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Simon Property Group Inc (SPG) Q4 2018 Earnings Conference Call Transcript

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Simon Property Group Inc  (NYSE: SPG)
Q4 2018 Earnings Conference Call
Feb. 01, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2018 Simon Property Group, Inc Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference Mr. Tom Ward, Senior Vice President, Investor Relations. Sir, you may begin.

Thomas Ward -- Senior Vice President, Investor Relations

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

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

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

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

David E. Simon -- Chairman and Chief Executive Officer

Okay. Good morning. We are pleased to report another year of record results, which marked our 25th year as a public company. Our full 2018 FFO per diluted share was $12.13, an increase of 8.2% year-over-year which will be at the high end of our peer group, and we beat the top end of our initial 2018 guidance by an impressive $0.11.

Over the last four years, we've grown our FFO per share on a compound annual basis of 8%, and to provide perspective on our FFO generation, we produced approximately $165 million in our first full year as a public company, $165 million and in 2018, we produced $4.3 billion.

Through the commitment to our strategy, active portfolio management, discipline investment, relentless focus on operations and cost structure, we have increased our annual FFO generation by more than 25 times, since our IPO. For the fourth quarter, FFO was $1.15 billion or $3.23 per share, an increase of 3.5% year-over-year. We continued to grow our cash flow and report solid key operating metrics. Total portfolio increased 3.7% more than $230 million for the year, our comp NOI increased 2.3% for the year and 2.1% for the fourth quarter.

Leasing activity remains solid, average base rent was $54.18. The Malls and the Premium Outlets recorded leasing spreads of $7.75 per foot, an increase of 14.3%. We are pleased that retail sales momentum continued in the fourth quarter, reported retail sales per square foot for the mall and outlet was a record $661 compared to $628 in the prior-year period, an increase of 5.3%.

Retail sales were strong across the portfolio, with growth in consecutive months throughout the year, and each platform ended the year at record retail sales levels. Our Mall and Premium Outlet occupancy ended the quarter at 95.9%, an increase of 40 basis points for the third -- from the third quarter increase of 30 basis points compared to the year prior and leasing activity accelerated throughout the year with occupancy for the combined Malls and Premium Outlets increasing 130 basis points from the end of the first quarter through the year-end.

We opened two new outlets in 2018. The Premium Outlet collection in Edmonton, Canada. Denver Premium Outlets construction continues on three new outlets in leading international markets. Two of which will open this year. Queretaro, Mexico will open in the summer and Malaga, Spain will open in the fall.

We're also under construction a new outlet in Cannock, United Kingdom, which will open in the spring of 2020. We expect to break-ground on a new outlet in Bangkok, Thailand in the next few weeks, and our new development and projects an extensive pipeline of development opportunities across all of our platforms reinforce our industry-leading position.

With important to know our diversified income generation by geography and product type with 48% of our NOI from domestic malls. 42% from our value platform, which is the Premium Outlets and Mills, and 10% internationally distinguishes Simon from all other retail real estate companies that are trading publicly.

We completed a number of redevelopment expansion opportunities across our portfolio during 2018, again expansions include Aventura, Toronto Premium Outlets, Shisui, Japan, Johor Premium in Singapore. We're reclaiming department store spaces continue to be a focus and significant opportunity for the company.

We currently have 10 anchor redevelopment projects under construction with the gross cost of approximately $725 million. And we have an additional 25 opportunities, we're actively working on, that are in various stages of development. We continue to fund these redevelopment projects through our internally generated cash flow. Quickly, turning to the balance sheet continues to lead our industry. Our liquidity ended the year at $7.5 billion.

We have the strongest credit profile metrics in the REIT industry. Net debt to EBITDA of 5.1 times lowest in our sector, our interest coverage ratio was 5.1. Our long-term issue rating of A/A2 continues to be the highest in the REIT sector. Our balance sheet continues to be a distinct advantage that should not be overlooked. During the quarter, we repurchased approximately 287,000 shares of common for approximately $47 million, we also redeemed 405,000 limited partnership units for $74 million.

Going to the dividend we paid a record dividend in 2018 of $7.90 per share and have achieved a compound annual dividend growth rate of more than 11% over the last four years. We have paid more than $28 billion in dividends, over our 25-year history as a public company.

Today, we announced a dividend of $2.05 per share for this quarter, a year-over-year increase of 5.1%. At this current rate, we will have paid more than $100 in dividends per share by the second quarter this year. Before I turn to our outlook for 2019, let me summarize our 2018 results.

We posted a another year of industry-leading record results including revenues, cash flow, FFO per share and dividends. Our reported FFO diluted share per share for 2018 was $12.13, which beat the midpoint of our initial guidance for the year by $0.17.

Moving onto 2019. Our FFO guidance is $12.30 and $12.40 per share. When analyzing our 2019 range in context of our 2018 results, it is important to note the following. We expect the impact from FASB ASU 2016-02 the new lease accounting standard to reduce FFO per share by approximately $0.13.

There were some items included in our 2018 FFO per share. They are not expected to recur in 2019, including our gain of $0.10 per share related to the contribution of our investment in the Aeropostale licensing business for an increased ownership interest in ABG. Higher income related to distributions from an international investments of approximately $0.05 per share. These nonrecurring items are approximately $0.15 per share in FFO for 2018 when you then adjust 18 for those factors you get to $11.85 with our new guidance for 2019, we will have approximately 4% to 4.5% growth compared to this adjusted number for 2018.

We expect our 2000 growth rate will be at the high end of our peer group. Also keep in mind when we are looking at our 2019 number, we are expecting lower lease settlement income in 2019 compared to the prior year.

We will have lost rents in 2019 due to closed department store spaces and the downtime related to redevelopment of those spaces. This impact to our NOI this year is temporary, as these investments will yield healthy returns and accelerate our NOI growth in 2020 and 2021.

We expect the impact of rising interest rates and a stronger dollar to affect our results for '19 compared to '18 and we also had the loss of our share of the FFO from the German operations of our HBS joint venture, which was sold at the end of 2018 for a gain of $91 million. So, therefore lot there, hope you are fast studied like I am.

Additional assumptions supporting our 2019 outlook include the following. Comparable NOI growth for combined Mall and Premium Outlets and Mills platform of 2%. No planned acquisition activity or retail disposition activity, assuming no launch of our consumer-oriented platform and a diluted share count of approximately 356 million shares.

To conclude, we had another excellent year, capping a solid first quarter century as a public company. We have consistently posted industry-leading returns along the way through hard work, innovation, great people, and great assets as in any industry is more important than ever that we drive change, focus on delivering, exceptional experience for our tenants and consumers, and we are now ready for questions.

Thank you for listening.

Questions and Answers:

Operator

Thank you. (Operator Instruction) And our first question comes from Craig Schmidt with Bank of America. Your line is now open.

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

Thank you. First just wanted to congratulate Rick given the changes that are going to come later in '19.

Richard S. Sokolov -- Director, President and Chief Operating Officer

Thank you.

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

My questions, I guess, you touched on it in your opening comments, but maybe you could talk about some of the other possible impacts from the repurposing of the Sears anchors you know like sales disruption or any kind of competition you might have to give tenants while you're working on the Sears space and especially with the densification efforts?

David E. Simon -- Chairman and Chief Executive Officer

Well, you know, Craig again, I think, I'd employee you and other people that covers us, you got to look at it differently. We are in -- some of the numbers that I gave you need to be factored in. So, we started the -- our enterprise in a $165 million of funds from operation. Today, we have 4.3 billion. We have 48% of our business in the Mall business and when we started it was 90% through 95%. So, there's always disruption in our industry, department store spaces that we reclaim either through lease termination or acquisition, we think will be beneficial in the long run. There are down-times associated with that and like I said, well -- that's all kind of manageable for a company like ours, and we give you the best sense of our guidance, and it is kind of all factored in there within this range that we hope to produce. We have obviously a history unrivaled frankly, I think, about beating expectations. We'll see this year. We've got a lot going on. So I don't -- we're not going to zeroing about one particular property, one particular tenant, one particular issue because you got to look at us on a broader basis. We're a little bit different.

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

Okay, thanks. And then I just wondered, if you've been having any discussions with JCPenney about potential store closings?

David E. Simon -- Chairman and Chief Executive Officer

No.

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

Okay, thank you.

Operator

Thank you. Our next question comes from Christy McElroy with Citi. Your line is now open.

Michael Bilerman -- Citigroup -- Analyst

Yeah, good morning. It's Michael Bilerman here with Chris. So, David --

David E. Simon -- Chairman and Chief Executive Officer

From the hip I'm like happy, but I don't know, Rick. I think Rick is square down here. What do you think?

Michael Bilerman -- Citigroup -- Analyst

I just hope that Rick is still going to be on these calls to go through the laundry list of retailers that are coming into your malls. So, David, you are pretty quick to deny the speculation of Simon trying to buy Macerich, which I can understand, if you are buying them. But, I guess, if I step back, why wouldn't you buy them because every deal that you've done in the past 25 years has worked out pretty well for shareholders. Great cost to capital. You talked about your under leveraged balance sheet being a distinct advantage that shouldn't be overlooked. You have an unbelievable platform that can produce synergies, you've proven out your redevelopment and densification efforts. You can probably access as much third-party capital as you wanted. You've consistently raised your cash flow and your earnings, which has led to dividend growth, which is pretty much contrary to every one of your peers by the way. So with those set of facts and the performance, why wouldn't you be more aggressive on the acquisition front?

David E. Simon -- Chairman and Chief Executive Officer

Well, first of all, Michael thank you for recognizing some of our achievements. Over the last 25 years -- we do, you know, we do -- we try to explain the company maybe we're not very good at it, to our best of our abilities we're a little bit different because of some of those factors. But obviously, Michael, I'm not going to comment on any specific company. We tried to do a deal with Macerich long time ago that's, as I've said before yesterday's news. We're glad to partner with them in Carson, which is moving forward and but I'm not going to comment on any deal we may or may not do or any particular company. We have no plans currently to do kind of M&A activity and we're very focused on what we've got in front of us. We're excited about the continuation of the evolution of the mall industry the way it's been evolving for 60 plus years. We are excited about our outlet business in the international, breadth and depth that it has. And as I mentioned in my calls you know we had leading sales per square foot in every platform. So we've got plenty to do and we have no plans at all to think about anything and we're focused on executing the vast amount of activity that we have.

Christine McElroy -- Citigroup -- Analyst

Hi David, it's Christy. Good morning.

David E. Simon -- Chairman and Chief Executive Officer

Good morning.

Christine McElroy -- Citigroup -- Analyst

You're coming off of a year of positive sales growth from a tenant perspective. You've been able to gain occupancy and maintain pricing power. Just from where you sit today and what you're seeing in terms of the health and store performance among your shop tenants. Would you expect that 2019 would be a little bit of a tougher year from a tenant fallout and leasing perspective? And then just sort of related to that as you've been building your fifth platform and announcing more consumer-focused initiatives, maybe you can talk about what you see coming down the pike in 2019?

David E. Simon -- Chairman and Chief Executive Officer

Well, I'll just start and Rick can chime in. Look, I do think on the retail front, the stronger getting stronger, it's -- as you've seen by numbers throughout the retail community, the days of a rising economic boat don't lift or -- tied don't lift all retail boats and you've had a lot of over out performance, and a lot of under performance. The underperformance, I can talk offline on a theory of why that is, but I don't want to bore you, and there are some retailers out there that were nervous about, I mean, so far in the first quarter bankruptcies are trending lower than they were in 2017 and 2018. However, there's some rumored things out there that could ultimately end up being at similar 2017 and 2018. 2018, as we said, and as we look and anticipated 2018, we thought it would be less than 2017. We were ended up being right there, but I do think there will be more bankruptcies to come in 2019, and that's why we're relatively conservative as we look at our comp NOI because look it takes time to, I mean, it's a little bit out of our control when we get the space and then to do a lease, it takes time and even though as much as we anticipated, we just take time to lease the space. So, I mean, we have our work cut out, we are concerned about a few retailers that should shake out in Q1, but I think the retailers that are investing in their product in their store experience, in their branding we are having decent results. So, physical retail can produce good results. But it can't be distracted with a lot of other activities and then, obviously as you know we've had a number of retailers, the list is long, the landscape is littered of leveraged buyouts in our industry that we continue to sort through. So that I hope I answered the first question. On the second one, look, we are very close to launching this platform and it -- these things always -- it's a little bit like building something, but it's that quite as certain, it's more like building internationally where you think you're going to open in Q3 goes to Q4 then goes to Q1. We've had a couple of those in maybe Spain and Mexico or it's -- it happens if delay a quarter there. So, I would expect us to launch it will affect, I mean, again, I mean, we're going to. We're going to -- you see our numbers, it will be -- the earnings impact to it will be, I think, completely on the margin. I hope that market appreciates that but because we don't have a set date yet on when that might happen, we're not going to put it in our numbers. And then if we launch it, we'll show it to you, you'll say, Oh boy that's worth a shot, it's not a big deal. It's a couple of cents here and there, and it's an unbelievable investment in our future and we'll see where it goes. So we expect that to happen, but a little bit. We just don't know exactly when we'll launch. So, we've been hesitant to say it's a Q1 or Q2 or Q3 debut. So, again, in summary, if the retailer is focused on product, brand, service, they're doing better, if they're leveraged, they haven't invested in their business over invested in e-commerce, struggling leverage buyouts were not ultimately beneficial by and large to our business. That's kind of working its way out of the system, and we are excited about our fifth platform we expected to debut, but when and how is a little bit up in the year. So, we'll just keep it at that. We'll keep it off the table for now, but we do we'll share with you. Again, I think, we're pretty transparent, I mean, the region, I guess, when you take a step back and think about our company we're about -- we got all these assets, we get all this business, it's all international's outlets, so if we got as granular as you want it, it would waste your time and waste our time. So again just -- you got to kind of think of us a little bit differently that we're not these handful of assets here and there, yes, and that's why we try to give you a broader bigger picture of what we're all about, what we expect next year or this year.

Christine McElroy -- Citigroup -- Analyst

Okay. Thank you, David.

David E. Simon -- Chairman and Chief Executive Officer

Sure.

Operator

Thank you. Our next question comes from Steve Sakwa with Evercore ISI. Your line is open.

Stephen Sakwa -- Evercore ISI -- Analyst

Thanks. Good morning. David, I don't know you or Rick maybe just talk about some of the newer tenants and some of the more online tenants kind of your experience and success bringing some of these folks into the mall and sort of your outlook for their growth into '19 and '20?

Richard S. Sokolov -- Director, President and Chief Operating Officer

Hi, it's Rick. Just to step back in all of these discussions, the single best thing we have going for us our incredibly strong properties across all three of our platforms. So, in any dynamic, and if you talk about the key is to, we have places where retailers want to be and happily we do and they're getting better by the day as we invest our capital and enhance them. In terms of the retailers, e-tailers are certainly one aspect of it, and there we're working with probably 40 different ones, we've rolled out on top that you've heard out all, the name and they want to be not unlike any other retailer in the best properties, and so we are doing deals with Warby Parker and Fabletics and Shinola and UNTUCKit and I could go on, and they are finding success and you don't have to take our word for it, you can take what they're saying, a lot of them are expressly raising money to roll out more stores. So, that has been an interesting and important part of diversifying our tenant mix and keeping our properties current.

Stephen Sakwa -- Evercore ISI -- Analyst

Okay. And then David, I just wanted to circle back you talked sort of about the anchor redevelopments and you said you're actively working on another 25 just in terms of sort of the mix between retail and hotels and office and multifamily how were those sort of project sort of breaking out in terms of the alternative uses?

David E. Simon -- Chairman and Chief Executive Officer

Actually, I think, we've never been busier on the alternative uses we've got to listen the 8-K that shows you what's been approved, but that doesn't. I think essentially that pales in comparison to the future activity. I'll just three off the top of my head, Steve, that are massive mixed-use projects include Northgate, which we have made a deal with the NHL franchise in Seattle to do their corporate office as well as their practice facility in ICE facilities for the general public. We have Brea, which we have reclaimed department store space that is in the process of permitting to do a massive amount of residential, same thing with the Stonebridge in California. So, those aren't even on our list. We obviously have a significant redevelopment in King of Prussia, which we're going through in our portfolio. So, I would say, by and large, when we are looking at these spaces, they're much more focused on change in the mix adding additional elements and then adding the wellness, fitness, restaurants, resi hotels to kind of make it kind of the standard statement of live work play et cetera. So, rarely is it just small shops and, I would say, by and large the vast majority has all those elements that I just mentioned. Rick you want to add?

Richard S. Sokolov -- Director, President and Chief Operating Officer

One other thing, I would say, to add to David's point. This trend is accelerating. This time last year in our K, we listed 11 projects for '18 and beyond. This year we have 19, and as David said we have many more that are in the pipeline that are going to be coming in there. So, we have a dedicated team. We have demand because our properties are located in great places and that is going to be an accelerating portion of our development activity.

Stephen Sakwa -- Evercore ISI -- Analyst

And maybe just a follow-up just on the cost and kind of yield when you sort of look at these future projects, just given what we've seen in construction cost increases. How would you sort of, I guess, estimate the returns on the future projects versus the ones that are -- the recently completed or currently under way?

David E. Simon -- Chairman and Chief Executive Officer

Well, I mean, look I think, it's not redevelopment, I mean, it's not new development returns, but I think our redevelopment efforts will be consistent in terms of return that we have over the last several years. You know, I mean, it's certainly accretive to the value of the asset. Otherwise, we wouldn't do it and six to 10 is kind of the range and a lot goes into that, Steve, but accretive to the value of the asset. Otherwise, we're just not going to invest. I mean the -- we don't feel like we have to because of the size and scope of the portfolio, we don't feel like we have to invest in an asset just to maintain it. That's not to say that we don't do appropriate maintenance -- investments like a typical renovation and that kind of stuff. But we don't feel compelled to do. We do it with the lens of what the consumer expects, what the retailer wants and what's the value of that asset is in our minds and that's when we pull the trigger. Our investment returns, I mean, we have embedded a thousand, but as my favorite, I don't want to attribute because you may get mad at me, but I think our returns on investment have not been too shabby over our career.

Stephen Sakwa -- Evercore ISI -- Analyst

Okay, thanks. That's it from me.

David E. Simon -- Chairman and Chief Executive Officer

Sure. Thank you, Steve.

Operator

Our next question comes from Alexander Goldfarb with Sandler O'Neill. Your line is open.

Alexander Goldfarb -- Sandler O'Neill -- Analyst

Good morning. Good morning out there. First Rick --

David E. Simon -- Chairman and Chief Executive Officer

Good morning. Yeah, out there is right. It's -- I want people to know it's cold and it's snowing but we're here.

Alexander Goldfarb -- Sandler O'Neill -- Analyst

Well, at least the malls are heated, so they have somewhere to warm up.

David E. Simon -- Chairman and Chief Executive Officer

You bet.

Alexander Goldfarb -- Sandler O'Neill -- Analyst

So, Rick, congratulations. And David, I think, you said 25 billion in dividends over the time, which is pretty remarkable.

David E. Simon -- Chairman and Chief Executive Officer

Alex, you've never been great at math not as good as we are, but it's 28.

Alexander Goldfarb -- Sandler O'Neill -- Analyst

28. Okay. So, I was a little off.

David E. Simon -- Chairman and Chief Executive Officer

I'm just kidding, it was a joke. Okay, just -- you are very good at math.

Richard S. Sokolov -- Director, President and Chief Operating Officer

Yeah, sure.

Alexander Goldfarb -- Sandler O'Neill -- Analyst

Your time. Just following up on Christy's question on the consumer platform that you're talking about, I mean, you're -- is this something like Simon brand ventures that will interplay with -- throughout the company or this truly is something totally separate and apart from your existing malls, mills outlets et cetera.

David E. Simon -- Chairman and Chief Executive Officer

Well, it is, put it this way, we would not be doing what we're doing, if we didn't own the assets that we own then had the branding that we do and had the consumer touch point as well as the retailer touch points. So, it is absolutely unequivocally related, and we hope it will be synergistic between what we do today, and what we want to do in the future. So, we would not be doing it, if we didn't have the business that we're currently obviously involved in day to day. So, it is complementary and where it goes will be a function of our commitment to invest, our courage to invest, conviction and our ability to execute what we think might be a real interest.

Alexander Goldfarb -- Sandler O'Neill -- Analyst

But this is something that would add like where SBV adds NOI or adds income to the overall company. This would be something commensurate, correct?

David E. Simon -- Chairman and Chief Executive Officer

Well, there will be an investment period, but the reality is, yes, we think it will have a financial return associated with it, but it is a little bit, there isn't a serious investment period before we get to that point.

Alexander Goldfarb -- Sandler O'Neill -- Analyst

Okay. And then the next question is on retailers, you said, you're expecting more shake out. Clearly minimum wage increases and just strong economy, low unemployment is pressuring on the wage front. Across your tenants, are you seeing all of them absorbing the higher wage or are the rising incomes allowing them to offset by raising their prices because their consumers are having more income. Just sort of curious how the wage and operating expense dynamic is occurring with your retailers, and if you think that's going to be a growing pressure point among your tenants?

David E. Simon -- Chairman and Chief Executive Officer

Well, I do think the category that seems to be most sensitive to that today is clearly in the restaurant category. So, I do think those pressures are affecting decision making. Now we haven't and I think that -- it's interesting because they're very -- those folks are very sensitive to location and to the extent that states have enacted minimum wage laws were higher than federal mandated numbers. It's got to be a really unique opportunity for the restaurant toward to do it, and thankfully we have most of those, but is it affecting the marginal deal in some of those states. I would have to say, yes, I don't necessarily see it on the, what I'd call, the soft goods apparel side. I haven't seen it in the wellness other side, but I think it's something to pay attention to and where we see it initially is in certain states and primarily when it comes to restaurants.

Alexander Goldfarb -- Sandler O'Neill -- Analyst

Okay, thank you.

David E. Simon -- Chairman and Chief Executive Officer

Sure.

Operator

Our next question comes from Caitlin Burrows with Goldman Sachs. Your line is open.

Caitlin Burrows -- Goldman Sachs -- Analyst

Hi. Good morning.

David E. Simon -- Chairman and Chief Executive Officer

Good Morning.

Caitlin Burrows -- Goldman Sachs -- Analyst

I was just wondering, if you could go through the decision to do buybacks during the quarter and then generally how that compares to your other uses of capital?

David E. Simon -- Chairman and Chief Executive Officer

Well, on the units, it was just -- we have the right. So, by and large we believe in the growth of our business units. We have the ability when they want to convert to buy the cash. So, it's a pretty easy simple trade, and we'll continue to do that as that happens. And there was a period of time in December, obviously, where the world was changing, I mean, obviously equities were being whipsawed around and we took advantage slightly, but we took advantage of that whipsawing.

Caitlin Burrows -- Goldman Sachs -- Analyst

Okay. And then on the balance sheet side also which obviously is a great differentiator for Simon. You previously had $600 million that was actually maturing today. So, I guess, I was just wondering what were the source is there and especially considering the development spend this year. Do you plan to issue new unsecured debt?

Brian J. McDade -- Executive Vice President and Chief Financial Officer

Hi, Caitlin. This is Brian. You're absolutely right. We had $600 million maturity today. As David mentioned in his remarks, we ended the year with 7.5 billion of liquidity. So we use existing liquidity to retire those notes this morning.

David E. Simon -- Chairman and Chief Executive Officer

Good news is we pay it off.

Caitlin Burrows -- Goldman Sachs -- Analyst

Great.

David E. Simon -- Chairman and Chief Executive Officer

By the way that's not always the cases in the real estate industry, OK. So, it's in PayPal.

Caitlin Burrows -- Goldman Sachs -- Analyst

And then maybe one more, if I could. Could you discuss maybe market rent trends and where they're stronger versus less. So, for example by US quality, your outlet versus mills or open-air versus in-closed?

Richard S. Sokolov -- Director, President and Chief Operating Officer

It's Rick. Frankly, we are having pricing power across our portfolios. And again that is a function of the quality of the properties. It all starts there and as we continue to improve them, we're able to drive our rents, and I think that's demonstrated in the spreads that we've reported.

David E. Simon -- Chairman and Chief Executive Officer

Look, I would only add to that. Look, the reality of how leasing works is that it does take time to lease space, right. It's not like you make a deal, you negotiate the lease, you -- the retailer builds the store blah, blah, blah. So with and if you look at the -- the -- our NOI growth, I mean, it's only the comp NOI growth. It's only -- it's being affected by some of these retailers that are going through this significant change and we tend to work with them because at the end of the day -- now we tend to do it on a shorter-term basis because we know ultimately we have to release the space to someone. So, there is a little bit of supply and demand that we're working our way through and that's, I think, it's been manifesting itself in the numbers over the last year or so. We expect it to manifest itself in '19 as well. But when it comes to a good property and a good space with a good retailer, we're making strides, but we're working with some of the ones that are going through their various restructurings and that ultimately has some impact certainly in the short run.

Caitlin Burrows -- Goldman Sachs -- Analyst

Okay, thank you.

David E. Simon -- Chairman and Chief Executive Officer

Sure.

Operator

Our next question comes from Jeremy Metz with BMO Capital Markets. Your line is open.

Jeremy Metz -- BMO Capital Markets -- Analyst

Hey, good morning.

David E. Simon -- Chairman and Chief Executive Officer

Good Morning.

Jeremy Metz -- BMO Capital Markets -- Analyst

Good morning. You mentioned the 10 anchor repositioning you have under way. The additional 25, you are working on just given some of the other development and the redevelopment opportunities you obviously have on your plate as well. Are you comfortable taking leverage up some from here as you kick off more of these projects. And then is there anything kind of holding you back from starting more of these other than just getting those right plans in place. Basically, would you be comfortable taking the pipeline up another billion when they're ready to go?

David E. Simon -- Chairman and Chief Executive Officer

Well, look, unfortunately in lot of these areas that I mentioned earlier when Steve asked the question, I mean , there is real process about permitting. I mean, we could show you our permitting file, you wonder whether it's -- I'll refrain, but it is a process where you scratch your head sometimes because all you are doing is making the asset better for the community and for everybody that lives there, but municipalities are in a lot of areas are -- you got to go through a real process. We see it all the time and we still see it in the Long Island as an example on our project that we have the land in Syosset. I mean we see it everywhere to go through, it's just a process. I would say to you, Jeremy, that holds us back more than anything because if I had approvals in like Brea we would start and the King of Prussia we would start, if we had approvals in Oyster Bay, we would start, but we don't, Stoneridge we would start that to us is a governor more than the balance sheet though I will say we respect our balance sheet, and we're very focused on it. I would also say that this, but I'd say the permitting is the biggest constraint. The second is , I mean, human resource constraint is not to be under appreciated because everybody here is really hustling very active and pressure is intense here, probably comes as no surprise to most, and that's more of a constraint as opposed to boy, we can't make this investment because we're too levered or we're worried about our cash flow generation or our maturities that are coming up, I mean, we don't do that, but I would say that with all due respect because the fact of the matter is, if we didn't take that into account, we wouldn't be in the spot that we're in today. So, we do take into account, we just do it by it just ingrained in the culture that we do it by Osmosis.

Jeremy Metz -- BMO Capital Markets -- Analyst

That's helpful. I appreciate that color. And then you did mention in your outlook for '19 your expectations for comp NOI 2%. You've been more focused on portfolio NOI growth though in most of your commentary. So, I know that's what matters more to you. So, any color on where your expectations are for that to trend?

David E. Simon -- Chairman and Chief Executive Officer

We didn't -- we are not, I don't think we're giving guidance there. We don't have a big portfolio NOI because a lot of the new developments that generate that are acquisitions we're not planning on, and we had some delays in a couple of our international deals that I mentioned earlier. We have a reduction in that because of the German sale of HBS. So, it's not going to be -- it won't be the growth that we had obviously in '18 where we had more external activity. So, part of that -- it will add incrementally, but it's not going to be like the spread between what we had in '18 primarily because our developments as I mentioned to you have been delayed and our new developments have been delayed, and now again we sold our HBS German business.

Jeremy Metz -- BMO Capital Markets -- Analyst

Got it. That makes sense. And last one from me you've had some really solid sales results here obviously in the past few quarters. Your lease spreads have been solidly in that double-digit range. I assume you're still obviously pushing your standard kind of 3%, recs, rent escalators through. So, I guess, I'm just wondering some of that hasn't translated into higher ABR growth necessarily. Is there anything we're missing there should be ABR growth really start to follow suit here?

David E. Simon -- Chairman and Chief Executive Officer

Well, Look I think the pressure I mentioned it earlier, I mean, the pressure that we have is that we are still dealing with a handful of retailers that for whatever reason, I have to go through their various restructurings because we can lease every space every minute. We tend to work with them and that does put pressure on our ABR, but it's moving in the right direction. I do think the cycle of the levered retailers is working its way through the system and, I think, Jeremy at the end of the day we need to just like cleans, I mean, we are suffering the pain, I mean, 2% comp NOI is not a static about it, but the primary factor in that is -- the retailers that are going through the various restructurings that we have. So, I think, you'll -- as that's cleansed, we'll get to that, we'll get to that number, but look retailers are very focused on their cost and their operating model. Stores continue to be their best investment and their best return, obviously there's a lot of talk about how profitable the internet is and the eCommerce and who is bearing the brunt of the investment and all that, I don't want to get into the psycho-babble talk about that, but the reality is because of a lot of investments they are making, they are looking at every expense category and -- we are having those discussions they're not easy.

Jeremy Metz -- BMO Capital Markets -- Analyst

Thanks for the time, David.

David E. Simon -- Chairman and Chief Executive Officer

Sure.

Operator

Our next question comes from Haendel St Juste with Mizuho. Your line is now open.

Haendel St. Juste -- Mizuho Securities -- Analyst

Hey, good morning.

David E. Simon -- Chairman and Chief Executive Officer

Good morning.

Haendel St. Juste -- Mizuho Securities -- Analyst

So, David as has been discussed, you have one of the best balance sheets, platforms, track records in the REIT sector and yet you trade and implied cap rate about mid-5s which seems to be in line with the overall REIT sector. So, curious why you think that's the case, if it's fair, and what levers you would consider pulling to address that?

David E. Simon -- Chairman and Chief Executive Officer

Well, I'm not worried, look, I think what we focus on is trying to make our product better, as opposed to what levers we can pull to, where we think we ought to trade at a better number than the next guy. I mean, if I took that philosophy, we'd be more levered, we'd be this, we'd be that. I don't look at it like that. I look at it how do we make this company better day in and day out. So, that's the focus. Why do I personally think that I have no idea, you guys know better than I do. I always think why are we -- given our cash flow generation and our ability to make appropriate strategic investments and our ability withstand, the restructuring that's been going on in the retail industry better than most. I don't know, if I had to tell you one thing, it's probably because people think we're going to buy something, and then when we tell people we're not, they ask why aren't you going to buy something. So I don't know, I don't sit here and obsess over it. We are focused on making this product better, people that get obsessed with where those stock price is, I think, end up making blunders, that's not -- that's not a REIT statement, that's a corporate America statement, and that's the philosophy, I hope that -- I hope shareholders appreciate it, maybe they don't, but that's how we operate the business. That's how, I think, our board thinks about it, how do we make our products that are in our business better. When you do that, it tends to manifest itself in the earnings and then we go from there. But I don't know, I mean, if I didn't answer your question, but I'm happy to hear what you -- do you have any ideas, you tell me.

Haendel St. Juste -- Mizuho Securities -- Analyst

Well, look, I think perhaps the sector is one variable to consider. It is a tougher business these days, but I think what you guys have built certainly merits value and should be acknowledged though. I'll just leave it there.

David E. Simon -- Chairman and Chief Executive Officer

Thank you.

Haendel St. Juste -- Mizuho Securities -- Analyst

My second question is on the rising cost of labor, which has been well-documented. Maybe you could talk a little bit about the labor cost inflation built into your 2019 guide maybe from a R&M and corporate G&A perspective. The corporate G&A has been trending down in the past couple of years. I'm curious if you think that continue as well?

David E. Simon -- Chairman and Chief Executive Officer

I think we're budgeting pretty consistent numbers for our G&A next year. I don't -- we don't see any -- we don't see any major changes in that. I mean, I think, we -- the area that we are going to end up beating up is in the area of mixed-use development. So, we are going to be adding some bodies over time. But again it's -- that's the other nice thing about the company. We still have the lowest overhead ratio by a large margin, I don't -- I can't remember the numbers it's 2 -- 2.5, right, 10 and 11 to other companies basically your G&A to NOI roughly, right. So, I mean, it's a staggering difference, OK, it's not like 100 basis points, it's like 700, 800 basis points. So, I mean, that not's going to be anything out of the ordinary for us that I see. But we are going to add some people in certain areas that we need to execute our vision on some of these redevelopments.

Haendel St. Juste -- Mizuho Securities -- Analyst

And last one, was there any reason that you can perhaps share with us on the sale of the German outlet. I think the designer outlet at Ochtrup?

David E. Simon -- Chairman and Chief Executive Officer

I'm not, I'm sorry, I don't think that -- what was your question again?

Haendel St. Juste -- Mizuho Securities -- Analyst

I was just curious on the rationale for the sale of the German, the German thing you're selling, the outlet?

David E. Simon -- Chairman and Chief Executive Officer

We did not sell the outlet. Actually Ochtrup we actually bought a few years ago. What we sold was our -- we're partners with Hudson Bay among other in addition to other institutional investors. We had the Kaufhof real estate investment that because of the merger with Kaufhof and Karstadt they wanted to also own the real estate, so they bought out the real estate interest in the department stores that Karstadt leased and that's what triggered our $91 million gain. We didn't sell an outlet.

Haendel St. Juste -- Mizuho Securities -- Analyst

Got it, got it. Okay , thank you for that.

David E. Simon -- Chairman and Chief Executive Officer

Yeah, no worries.

Operator

Our next question comes from Linda Tsai with Barclays. Your line is open.

Linda Tsai -- Barclays Capital -- Analyst

Hi, good morning.

David E. Simon -- Chairman and Chief Executive Officer

Good morning.

Linda Tsai -- Barclays Capital -- Analyst

In '18 you guided SS NOI to above 2% and came in at 2.3% and now you're looking for 2% growth in '19 implying slight deceleration, but I was just understanding that this also reflects what's happening with more closures in the Sears redevelopments. Do you view 2% as a trough or is this sort of a steady-state long-term growth rate for high quality outlets and malls?

David E. Simon -- Chairman and Chief Executive Officer

Well, we do not think it's our steady-state, but we are because of the redevelopment we are -- there is a significant amount of reduction in '19 due to income that we received from certain department stores, and then it takes a year or two to build and we're going to, we're suffering from that in '19. So, that's certainly part of it. And then the other part is just what I mentioned earlier, just dealing with some of the retailers that have been continuing to go through a more difficult time, but now -- we don't, I don't view 2%, not 2% it makes me, I mean, we try to give you a sense of where we're at, we hope to do better, but I do not under any circumstance think 2% is our steady-state.

Linda Tsai -- Barclays Capital -- Analyst

Thanks. And then through your Simon Ventures Fund when you look at some of these nascent brands you're nurturing for this platform. What are some of the business models or concepts you're seeing that make them more successful versus what's happening with some of the struggling legacy retailers. Are these concepts more niche like in nature or could be grown, scaled and replicated across larger physical base?

David E. Simon -- Chairman and Chief Executive Officer

Well, I don't think you can go from that point to the next point, I mean, I think the retailers that have struggled by and large have had and again we have a list that, and I don't know, if I should, well, put it this way. We have a long list of retailers that have struggled, 80% to 90% of that list have been over levered, so they couldn't turn left or right. And you just can't have too much leverage in any industry and any business when things are -- you run into an economic difficulty or you need to make investments, you just got -- you have nowhere to go, and if I read you the list, you would, it might -- it comforts me in one sense because we would stood this pretty successfully. On the other hand, I might scare you. So, I prefer not to scare you at this point, OK. But it's something that we've been able to withstand and so, I think, that whole -- that's where and the retailers have a vision and whether they're starting from the internet or just been around, but they've invested in their business and their product. We're seeing pretty good results. Let's look at the higher end luxury category, they don't have a lot of internet sales, they invest unbelievably in the store experience and then the product and whoops guess what they had great results. So, not overly complicated, the technology and some of the new concepts that we've seen out there that have been successful. Usually it's a visionary leader, it's a visionary group that's dedicated to the business, they may have a little different angle on something that exist today, and they just executed better than the next person. I mean, as an example, we're an investor in FabFitFun, which just raised $80 million from Kleiner Perkins and that's basically a subscription business, which has been done before, but they just know how to do it better and more creatively and with better focus, then maybe the next person. And that's always been the case in the industries, right. There are somebody, there maybe another idea, but the group takes that idea and then just does it a little bit better than the next person. So, I think, the power of our industry is that we can withstand the ups and downs of a retailer or retailers their points and times where it's painful as we go through that with them. But ultimately whether they turn it around or not, if we get the space back, historically, we've been able to lease it to a better, a better person. So, that's what we've done. Now, I will give you a number that I probably shouldn't, but we tend to be on most retailers unsecured creditors committees. We have somebody internally that's -- he's always been around as long as me and Rick. So, he's been through his time, he has and this is, I think, this is actually a great positive statement about our industry and our business. But he is currently on his 200 unsecured creditors committee. Now, OK, yeah, that might say holy cow that's -- that makes you a little nervous. On the other hand, I mean, we did earn 4.3 billion. And my colleague has been on this committee, recent committee is on his 200. So I think more importantly, it speaks to this, the resilience of our industry, our product and what the consumer really wants.

Linda Tsai -- Barclays Capital -- Analyst

Thanks.

David E. Simon -- Chairman and Chief Executive Officer

Sure.

Operator

Our next question comes from Michael Mueller with JPMorgan. Your line is open.

Michael Mueller -- JPMorgan -- Analyst

Thanks. Just have a quick one. For the 2019 outlook, are there any significant one-time either expenses or benefits that we should be aware of, I guess, for example like a Puerto Rico insurance recovery, anything like that?

David E. Simon -- Chairman and Chief Executive Officer

Well, actually, Puerto Rico came in lower than we thought in '18. So, as a company of this size, we're always going to have some of that stuff. We don't really get into that level of detail. I mentioned some of the other items that we think will be lower this year, lease settlement income, we do think rates rising, we'll have some impact negatively as well as the stronger dollar. Now, some of that's moving around, but who knows how it all shakes out. So, we are always going to have, I think, that's another interesting thing about this company is that we are able to create other income opportunities. We have some, but we don't really get into that level of detail. It's all kind of factored into our numbers.

Michael Mueller -- JPMorgan -- Analyst

Got it. Okay. And then last thing, the sales of $661. Do you have that number on our weighted NOI weighted basis?

David E. Simon -- Chairman and Chief Executive Officer

We do, and the number is $832. So, we took, I asked Tom, do people care about that NOI weighted number and he said, no, no one's ever called me or asked me. So, we took it out, but the number is $832 a foot.

Michael Mueller -- JPMorgan -- Analyst

Yeah, it just seems like, if you're doing an NAV buildup, you should apply weighted average -- cap rate?

David E. Simon -- Chairman and Chief Executive Officer

Yeah, we don't disagree. If people really like it, we're happy to put it back in and they can call Tom.

Michael Mueller -- JPMorgan -- Analyst

Got it. Okay. That was it. Thank you.

Operator

Our next question is from Nick Yulico with Scotiabank. Your line is open.

Nicholas Yulico -- Scotiabank -- Analyst

Thanks. Good morning. Just a question on your tenant reimbursements. You had a unusual situation last year with your reimbursements declined about 1% for the year same impact in the four quarter. So what's driving that?

David E. Simon -- Chairman and Chief Executive Officer

That's usually just the quarterly spread of how things go. Nothing is driving it, I mean, again you need to look at the -- you need to look at the totality of the year and not quarter-by-quarter.

Nicholas Yulico -- Scotiabank -- Analyst

Yeah, that's what I'm saying, if you look at the year, your reimbursements declined 1%, and so that's what I'm trying to figure out what -- there was unusual, I mean, your occupancy is going up, your expenses are going up, how come your tenant reimbursements are going down?

David E. Simon -- Chairman and Chief Executive Officer

Those are the numbers.

Nicholas Yulico -- Scotiabank -- Analyst

I mean is that something, Dave, when you're talking about earlier when you're working with some retailers is lower reimbursements, one of the tools you are offering to the challenge retailers?

David E. Simon -- Chairman and Chief Executive Officer

No, I think, we had a significant rise in utility costs and other items, so nothing. We had some disposals that factored in there, I don't think it's anything material.

Nicholas Yulico -- Scotiabank -- Analyst

Okay, thank you.

Operator

Our next question comes from Ki Bin Kim with SunTrust. Your line is open.

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

Thanks, and good morning out there. When you think about your -- the capital you're allocating to redevelopment deals or development. What do you think about the risk profile of the newer deals that are doing like the Sears repositioning or densification deals. Is the risk profile for those deals similar to what you've done in the past in terms of redevelopment or is it a little bit different?

David E. Simon -- Chairman and Chief Executive Officer

No, I mean, that's what we do. I don't, there's no -- the, I would say, the risk is, we don't feel like we're at high on the higher risk plank than redeveloping department store space than anything else.

Richard S. Sokolov -- Director, President and Chief Operating Officer

We're applying the same disciplined to decide whether we're going to build a multi-family or an office or a hotel that we apply when we're doing a retail redevelopment. We do our market studies, we assess market rents and we make sure that we're doing a good capital allocation decision as we decide to put in these incremental elements to our properties. So, the risk is frankly the same because we're doing the same underwriting.

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

Okay. And just going back to the same-store NOI. Can you provide a little more detail around what type of cushion that you're building in and specifically the temporary retailers that you have to -- you're having to kind of reposition like how much of the impact does that making for that 2% same-store NOI growth?

David E. Simon -- Chairman and Chief Executive Officer

Look, we don't do that, I encourage you to think about our company a little bit differently. Look at our history and realize that we're a very large company with a very -- we don't get into that granular level of detail. And we would encourage you just to look at our history, and the fact that this is the number that we roll up and we don't really get into that kind of detail.

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

All right. Thank you.

David E. Simon -- Chairman and Chief Executive Officer

Sure.

Operator

Our next question comes from Wes Golladay with RBC Capital Markets. Your line is open.

Wes Golladay -- RBC Capital Markets -- Analyst

Hey, good morning, everyone. You mentioned there's some tenants that maybe a little less relevant these days and some of them don't have balance sheet issues. Are you seeing any changes in tenant retention at lease expiration and how much of a headwind is this for same store NOI with 10 basis point headwind each year, 50 basis points. Any context around that would be great?

Richard S. Sokolov -- Director, President and Chief Operating Officer

We have had pretty much the same percentage of renewals that we've had historically. So that is not manifesting itself as an issue.

Wes Golladay -- RBC Capital Markets -- Analyst

Okay. And then maybe for given years. Is it typically about 20 basis point impact. Is that seemed about, right?

Richard S. Sokolov -- Director, President and Chief Operating Officer

In what context, I mean, we are renewing the same percentage of the tenants. We have tenants that we are intentionally not renewing because we want to bring in more productive tenants that are better operators and we have tenants, as David has references, through their own issues have to be following out. So, that hasn't changed overall the years we have been operating. It just the same constant dynamic.

Wes Golladay -- RBC Capital Markets -- Analyst

Okay, thanks a lot.

David E. Simon -- Chairman and Chief Executive Officer

Sure.

Operator

Our next question is a follow up from Christy McElroy with Citi. Your line is reopened.

Michael Bilerman -- Citigroup -- Analyst

Hey, it's Michael Bilerman. I just had two quick follow-ups. David, at the end of your opening comments, you talked about all the changes '18 relative to '19, you rattled off the FASB change, the Aero gain, the loss of FFO, the sale of the German operations, lower Houston fees. The impact of rising rates and the rising dollar on your international operations, and then you talked about, and you mentioned it a couple of times was this impact of the lower department store NOI, as you take those boxes back and you redevelop them. Are you able to at least recognize your large company, we should think about you differently, but are you able just to identify the impact of that item you produced $5.7 billion of same-store NOI. I'm just trying to get a sense of how big that piece is, impact of that 2% growth rate?

David E. Simon -- Chairman and Chief Executive Officer

Well, I guess, if material enough to mention it, OK. But again I -- we are not -- we don't get into this -- the granularity of these debates. We ask that you look at our track record and our ability to generate cash flow, I mean, as we did say --

Michael Bilerman -- Citigroup -- Analyst

And I do that, right?

David E. Simon -- Chairman and Chief Executive Officer

Again, so, I guess, and I answered it exactly how I would answer. In other words, we would mention it, if it was $12, OK, but we also wouldn't mention it, we would mention it, if it's material, but we don't -- we're not going to, we don't give that number, it all goes into our buildup and, but we also don't want to make, I mean, and the purpose of not disclosing it is because we don't want to make excuses, a lot of companies say, next year is a throwaway year because I'm investing this that and the other, and we don't do that here, and that's -- so the reality is, yes, we're going to have the best growth, I think, in the retail real estate industry. I don't know, if anybody is going to be better, but if there is maybe one or two, we're going to have the best dividend growth probably in the industry. We had the best balance sheet in the industry. And, yeah, we've got some setbacks and you know what, we're not going to have a throwaway year, we're just going to keep doing what we do, and we don't want to use that as an excuse and that's the facts.

Michael Bilerman -- Citigroup -- Analyst

Listen, I always take when company say. Well, if you exclude this -- and then as we produced 10% like well shareholders don't have that choice, shareholders will know the whole damn thing, right. I was just trying to focusing on you brought it up and I was just trying to figure out what sort of headwind it was creating on that 2% number?

David E. Simon -- Chairman and Chief Executive Officer

It is, again, I'll answer it exactly how I should, which is the --

Michael Bilerman -- Citigroup -- Analyst

You don't need to answer the same way.

David E. Simon -- Chairman and Chief Executive Officer

Okay. Again I just think, we got -- we all want to, let me micromanage, I will micromanage with my team, you guys look big picture, OK. And when you look big picture, you're going to say, hey, we paid $28 billion in 25 years, that's not too shabby, and again tenant reimbursements, OK. Well, the real, look, let's talk about tenant reimbursements, real estate taxes go up because the municipalities want to attack the golden goose, they don't want to attack the internet sales, yes, they are like figuring it out. So, let's just see how it all evolves, we know what -- we know how to -- we know how to deal with the stuff, and we will continue to produce, I think, industry-leading results, if we don't do it in one year, call us where you want to call us.

Michael Bilerman -- Citigroup -- Analyst

And then just a clarification on this whole consumer initiative when you and I spoke about this a bunch after you put it out in your shareholders letter last year. You sort of said there is a few cents potentially as a cost. I'm just trying to understand, is that a cost to capital cost or let's say you go out and you put $500 million or it's $1 billion investment, the impact is the cost of carry before the initiative starts to produce results?

David E. Simon -- Chairman and Chief Executive Officer

Again, it's -- we pointed out because it's an investment. It's not going to be, let's assume, we earned $12.35. We're not going to be at $12 because of that, OK. We are not, I would appreciate, just the understanding that we're thoughtful folks but, yet, we do need to make investments for the future. And we have the track record that allows us to think about that a little bit that warrants our thoughtfulness. So, it's going to be a number and it's not going to be a big deal and we'll figure it out going forward.

Michael Bilerman -- Citigroup -- Analyst

And I have no qualms with the company making investments. There was just more or so I was trying to understand if that was -- the cost was making the dollar investment, which is very small, right. A few pennies 10, 12, 13 million bucks or does that represent the cost of carry on a much larger investment is, thinking about it of, look, I'll out go and I'll put $500 million to something in the effective opportunity cost of that capital?

David E. Simon -- Chairman and Chief Executive Officer

You are dealing with the guys who knows accounting. So, the reality is both, right because you have to depreciate the stuff, you don't add it back for FFO, sums investments, sums and operating expenses. So, it's actually, it would be both, OK. It's not -- you don't add the FFO back from -- for depreciation because it's not real property. So, it's a little bit of both, the amortized certain cost, it's IT spend. So, sums and amortized, we can sit down and go through the P&L, if you're really interested.

Michael Bilerman -- Citigroup -- Analyst

It would be scintillating.

David E. Simon -- Chairman and Chief Executive Officer

It will be scintillating.

Michael Bilerman -- Citigroup -- Analyst

Okay. I appreciate it, David. Thank you. Have a good rest of the year.

David E. Simon -- Chairman and Chief Executive Officer

No worries.

Operator

The next question comes from Derek Johnston with Deutsche Bank. Your line is open.

Derek Johnston -- Deutsche Bank -- Analyst

Good morning.

David E. Simon -- Chairman and Chief Executive Officer

Good morning.

Derek Johnston -- Deutsche Bank -- Analyst

Could you help us understand the retail leasing environment today versus six or 12 months ago. Any category standout from a lease term or store closure versus store opening perspective and has rising sales per square foot over the past year plus translated into higher demand for space?

David E. Simon -- Chairman and Chief Executive Officer

Well, I would say, as we discussed that by and large demand is better, better sales produce for the retailer produce more interest in opening up. There's new and more retailers coming into the market all the time and the only offsetting of this is, certain retailers that are in the process of dealing with not recent problems, but legacy financial issues that have never been properly addressed.

Derek Johnston -- Deutsche Bank -- Analyst

Okay. And then just to continue on the ten-anchor redev projects and the pipeline of 25 others. So, beyond the large-scale mixed use transformative redevelopment, which trust me, we think is the future. However, it's likely not justified for most reclaim Sears or other returned large boxes. So, where is that demand coming from to release this space. We've seen like lifetime athletic and some co-working facilities. Can you share any other demand you're seeing?

David E. Simon -- Chairman and Chief Executive Officer

I don't, what do you mean, I'm not sure I understand, mode, not justified. Could you restate that please?

Derek Johnston -- Deutsche Bank -- Analyst

What I mean it for all 25 projects, it's a large densification effort, maybe not justified for all markets, right. So you might be looking at a box where maybe you just want to bring in another tenant to fill it. And I'm wondering where that demand is coming from, I've seen lifetime and some co-working. Just wondering who else is kind of out there?

David E. Simon -- Chairman and Chief Executive Officer

There is a great deal of retail demand. Frankly, we are dealing with, I call them, fitness centers, but they are frankly closed country clubs, theaters, entertainment uses. A number of the larger format retailers in many of these instances, we are adding small shop, specialty store space, because as I said prior, if we have a great property, there is demand for that property and the spaces we're getting back are spaces that are in great properties that have demand. So, there is substantial retail demand in addition just the densification efforts that we've talked about previously.

Derek Johnston -- Deutsche Bank -- Analyst

Okay, thanks.

David E. Simon -- Chairman and Chief Executive Officer

Sure. All right. Well, thanks for your questions, and we're available if you like to talk further. Thank you.

Operator

Ladies and gentlemen, this concludes today's question-and-answer session. And thank you for participating in today's conference. This does conclude today's program. And you may all disconnect. Everyone have a wonderful day.

Duration: 83 minutes

Call participants:

Thomas Ward -- Senior Vice President, Investor Relations

David E. Simon -- Chairman and Chief Executive Officer

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

Richard S. Sokolov -- Director, President and Chief Operating Officer

Michael Bilerman -- Citigroup -- Analyst

Christine McElroy -- Citigroup -- Analyst

Stephen Sakwa -- Evercore ISI -- Analyst

Alexander Goldfarb -- Sandler O'Neill -- Analyst

Caitlin Burrows -- Goldman Sachs -- Analyst

Brian J. McDade -- Executive Vice President and Chief Financial Officer

Jeremy Metz -- BMO Capital Markets -- Analyst

Haendel St. Juste -- Mizuho Securities -- Analyst

Linda Tsai -- Barclays Capital -- Analyst

Michael Mueller -- JPMorgan -- Analyst

Nicholas Yulico -- Scotiabank -- Analyst

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

Wes Golladay -- RBC Capital Markets -- Analyst

Derek Johnston -- Deutsche Bank -- Analyst

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