David Simon: Sure, so – and Brian will chime in here. I will just give you some thoughts off my head and then Brian, hopefully, will agree or correct people. Three or correctly. So. I would say we saw in ’23 really decent bounce-back from the tourist centers. I give you a great example. So, – and I was just happy to look at this having to look at this for now, I must have been probably doing my job. But, I noticed in Q4 as an example of the bounce back, the Woodbury Q4 sales were around $350 million. Sorry. Which to me is a real good indicator of bounce back and obviously, the highest fourth-quarter sales we’ve had zero in quite some time. So, I would say generally we’re seeing a really good bounce-back in the tourist centers.
I don’t think we’re the one area that the U.S. overall and obviously will have an impact on us. I do not think we’ll see the Chinese. We do not expect the Chinese to come back the way they have beforehand before pandemic and they had – and just our tourist centers did outpace our sales for the portfolio for ’23 on average. So, good bounce-back across-the-board and then I would on your variable rent, we continue to see that as lower percent revenues, both the vast majority as we increased our, the way to think about it and it’s interesting is and again, hopefully Brian will need to correct me, but Brian’s available to correct me. Our domestic operations at $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 kind of a of a leading barometer, we’re still working that way down and we’re getting that into kind of our base rent. So and then your final on OPI, loss Q1 relatively flat Q2, Q3 and then most of it in Q4. Q2 is a little better than Q3 usual, but on the margins. And it’s only growing projecting this year $0.10 to $0.15.
Brian McDade: All right. Got it.
Ron Kamdem: Thanks so much.
David Simon: Thanks, Ron.
Operator: Thank you. Our next question is from Greg McGinniss with Scotiabank. Please proceed with your question.
Greg McGinniss: Hi, good evening, David. I just wanted to dig into the guidance a bit and 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: Yes, thank you for that question and the answer is no, that’s pure operations. And no one-timer or sale gains or any of that are in there. And yes – I mean – just by – I mean, we had a tough ’23 in our OPI. We didn’t meet our both our budgeted expectations and our expectations kind of mid-year when we re-calibrated it. The team in OPI, again we’re partners with, so it’s not just us, where partners are making significant efforts within their own business to improve performance. And again, the overriding theme was – and we should be sensitive to this across the board, the overriding theme was the lower income consumers still, with inflation embedded even though inflation has subsided, they are still dealing with things that cost a lot more money than they used to.
And 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, we need to figure that out as a country.
Greg McGinniss: So just to clarify.
David Simon: So no – yes, 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 yes, just to take a step back, we’re kind of getting OPI in this level where it was pre the extraordinary year of ’21 ’22, if you go back in time, this is kind of where the number was already cleared. We had – we really outpaced ourselves that extraordinary ’21 and ’22 and I think now we’re kind of getting back to more of a more stabilized number.
Greg McGinniss: 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. And how are those retailers performing and are they going to be able to make the same sort of operational changes to benefit income?
David Simon: Well, you’re just talking about our tenant base now is that the question or…
Greg McGinniss: Your tenants, yes.
David Simon: Okay, well, like I said, the ones of SPARC and Penny I really spoke to. I mean, I think generally, the plan with that they have in place we think we’re on the right track and we’re all working very hard to produce these results, and hopefully, we’ll do better than that. Again, I mentioned to you, we’re kind of getting back to where we used to be and if you looked at it in conjunction with pre-pandemic ’18, ’19, that’s kind of where the number was. And we really outperformed in ’21, ’22. And we really underperformed in ’23, simple as that. Brands are good. Businesses have the right game plan and we’re moving. I would – so that’s SPARC, Penny, questions on that.
Greg McGinniss: No.
David Simon: Then I’ll move to your other questions. I mean. Here retail is very specific. So, I think our retailers generally and the credit is in really good shape. There’s always one or two or three tenants that we are somewhat nervous about. But there – they all understand the importance of bricks and mortar, they’re reinvesting in their stores. They’re spending less on technology, which is good for us, putting more money back in the stores. And there are open to buy and 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, but there will always be a couple of here and there that have to sort of through their financial issues.
Greg McGinniss: Great, thanks for the color, David.
David Simon: Sure, thank you.
Operator: Our next question is from Hong Zhang with JPMorgan. Please proceed with your question.
Hong Zhang: Yes, hi guys. I guess, I was wondering if you could quantify the magnitude of the development drag this year. And also it seems like you saw a very strong rent and occupancy growth in the Taubman portfolio in the fourth quarter, measuring what drove that and what are your expectations for that portfolio this year as well.
David Simon: Just on Taubman, and I mean, our expectations on the comp NOI are roughly right on in excess of 3%. What drove both portfolios really is supply and demand, multi-retail sales, operational excellence, all the things there I mentioned earlier. Listen, we’re a big company, we did have some drag from redevelopment, but it’s not, it’s not an excuse. We don’t worry about it, and it’s not so much big redevelopment. You – when you re-tenant a mall you have downtime and as I’ve mentioned this before, the better the tenant, the better the build-out. And in some cases, build-out is six to nine months and restaurants it can be even close to a year. And as you know, we have – our portfolio restaurant new business is at least 100 new restaurants over the next year or so.
So, it is a long, arduous process getting permits. I mean, we had a crazy thing in the Bay Area, where they couldn’t hook up the gas for a while. Encourage you to read the Supreme Court, over-ruling an ordinance in Berkeley, that affected if you’re really bored, you can read it. We finally got guests back into the year at center. And as you know, chefs like to cook with gas. So, it was – it cost us six months and the delay. I mean that’s normal. But I’d say the bigger issue on just is not so much redevelopment, it is really re-tenanting and I would say by and large, if I had to it make-up a number, it costs this probably $0.10 to $0.20 a year, just downtime, but that’s a guess.
Hong Zhang: Got it, thank you.
David Simon: Thank you.
Operator: Thank you. Our next question is from Ki Bin Kim with Truist Securities. Please proceed with your question.
Ki Bin Kim: Thank you. Just a couple of questions, first, your operating expenses were down in 4Q. I just curious what drove that and if that’s sustainable.
Brian McDade: Yes, Jason, this is Brian. Yes, we did see some savings on a 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: Okay, and on the ABG partial sale, was it down around valuation versus the $18 billion mark previously?
