is good for us, putting more money back in the stores.

And they're open to buying -- their return on investment in stores is a proven financial model. They're doing that. So, I'd say, generally, comfortable -- very comfortable with all the retailers that we're doing business with. There'll always be a couple here and there that, you know, have -- have had to sort through their -- you know, their financial -- you know, financial issues.

Greg McGinnis -- Scotiabank -- Analyst

Great. Thanks for the color, David.

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

Sure. Thank you.

Operator

Our next question is from Hong Zhang with J.P. Morgan. Please proceed with your question.

Hong Zhang -- JPMorgan Chase and Company -- Analyst

Yeah, hey, guys. I guess I was wondering if you could quantify the magnitude of the development drag this year. And also, it seems like you've -- you saw very strong rent and occupancy growth in the Taubman portfolio in the fourth quarter. Wondering what drove that and what your expectations for that portfolio this year as well.

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

Just on Taubman, I mean, our -- there -- our expectations on the comp NOI are roughly right on the -- you know, in excess of 3%. What drove both portfolios really is, you know, supply and demand, healthy retail sales, operational excellence, all the things that I mentioned earlier. So, listen, we're a big company. We did have some drag from redevelopment, but you know, it's not -- you know, it's not an excuse. We don't worry about it.

It you know -- and it's not so much big redevelopment. You -- you know, when you -- when you retenant a mall, you have downtime. And as I mentioned this before, the better the ten out -- the better the tenant, the better the build-out. And in some cases, build-out is six to nine months.

And restaurants, you know, can be even close to a year. And as you know, we have -- our portfolio of restaurant new business is at least 100 new restaurants over the next year or so. So, you know, it -- it is a long arduous process getting permits. You know, I mean we had a crazy thing in the Bay area where they couldn't hook up to gas for a while. Encourage you to read the Supreme Court overruling of an ordinance in Berkeley that affected Palo Alto.

But, you know, if you're really bored, you can read it. We finally got gas back into the center. And you know -- as you know, chefs like to cook with gas. So, it was it -- it was a -- you know, it cost us six months and a delay. I mean that's normal.

But I'd say the bigger issue on -- you know, just is that so much redevelopment is really retenanting. And I would say, by and large, if I had to make up a number, it cost this probably $0.10 to $0.20 a year of just downtime. But that -- that's a -- that's a -- that's a guess.

Hong Zhang -- JPMorgan Chase and Company -- Analyst

Got it. OK. Thank you.

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

Thank you.

Operator

Thank you. Our next question is from Ki Bin Kim with Truist Securities. Please proceed with your question.

Ki Bin Kim -- Truist Securities -- Analyst

Thank you. Just a couple questions. First, your operating expenses were down in 4Q. I was just curious what drove that and if that's sustainable.

Brian McDade -- Chief Financial Officer

Hey, Ki Bin, it's Brian. Yeah, we did see some savings year over year. There was some seasonality to it. Weather was a little bit lighter, but yes, we do expect it's sustainable.

Ki Bin Kim -- Truist Securities -- Analyst

OK. And on the ABG partial sale, was that a down round valuation versus the $18 billion mark previously?

Brian McDade -- Chief Financial Officer

No.

Ki Bin Kim -- Truist Securities -- Analyst

OK. Thank you.

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

Yeah, remember, that -- that was enterprise value. They have some debt, so that was an equity value. But it was -- it was at -- so, just when you say 18 billion, that's enterprise value as opposed to equity value, OK?

Ki Bin Kim -- Truist Securities -- Analyst

OK, thank you.

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

Sure, No problem.

Operator

Our next question is from Haendel St. Juste with Mizuho Securities. Please proceed with your question.

Haendel St. Juste -- Mizuho Securities -- Analyst

Hey, good evening out there. So --

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

How are you?

Haendel St. Juste -- Mizuho Securities -- Analyst

I'm doing great. I hope you're well too. Question I have is on your signed but not yet open pipeline. I think last quarter -- or you previously outlined about 200 basis points of embedded occupancy from that side, but not the open pipeline, so maybe you can give us an update on where that stands today. And then, also, maybe what's embedded in the guide for bad debt and lease term fees this year.

Thank you.

Brian McDade -- Chief Financial Officer

Sure. So, signed but not open is a little bit north of 200 basis points. We've been kind of holding that as we open stores and sign new leases, so we're holding steady around 200 basis points. We are assuming a normal level of bad debt, which is about 25 basis points of total revenue would be our expectation on that.

Haendel St. Juste -- Mizuho Securities -- Analyst

The term fees?

Brian McDade -- Chief Financial Officer

Our normal -- normal rate of lease term fees, I think the answer to the number for the year is $30 million is the estimate.

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

OK, thank you. Operator?

Operator

Our next question is from Juan Sanabria with BMO Capital Markets. Please proceed with your question.

Juan Sanabria -- BMO Capital Markets -- Analyst

Hi, good evening. Just a quick one for me. Just curious on the current state of affairs with Jamestown and how that relationship is progressing. You know, talk about mixed use.

Just curious if there's anything in the works or in the planning stages that you're doing with them and how you're thinking about that particular relationship. Thank you.

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

Yes, thank you. So, we're -- we haven't quite had a year under our belt, but we're very pleased with the relationship and the partnership. And, you know, we continue to look at opportunities, both within our pipeline and -- and obviously what their -- what they do on behalf of investors. So, a lot of good feedback going both ways.

And, you know, we haven't -- there has -- you know, we're working on one project. You know, I mean we have -- we have one development project where we're working on together. But other than that, it's -- it's a lot of corporate -- you know, there's -- it's more strategic and more corporate and more of a corporate discussion than property-level specifics other than one where we are partners and going through a development process in that now in the southeast.

Juan Sanabria -- BMO Capital Markets -- Analyst

Thank you.

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

Sure. OK.

Operator

There are no further questions at this time. I'd like to hand the floor back over to the management for a closing comment.

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

OK, thank you. And obviously, Tom and Brian are available. And we really appreciate everybody's participation. 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

Caitlin Burrows -- Goldman Sachs -- Analyst

Jeff Spector -- Bank of America Merrill Lynch -- Analyst

Alexander Goldfarb -- Piper Sandler -- Analyst

Michael Goldsmith -- UBS -- Analyst

Craig Mailman -- Citi -- Analyst

Vince Tibone -- Green Street Advisors -- Analyst

Ronald Kamdem -- Morgan Stanley -- Analyst

Brian McDade -- Chief Financial Officer

Greg McGinnis -- Scotiabank -- Analyst

Hong Zhang -- JPMorgan Chase and Company -- Analyst

Ki Bin Kim -- Truist Securities -- Analyst

Haendel St. Juste -- Mizuho Securities -- Analyst

Juan Sanabria -- BMO Capital Markets -- Analyst

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