Q2 2025 Simon Property Group Inc Earnings Call
Sherry (Operator): Greetings. Welcome to Simon Property Group's second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Tom Ward, Senior Vice President, Investor Relations. Thank you, sir. You may begin.
Tom Ward: Thank you, Sherry. Thank you 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 actual results may differ materially due to a variety of risks, uncertainties, and other factors. We refer you to today's press release and our SEC filings for a detailed discussion of the risk factors relating to those forward-looking statements. Please note that this call includes information that may be accurate only as of today's date. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included within the press release and the supplemental information in today's form AK filing.
Greetings, welcome to Simon Property Group. Second quarter 2025 earnings conference call. At this time, all participants are in a listed on the mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. This is now my pleasure to introduce Tom Ward, senior, vice president, investor relations. Thank you, sir, you may begin.
Thank you Sherry, thank you for joining us this evening presenting on today's caller, 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 actual results May differ material. We need you to variety of risks from certainties and other factors. We refer you to today's press release in our SEC party for a detailed discussion of the risk factors related to Affordable with your statements. Please note that this call and this information that may be accurate only as of today's date.
Tom Ward: 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 am pleased to introduce David Simon.
Reconciliations of non-gaap financial measures to the most directly comparable. Gaap measures are included within the press release and a supplemental information. In today's Forum AK filings, both the press release and the supplemental information are available on our IR website at investors simon.com
David Simon: Good evening, everyone. We delivered robust financial and operational results yet again for the second quarter. Occupancy gains, increased shopper traffic, and higher retail sales volumes contributed to strong cash flow growth. We continue to enhance our retail real estate platforms through development, redevelopment, and acquisitions, including the purchase of our partners' interest in Brickell City Center, a premier mixed-use property in Miami and its rapidly growing central business district. Our focus remains on creating long-term value through disciplined investments and operational excellence that drive growth and cash flow, funds from operation, and dividends per share, which yet again we raised. I'm now going to turn it over to Brian, who will cover our second quarter results in more detail.
our conference call this evening will be limited to 1 hour for those who would like to participate. The question and answer session, we ask you to, please respect a request to the nearest yourself to 1 question, but please introduce David Simon. Uh, good evening everyone. We're we delivered robust financial and operational results. Yet again for the second quarter occupancy gains increased Shopper traffic,
And higher retail sales volumes contributed to strong cash flow growth.
We continue to enhance our retail real estate platforms through development Redevelopment and Acquisitions including the purchase of our partners' interest in brickl City Center, a premier mixed use property in Miami and it's rapidly growing Central business district
Our Focus remains on creating long-term value, through discipline Investments.
And operational excellence that drive growth and cash flow funds from operation and dividends per share, which yet again, we raised.
I'm now going to turn it over to Brian, who will cover.
Our second quarter results.
Brian Mcdade: Good evening, and thank you, David. Real estate FFO was $3.05 per share in the second quarter compared to $2.93 in the prior year, 4.1% growth. Domestic and international operations had a very good quarter and contributed 21 cents of growth, driven by a 5% increase in lease income. As anticipated, lower interest income and higher interest expense combined were a 7-cent drag year over year. Domestic property NOI increased 4.2% year over year for the quarter and 3.8% for the first half of the year. Portfolio NOI, which includes our international properties at constant currency, grew 4.7% for the quarter and 4.2% for the first half. We signed approximately 1,000 leases for more than 3.6 million square feet in the quarter, with approximately 30% of our leasing activity for the quarter on new deals.
In more detail. Good evening and thank you David.
Real estate FFO was $3.00 per share in the second quarter compared to $2.93 in the prior year, representing a 4.1% growth.
Domestic and international operations had a very good quarter, contributing 21 cents of growth driven by a 5% increase in lease income, as anticipated. Lower interest income, along with higher interest expense, combined for a 7-cent drag year-over-year.
In increased 4.2% year-over-year for the quarter and 3.8% for the first half of the Year portfolio in oi, which includes our International property. That constant currency through 4.7% for the quarter and 4.2% for the first half.
Brian Mcdade: Nearly 90% of our leases expiring through 2025 are complete, ahead of this time last year. The malls and premium outlets ended the second quarter at 96.0% occupancy, up 10 basis points sequentially and 40 basis points year over year. The mills achieved a record 99.3% occupancy, an increase of 90 basis points sequentially and 110 basis points from the prior year. Occupancy remained strong across the portfolio, overcoming retailer bankruptcies of approximately 1.8 million square feet this quarter. Average base minimum rent for the malls and outlets increased 1.3% year over year, and the mills increased 0.6%. Sales for malls and premium outlets per square foot were $736 for the quarter, and occupancy costs at the end of the quarter were 13.1% flat sequentially from Q1 of '25.
We signed approximately 1,000 leases for more than 3.6 million square feet in the quarter with approximately 30% of our leasing activity. Uh, for the quarter on New Deals. Nearly 90% of our leases expiring through 2025 are complete ahead of this time. Last year,
The malls and Premium Outlets ended the second quarter at 96.0% occupancy.
Up 10 basis. Points sequentially in 40 basis points year-over-year, the Mills achieved a record 99.3% occupancy. An increase of 90 basis points, sequentially in 110. Basis points from the prior year.
Occupancy remained. Strong across the portfolio, overcoming retailer bankruptcies of approximately 1.8 million square feet this quarter.
Sales for malls and Premium Outlets per square foot were $736 for the quarter.
Brian Mcdade: Second quarter funds from operation were $1.19 billion or $3.15 per share compared to $1.09 billion or $2.90 per share last year, 8.6% growth. Second quarter results include a 21-cent per share non-cash after-tax gain, primarily due to Catalyst Brands' deconsolidation of Forever 21. In addition, better operational performance at Catalyst Brands compared to last year. And lastly, a 13-cent per share non-cash loss from the unrealized mark-to-market adjustment on our exchangeable bonds due to the outperformance of Clay Pier's share price, which increased 8% during the second quarter. Now, turning to development at the end of the quarter, development projects were underway across all platforms with our share of net cost of 1 billion and a blended yield of 9%. Approximately 40% of net costs are for mixed-use projects. As David mentioned, we acquired our partners' interest in Brickell City Center.
And occupancy cost. At the end of the quarter were 13.1% flat sequentially from q1 of 25.
Second quarter funds from operation were 1.19 billion or $3.15 per share compared to 1.090% growth.
second quarter results, include a 21 cent per share, non-cash after tax gain, primarily due to Catalyst Brands deck, consolidation of Forever 21,
In addition better operational performance at Catalyst Brands compared to last year and lastly a 13 cent.
Per share non-cash loss from the unrealized mark-to-market adjustment on our exchangeable. Bonds, due to the outperformance of clay Pierre's share price, which increased 8% during the second quarter.
At turning to development, at the end of the quarter development projects were underway across all platforms with our share of net costs of 1 billion, and a blended yield of 9%.
Approximately 40% of net costs are for mixed juice projects.
Brian Mcdade: Our $512 million investment includes the retail and the parking components and is accretive. We now wholly own and manage this highly productive center and look forward to enhancing operations with efficiencies in our leasing and management expertise to drive NOI growth. Turning to the balance sheet and liquidity, during the first half of the year, we completed 21 secured loan transactions totaling approximately $3.8 billion. The weighted average interest rate on these loans was 5.84%. And we ended the quarter with over $9 billion of liquidity. Turning to the dividend, today we announced our dividend of $2.15 per share for the third quarter, a year-over-year increase of 10 cents or 4.9%. The dividend is payable September 30th. Now, moving on to guidance, we are increasing our full-year 2025 real estate FFO guidance range to $12.45 to $12.65 per share compared to $12.24 last year.
As David mentioned, we acquired our partners' interest in brickl City Center, our 512 million investment includes the retail, and parking components and has accreted. We now fully owned and managed this highly productive Center and look forward to enhancing operations with efficiencies
in, in our Leasing and management expertise to drive noi growth.
Turning to the balance sheet and liquidity. During the first half of the year. We completed 21 Secura, transactions, totaling approximately 3.28, million billion dollars. The weighted average interest rate on the these loans was 5.84%
And we ended the quarter with over 9 billion dollars of liquidity.
Turning to the dividend today. We announced our dividend of $2.15 per share for the third quarter, a year-over-year, increase of 10 cents or 4.9%. The dividend is payable, September 30th.
Brian Mcdade: This is an increase of 5 cents at the bottom end of the range and 3 cents at the midpoint. With that, thank you. And David and I are now available for your questions.
Now, moving on to the guidance, we are increasing our full year 2025 real estate SSO. Guidance range to 12 $12.45 to $12.65 per share compared to $12.24 last year. This is an increase of 5 cents at the bottom, end of the range and 3 cents at the midpoint
Uh, with that. Thank you and David and I are now available for your questions.
Sherry (Operator): Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Jeff Spector with Bank of America. Please proceed.
Thank you. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Analyst (various, see below): Great. Thank you. Given them first, I'll keep it high level. You know, just given all the uncertainty, you know, ICSE to today, I guess could you describe for us the leasing velocity you're seeing, some of the demand, maybe a peek into, you know, your last, leasing meeting in terms of quantity, deal flow, and and quality of the deals, please? Thank you.
Our first question is from Jeff Spectre with Bank of America, please proceed.
Great. Thank you. Giving them first, I'll keep it high level. So, just given all the uncertainty, you know, I see today, I guess, could you describe for us?
The leasing velocity, you're seeing some of the demand may be a peek into, you know, your last, uh, leasing meeting in terms of quantity deal flow uh and and quality of the deals, please. Thank you.
David Simon: Unabated. So you're right, Jeff, in the sense that, you know, the whole world, and, is uncertain. A lot of, you know, geopolitical stuff going on, obviously. a lot of domestic political stuff going on. New York City, thankfully, we're not an investor in New York City, but obviously a lot of political uncertainty, in New York City. you know, tariff, you know, swings back and forth. interest rate, uncertainty. you know, you can you can name it. however, you have unbelievable stewards that are, us, you know, in particular, that are able to manage that. and in addition, you know, retail demand is really unabated. And, you know, the physical shopping environment, you know, continues to be the place to be.
Uh, unabated. So
You're right, Jeff, in the sense that, uh,
You know, the whole world. Um,
And, uh, is uncertain. A lot of, you know, geopolitical stuff going on, obviously.
Um, out of domestic political stuff going on, uh, New York City. Thankfully, we're not an investor in New York City, but obviously a lot of political uncertainty
Uh, in New York City.
Uh,
you know, tariff.
Uh, uh, you know, uh, it swings back and forth.
uh,
uh, interest rate uncertainty.
uh, you know, you can, you can name it
Uh, however, you have unbelievable stewards.
um, that are, uh, us
You know, in in, in particular, that are able to manage that.
Um and in addition um, you know, retail demand is really unabated and um, you know, the physical shopping environment.
David Simon: So we're quite bullish, about what we've done, what we are doing, where we are going, despite, you know, all of the, you know, headlines that are out there. so unabated. and you know, if you look at our 33-year almost track record, you know, I kind of laugh, you know, not to, I guess not to segue, but to segue. you know, I kind of I kind of chuckled to myself in that, you know, some of our, you know, you you read all these companies that are restructuring. well, now they're going to lease their properties better. Now they're going to manage their balance sheet better. now they're going to bring in new management and be better. you know, if you look at our particular little niche, you know, we've had bankruptcies. We've had people that have bought companies that have overpaid, that had to restructure their operations.
Uh, you know, continues to be the place to be so we're quite bullish.
Uh, about what we've done what we are doing.
Uh, where we are going. Um,
Uh, despite, you know, all of the headlines that are out there.
Uh, so unabated.
Uh, and you know, if you look at our 33-year, almost track record, you know, I kind of laugh. Um.
You know, not to, I guess, not to segue, but to segue, uh, you know, I kind of chuckled to myself.
In that.
You know, some of our, you know, you you read all these companies that are restructuring.
Um, well now they're going to at least their properties better. Now they're going to manage their balance sheet better.
Uh, now they're going to bring in new management and be better.
David Simon: Wholesale management changes, you know, restructuring of operations, this, that, and the other. There's one group, one group that's never done that. And that's us. And all we've done is run our business appropriately. And we'll continue to do so. And you know, it's something that I think investors and analysts in particular, Jeff, should point that out. You've never read about a Simon Property Group, you know, restructuring. Yes, we had to do some, you know, certain drastic things, you know, to deal with COVID and to deal with the great financial crisis. But you know, there's been no restructuring of this company. Only things that have benefited shareholders. So you know, the headline risks that are out there, they're real. but tenant demand is unabated. Traffic's up. Sales are holding their own. And, our properties are continuing to get better.
Um, you know if you look at our particular little niche, you know, we've had bankruptcies and the people that have bought companies that have overpaid you have to restructure their operations, wholesale management changes.
You know, restructuring of operations, this that and the other there's 1 group.
1 group that's never done that.
And that's us, and all we've done is run our business appropriately.
And uh, we'll continue to do so.
Um,
and um, you know, it's it's something that I think investors and analysts in particular
Just should point that out you've never read about.
A Simon Property Group, you know? Restructuring. Yes. We had to do some, you know, certain drastic things. Um,
You know, to deal with Co and to deal with uh the great financial crisis. But
You know, there's been no restructuring of this company. The only things that have benefited are shareholders.
So you know the headline risks are out there, they're real.
uh, the tennis demand is unavailable,
Sales are holding their own.
And, uh, our properties are continuing to get better.
Analyst (various, see below): Great. Thank you.
David Simon: Sure.
Great. Thank you.
Sure.
Sherry (Operator): Our next question is from Michael Griffin with Evercore ISI. Please proceed.
Analyst (various, see below): Great. Thanks. Maybe just diving into that tenant demand piece a bit more. You know, it probably seems like the national retailers and concepts have, you know, a greater footing or clarity around their, you know, real estate footprint needs. But for maybe some of those smaller tenants, maybe those mom-and-pop local concepts, are you still seeing strong demand from those as well, David? You touched about kind of across-the-board demand, but just curious if you can kind of bifurcate those two pieces. Thank you.
Our next question is from Michael Griffin with Evercore. Isi, please proceed.
David Simon: Yeah. Yeah. You're right. Last quarter, I did express my concern about that segment given, you know, how tariffs might affect them and their cost of goods. But it's, it's, they're doing, they're beating their plans so far this year. So it's all systems go there. I'm sure there's trepidation, but they're, I think they're managing it, you know, as best they can. I still think the full story, obviously, given the volatility has not been written, but we're not seeing it in demand. And that particular business that is sensitive to moms and pops continues to perform well. So you know, we're more optimistic about that segment than I was last quarter. But you know, like I said, we, you know, it is a, it is something that we're watching closely.
Great, thanks. Um, maybe just diving into that tenant demand. Uh, piece a bit more. You know, probably seems like the national retailers and Concepts have, you know, a greater footing or, or Clarity around their, you know, real estate footprint needs but for maybe some of those smaller tenants, maybe those mom and pop local concepts. Are you still seeing strong demand from those as well? David, you touched about kind of across the board, demand, but just curious, if you can kind of bifurcate those 2 pieces. Thank you. Yeah, yeah. You're right. Last quarter, I did.
I express my concern about that segment, given you know how terrorists might affect them and their, uh,
Their cost of goods. Um,
but,
it's it's they're doing, they're beating their plans so far this year so
Uh it's all systems go there. I'm sure there's trepidation, but they're I think they're managing it. Um,
You know, as best they can. I I I still think the full story.
Uh, obviously given the volatility has not been written, but um, we're not seeing it in demand and, um, and that's particular business that insensitive to monitor tops, uh, continues to, um, to perform well. So, you know, we're we're more optimistic about that segment than I was last quarter, but, you know, like I said, we, you know, it is a, it is something that we're watching closely.
Analyst (various, see below): Great. Thank you.
David Simon: Sure.
Great. Thank you.
Sherry (Operator): Our next question is from Caitlin Burrows with Goldman Sachs. Please proceed.
Sure.
Caitlin Burrows: Hi. Thanks. Maybe just on the acquisition side, you guys were active in the first half with acquisitions, which was exciting to see. So I was wondering if you could talk a little bit more about the upside you see at Brickell and then more broadly to what extent other acquisition opportunities seem to exist for Simon today, either from JV partners or otherwise.
Our next question is from Caitlyn Burrows with Goldman Sachs, please proceed.
Broadly, to what extent do other acquisition opportunities seem to exist for Simon today, either from JV partners or otherwise?
David Simon: Sure. Well, Brickell is a really good asset that long-term will be great. Miami, you know, Caitlin, I'm sure you're familiar with it. We're in the central business district. There's no real retail that can be built in that. Because of the traffic of Miami, it's kind of its own submarket. And even though, you know, there's a lot of retail generally in Miami, just because of the traffic and the population density and the tourism, it is really, you know, you can have a number of properties that that flourish. And central business district, you see what Citadel's doing there. I still think you'll see a continuation of New York and Chicago companies moving there. So the job prospects are great. And Brickell in itself deals and attracts a lot of international customers and tourism. It's got the hotels. It's got the nightlife.
Uh sure. Well Bristol Brickle is
Uh, a really good asset that long-term will be great.
Uh, Miami, you know, um, Caitlin, I'm sure you're familiar with it, we're in the central business district, there's no real retail that can be built in that because of the traffic.
Of Miami. It's kind of its own submarket.
Um,
and um, even though, you know, there's a lot of retail generally in Miami
Just because of the traffic and the population density.
And the tourism. Um,
you it, it is really, you know, you can have a number of properties that uh that flourish and um
Central business district, you see with citadel's doing their
Um, I still think you'll see, um, a continuation of...
Uh, uh, New York and Chicago companies moving their... So the job prospects are great.
And brickl and itself deals.
And attracts a lot of international uh customers and tourism. It's got the hotels.
David Simon: And we just think that the asset's going to get better and better. And there'll be more development around it that, you know, will continue to fuel its growth. And we bought it on a very accretive basis. We bought it at a higher cap rate than the strip centers that are being sold today. Strip centers that are subject to, you know, probably easier competition, easier to build. You know, and Brickell, we bought it at below its replacement cost by far. It hasn't even had its first rollovers of rent. And again, I think we'll do, now this is our core business, so I think we'll do better leasing and managing the asset. So we're very excited about Brickell, as we, you know, as we are with the mall. And we're working on a few other things that, you know, we're able to do.
It's got the nightlife um and we just take the the assets going to get better and better and there will be more development around it that um you know will continue to fuel its growth and we bought it on a very creative basis.
uh, we bought it at a higher price than
The script centers that are being sold today.
Strip centers that are subject to
You know, probably easier competition.
Um, easier to build, um, you know, um, and Brickle. We, we bought it at below its replacement cost by far.
Um, it hasn't even had its first rollovers of rents.
Uh and again I think we'll do now. This is our core business. So I think we'll do better Leasing and managing the assets. So we're very excited about brickl um as we you know, as we are with the mall and we're working on a few other things that
David Simon: And I mentioned this before. We're working on some other interesting things that we're able to do because we've never gone through a restructuring. All great, great to buy a mall because you haven't bought anything in a decade. Well, that's never been us. And so we'll keep, you know, we'll keep finding opportunities where we can grow our platform. And we're going to be, you know, we're going to be picky on what we what we buy and what we want to do. But we're able to do it because, you know, this company doesn't need to sell a bunch of assets. It doesn't need to bring in a new management team. You know, it doesn't need to downsize its platform. It, you know, it doesn't need to do it because it's outperformed over a 30-plus year period, you know, that that no one else has done.
You know, we're able to do and I mentioned this before.
um, we're working on some other interesting things that
um,
That.
We're able to do this because we've never gone through a restructure.
All great. It's great to buy them all because you haven't bought anything in a decade. Well, that's never been us. Um,
and so we'll keep, you know, we'll keep finding uh opportunities where we can grow our platform, but we're going to be
you know, we're going to be picky on what we what we buy and what we want to do, but we're able to do it because you know, this company doesn't need to sell a bunch of assets, it doesn't need to bring in a new management team, you know, it doesn't need to downsize this platform and, you know, it, it it, it it, it doesn't need to do it because it's
It's out of form, uh, over a 30-plus year period.
David Simon: So we're hopeful that a couple of more things will get announced this year, and they'll be accretive. They'll add to our platform, and that we'll be able to manage them better, so we'll be able to grow our cash flow.
you know that, um, that's that, that no 1 else has done so, um,
We're hopeful that a couple of more things will get announced this year and there'll be a creative the allowed to our platform and that we'll be able to manage them.
Uh, better. So we'll be able to grow our cash flow.
Caitlin Burrows: Thanks for all that.
David Simon: Sure.
Thanks for all that.
Sure.
Sherry (Operator): Our next question is from Alexander Golfer with Piper Sandler. Please proceed.
Our next question is from Alexandra Golder with Piper Sandler. Please proceed.
Analyst (various, see below): Hey, good afternoon out there, David. just, you know, continuing on.
David Simon: We're actually in New York City. That's why I brought up the New York City.
Analyst (various, see below): Okay. well, then, you're just down the train line from us here in Greenwich. so hopefully, you're enjoying in the city. so, a question. Just following up on Caitlin's, you know, question on on externals. For for quite a long time, you've been reiterating to us that you see more investment potential in your existing portfolio versus externally. So if Tom will forgive me for a two-parter. One, what is the return threshold, the gap that you need when you go externally versus, you know, ability to reinvest internally in your existing? And two, it does seem like we're on the cusp of a mall transaction wave where capital is starting to flow back to malls across, you know, the spectrum.
Hey, uh, good afternoon out there. David, um, just you know, continuing on, we're actually in New York City. That's why I brought up the New York City Council.
Analyst (various, see below): And just sort of curious if, in your view, this is going to set up like a repeat that we had in the, I guess, late '90s, early 2000s when there was suddenly, within a few years, this massive mall trade. So wondering if you're foreseeing that. So that's my two-parter. Forgive me, Tom.
Need when you go externally versus you know ability to reinvest internally in your existing and 2. It does seem like we're on the cusp of a mall transaction wave where capital is starting to flow back to malls across, you know, the the Spectrum and just sort of curious. If in your view this is going to set up like a repeat that we had in the I guess late 90s, early 2000s when there were suddenly within a few years this massive Mall trade. So wondering if you're foreseeing that so that's my 2-part uh, forgive me, Tom
David Simon: Well, you don't have to, Tom. You don't have to ask for forgiveness from Tom. He's a very nice man. We'll give you a free pass, Alex. So, look, I don't, I think a lot goes into acquisitions. And you know, it's not an either/or thing. I think, you know, we have, as you know, Alex, the balance sheet and the firepower to do both. And the development process, i.e., or the redevelopment process, takes, you know, years to do, right? So, you know, the Tate Spray is under construction, and then we had to buy the stewards' store. We had to get approvals. We had to go, you know, we're about to start on the multifamily. You know, that's over a three-year process. So it's not like suddenly the money just goes out day one.
Well, you don't have to come. You don't have to ask for forgiveness from Tom. He's a very nice man.
We'll give you a free pass, Alex. So, um, look, I, I don't, I think, um, a lot goes into...
acquisitions.
Um and I you know it's not an either or thing. I think you know, we have as you know, Alex um the balance sheet and the Firepower to do both
And, um, the development process or the redevelopment process.
Takes you know, years to do right? So you know uh take Breya that you know is under construction. And you know, we had to buy the Sears store. We had to get approvals. We had to build, you know, we're about to start on the monthly family, you know.
That's over 3 year.
David Simon: So we've never had this, you know, dilemma that you're suggesting where it's an either/or. And I think, from a math point of view, we look at it kind of the, you know, similar basis. Do we, are we buying it, or when we're redeveloping or developing, are we creating net asset value? so if it's a mall, you know, is the redevelopment yield higher than, you know, where that asset might trade? and what does it do to the overall asset's growth rate of cash flow? A lot goes into that, but that's the basics. Then on an acquisition, it's a little bit of the same thing with our expertise. You know, what does it do for the platform? Does it deepen our relationships with the retailers? You know, are we buying it under replacement cost?
Process. So it's not like suddenly the money just goes out to $1. So we've never had this.
um,
You know, the dilemma that you're suggesting, where it's an either-or.
and I think, um,
from a, Matt point of view, we look at it kind of the
You know similar basis. Do we are? We buying it? Um,
um, or when we're redeveloping or developing or recreating net asset value,
um so if it's a law, you know, is the Redevelopment yield higher,
Than, you know, where that asset might trade.
Um, and what does it do? To the overall assets growth rate of cash flow
um,
A lot goes into that but that's the basics. Then on an acquisition, it's a little bit of the same thing with our expertise.
You know, what does it do for the platform? Does it deepen our relationships with the retailers?
David Simon: And you know, as we, and when we look back, will it be accretive at AV? And you know, so you have to take a little bit longer-term view on that. But it's not, it has not, you know, it has not created this situation where we can't do both. And so our goal is to continue to do both and to push to do both. And the reason we haven't done as many acquisitions is we, you know, we really, you know, have been product and price sensitive. And we'll continue to be product and price sensitive because we can't create an AV without focusing on the product and the price sensitivity. So as my, you know, I'm on the board of Apollo, and not to, not to, quote Mark Roland, but I'll go ahead and quote him. You know, purchase price matters, okay? So, you know, it does.
Um, you know, are we buying it under replacement costs?
and you know, as we and when we look back, will it be a 3 to 10 a
And, um, you know that, so you have to take a little bit longer-term view on that.
Um, but it's not.
It's it's it has not, you know, it has not uh created this. Um,
This situation where we can't do both, and so our goal.
Is to continue to do both, and to push to do both.
And the reason we haven't done as many acquisitions as we, you know, we really have been, uh, product and price sensitive.
And we'll continue to be product- and price-sensitive because we can't create NAV.
Without focusing on the product and the price sensitivity.
So, as my, you know, I'm on the board of Apollo.
And not to not to um, quote Marc Rowan, but I'll go ahead and quote him.
You know, purchase price matters.
David Simon: So, you know, and, and we're very focused on that. So rest assured, when we buy something, we've vetted the price. Really vetted the price. So going to your next thing, I'm not sure about whether there's going to be this huge, you know, mall transactions. I think you'll have other players come in, you know, buying maybe not necessarily, you know, quote, "A properties," but a lot of Bs. And because, you know, the reality is you can make, you know, you can, you're stay-at-home, and you can create, you know, a nice arbitrage. You can manage them and lease them and improve them. And, and they're a lot stickier than than people believe because, you know, most malls, Alex, I hate to break it to you, but most enclosed malls are 30 to 50 years old.
Okay, so, you know, it does, so you know, and um,
And we're very focused on that. So, rest assured, when we buy something,
we vetted the price.
Really bad at the price. So, going to your next thing, I'm not sure about whether there's going to be this huge.
You know, um, small transactions, I think you'll have other players come in.
um,
you know, buying
Um, maybe not necessarily.
You know, quote a property, but a lot of bees and because, you know, the reality is, you can make, you know, they're stable, and you can create, you know, a nice arbitrage and manage them and lease them and improve them. And, um, and there are a lot of stickier than.
You know, most malls.
David Simon: And yet, you know, despite the media and the naysayers, you know, they've, and that's not to say there hasn't been a significant amount of obsolescence. But most of them, you know, are here today still still fighting a pretty good battle. And despite, you know, a lot of things not not going their way. So I think there'll be more trades, but I don't, I'm not sure it'll just be this huge, huge wave of transactions. I think, Brian, you can weigh in if you want, but that's kind of, you know, just some random rambling thoughts, Alex. You can comment. I will let Tom give you another pass. You can comment on my comments while Brian is contemplating whether he will want to add anything to it. So your turn.
Alex, I hate to break it to you, but most enclosed malls are 30 to 50 years old.
And yet, you know, despite the media and the naysayers, they’ve—and that’s not to say that it hasn’t been a significant amount of obsolescence.
But most of them, you know, were here.
Today, still still fighting pretty good backs. Um, and despite, um, you know, a lot of things not not going their way. So I think there'll be more trades but I don't, I'm not sure. It'll this be this huge
Huge wave of transactions that are a grind. You can weigh in if you want, but that's kind of, uh, you know, um.
Just some random rambling thoughts. Alex, you can comment. I will let Tom give you another pass. You can comment on my comments.
Analyst (various, see below): No, I'm going to defer to others who want to ask. That was a very thorough, so thank you, David.
Uh, Brian is contemplating whether he will want to add anything to it. So, your turn.
No, I'm going to defer to others who want to ask. That was very thorough. So thank you, David.
David Simon: Brian, nothing to add, covered it.
Something that covered it.
Sherry (Operator): Our next question is from Craig Melman with City. Please proceed.
Our next question is from Craig Melman with City. Please proceed.
Analyst (various, see below): Hey, guys. Good evening. I wanted to maybe circle back on some of the themes of the earlier questions, David. Just, you know, a lot's happened in the last 90 days and last quarter. Your message was, you know, a little bit more realistic, I think, in the face of uncertainty. And, you know, Brian kind of focused us to the midpoint of guidance. Fast forward 90 days, maybe there's been a little bit less fallout than than would have expected. You guys raised the low end. Would you still kind of point us to that that midpoint of guidance? Maybe update us on, you know, your views today of, you know, how you're feeling about the macro? And are you concerned about, you know, any lingering effect of of policy or geopolitical, happenings kind of weighing on 2026 growth?
Hey, guys, good evening. Um, welcome to the May Circle back on on some of the themes of the earlier questions. David just, you know, A lot's happened in the last 90 days. And, and last quarter, your message was, you know, a little bit more realistic. I think in the face of uncertainty and, you know, Brian kind of focused us to the midpoint of guidance fast forward, 90 days. Maybe there's been a little bit less Fallout than than would have expected. You guys raised the low end, would you still kind of point us to that that midpoint of guidance, maybe update us on? You know, your views today of, you know how you're feeling about the macro and are you concerned about, you know, any lingering effect of of policy or geopolitical, um, happenings kind of Weighing on 2026 growth.
David Simon: Well, let me, I'll let Brian kind of, I'll be less rebellious than I than I was with Alex. I will say, unquestionably, even though we raised the bottom end, I mean, I mean, we're still very cautious about, you know, the economic environment. We have to, right? I mean, you know, terrorists are a real cost to doing business. And, and they're changing, you know, consistently, right? the only consistent thing about terrorists is that they've been consistently changing, right? So, and it's a cost to do business. Now, you know, ultimately, who pays that cost? You know, is it the consumer? No, there's only, first of all, it's the domestic company that imports, right?
Uh,
Well, let me. I would, I'll let Brian kind of be a bit less verbose. And I, when I was with Alex, I will say unquestionably.
even though we raised that the bottom end, I mean, we're still very cautious about
You know.
The the, the the economic environment we we have to be, right? I mean, you know terrorists terrorists are a real
Cost to doing this and, um, and they're changing.
You know, consistently right? Um, the only consistent thing about terrorists is that they've been consistently changing, right? So and it's a cost to do business now, you know, ultimately who pays that cost?
David Simon: So they start with the cost, pain, and you can see it by Ford and, you know, a number of other companies that it's going to cost me, you know, $800 million or a billion dollars. And then the next question is, can the suppliers chip in? And then ultimately, the consumer. And I think most companies are kind of working that next step or two, three. So in that scenario, it is hard for us not to be cautious. And obviously, from just pure retail, are they going to, you know, are they going to be more cautious on buying than they might not otherwise be through tariffs? At the same time, the US economic landscape looks, you know, I mean, I don't have to tell you how much money and capital is planning to be spent in the US. That's a huge driver of GDP.
You know is it the consumer? You know there's only first of all it's the it's the domestic company that employs, right? So they start with the cost.
Um, uh, pain. And you can see it by Ford and, you know, a number of other companies. It says it's going to cost me, you know, $800 million or a billion dollars.
And then the next question is, can the suppliers ship in? And then ultimately the consumer and I think most companies are kind of working
That next step or 2 3.
so in that scenario, it is
It is hard for us, not to be cautious, and obviously from just pure retail or they going to, you know, they're going to be more cautious on buying.
Um,
then they might not otherwise be for terrorists.
at the same time, the US economic
um,
Landscape looks, you know, I mean, I don't have to tell you how much money and capital.
is planning to be spent in the U.S.
David Simon: I don't think it'll be all that's out there, you know, all that's announced, but you know, there's going to be a huge driver of GDP growth. You know, the ultimate ramifications of those investments are uncertain, but that's several years down the road, I believe. So, you know, we're optimistic about the growth profile of the US. But, you know, I mean, it's, it's, it's, there's a lot of variabilities that all companies are dealing with. So, again, I said I wasn't going to be long-winded. It turns out that I was. But, but so I think the bottom line is we're being a little more cautious. I think 26X, to me, might feel better only because by then, you'll know the tariffs. The tariffs could be a one-time cost.
That's a huge driver of GDP.
Uh, I don't think it'll be all that's out there, you know, all of it's announced. But, you know, there's going to be a huge driver.
Of GDP growth.
Um,
you know, the ultimate ramifications of those investment or uncertain but that's
Years down the road, I believe.
Um,
so you know, we're optimistic about the growth Pro profile of the US, but
You know? I mean, it's it's it's um,
it's um,
There's a lot of variability that all companies are dealing with, so
Um, again I said, I wouldn't even be a long way to turns out that I was, but, but so I I, I think the bottom line is, will be a little more cautious.
I think 25 actually to me might feel better only because
By then, you'll know the terrorists.
David Simon: That time, you know, between the suppliers and the vendors or the importers, you've kind of, you've kind of figured out who's going to pay for it. And it'll, it'll, it'll surface, and then you'll be able to go forward and, and, operate the business. So I don't think 26 will have this kind of volatility from the terror scenario, and it actually could look better.
Um, the terrorists could be a one-time cost that time.
You know, between the suppliers and
Um the vendors or the importers you've kind of, you've kind of figured out who's going to pay for it.
And it'll it'll it'll surface and then you'll be able to go forward and and um, operate the business. So
I don't think 26.
Will have this kind of volatility.
From the Tariff, um, uh, scenario. And it actually could look
Analyst (various, see below): Brian?
David Simon: Craig, I guess all I would add to that is, as you look at kind of what we did for guidance, certainly looking back over history, you know, it is not, we traditionally will bring up the bottom end of our range at this point in the year after, you know, seeing the first six months. You know, occupancy's up. FFO's up. So I think we're cautiously optimistic to David's point for the balance of the year.
that Brian.
Craig, I guess all I would add to that is, is you look at kind of what we did for guidance. Certainly looking back over history. No, it is not. We traditionally will bring up the bottom end of our range at this point in the year. After you know, seeing the first 6 months, you know, occupancy is up ffos up. So I think we're cautiously optimistic to David's point for the balance of the year.
Analyst (various, see below): Great. Thank you.
Great. Thank you.
Sherry (Operator): Our next question is from Michael Goldsmith with UBS. Please proceed.
Our next question is from Michael Goldsmith with UBS. Please proceed.
Analyst (various, see below): Good afternoon. Thanks for offering to take my question. David, I think you've mentioned increased shopper traffic on the call twice now. So are you able to quantify what you're seeing? And is there any difference in the traffic growth between mall and outlet or any other way that you can segregate it with the goal of trying to understand if the consumer is, if there's any trends for the consumer at different price points?
Good afternoon. Thanks for taking my question, David. I think you've mentioned increased shopper traffic on the call twice now. So, are you able to quantify what you're seeing? Is there any difference in the traffic growth between mall and outlet, or any other way that you can segregate it with the goal of trying to understand if the consumer is, uh, if there's any trends for the consumer at different price points?
David Simon: Yeah. Our traffic is up 1.5%. So that's the number. I would still, you know, we're not operating on all cylinders. And where we see a little bit of sales and traffic weakness are border, you know, these assets are still great, so don't get me wrong. But generally, they provide, you know, pretty, pretty healthy sales growth. And right now, they're relatively flat. But I would say the softness, at least based upon historical results, has been assets on, and it doesn't really matter whether it's an outlet or a full-price mall, but it's assets that are on the border north or south, okay? It's almost irrelevant whether it's the Canadian border or the Mexican border.
Yeah, I I it's it's our traffic is up 1 and a half percent. Uh, so that's, that's the number. Um, I would still um
You know, we're we're not. Um,
Operating.
On all cylinders.
And where we see.
Um, a little bit of sales and traffic weakness or, um, border, you know, these assets are still great. So, don't get me wrong. But generally, they provide.
You know, pretty, pretty healthy sales growth, and right now they're relatively flat.
but I would say the
The softness at least based upon historical results.
Has been assets.
Uh, on it, it doesn't really matter whether it's an outlet or a full-price mall, but it's assets that are on the border, north or south.
David Simon: And so from a sales and traffic point of view, we're not hitting on all cylinders because those, that freedom of, you know, going back and forth, you know, to shop or whatever is, you know, is restricted. And I would also say, you know, we're not seeing the benefit that normally you might see from a weaker US dollar, VZP, the euro, or certain other currencies, you know, as the international tourist is not growing or flatlining in terms of in terms of people the way, you know, you might, you might see historically. So those kind of tourist-oriented vendors are not, before, again, they're great vendors. So they have a high bar to achieve. But they're not, they're hopefully being articulate, but they're not outperforming like they always do for us. They're kind of in line.
Okay, it's almost irrelevant whether it's the Canadian border or the Mexican border. Um,
and so from a sales and traffic point of view, we're not hitting on all cylinders because those
That freedom.
Of, you know, going back and forth.
you know, to shop or whatever is um,
you know, is is um,
You know, it is restricted, and I would also say.
You know, we're not seeing the benefit that normally you might see.
From a weaker U.S. dollar, these would be the euro.
Or certain other currencies.
Um,
You know, as the international tourists.
is uh, not growing or flatlining.
In terms of, in terms of people,
The way, you know, you might, you might see. Historically, so um, those kind of tourist oriented centers or not.
Again, they're great centers.
So they they have a high bar to achieve.
Ridiculous, but they're not.
David Simon: So therefore, we're not, in my opinion, not performing at the highest level because those great properties border north-south tourism are kind of operating within the normal portfolio performance. Make sense? You understand what I'm saying?
Outperforming like they always do for us. We're kind of in line.
So therefore, we're not in my opinion not performing.
At the highest level because those great properties order.
North south tourism or kind of operating within the normal portfolio performance makes sense. You understand what I'm saying?
Analyst (various, see below): Absolutely. Thank you very much.
David Simon: Thank you.
Absolutely, thank you very much.
Thank you. Bye.
Sherry (Operator): Our next question is from Flores Van Dijkstam with Leidenberg Thomann. Please proceed.
Our next question is from Flores Van Duysen with Latin Brooke Salman. Please proceed.
Analyst (various, see below): Hey, David. Thanks for taking the question. David, maybe if you could comment on, you know, last, I think last quarter I asked about your, your ethanol pipeline of being around 300 basis points. And I, as I look at your portfolio, your mills assets are 99.3% leased or something like that. Is this getting to be the new normal on this supply-constrained market? I did notice your TRG assets saw a drop, but the rents were up markedly. Maybe if you can talk a little bit about where the greatest growth potential is in your view, in, in, in, you know, between the the various segments of your portfolio. If you could, you know, maybe expound on that and then maybe talk update on the ethanol pipeline as well, please.
Hey, uh David uh, thanks for for taking the question David. Maybe if you could comment, um, on, you know, last I think last quarter, I asked about your, uh, your ethanol pipeline of being around 300 basis points, and I, as I look at your portfolio, your Mills assets are 99.3% leased or something like that. Is this getting to be the new normal on this Supply, uh, constrained Market, I, I did notice your, your TRG assets, saw a drop, but the rents were up marketed. Maybe if you can talk a little bit about where the greatest growth potential is in your view, uh, in in in in, you know, between the the, the various segments of your portfolio, if you could, you know, maybe expound,
On that and then maybe talk update on the Sno pipeline as well, please.
David Simon: So, Flores, I'll start with the ethanol. It's at 340 basis points at the end of the quarter. As we think about, and you've heard us talk, you know, about occupancy, it's the optimization of that occupancy is where we're kind of at in the point in the cycle now. And so it's really finding merchandise mix and finding tenants that make the property better. And so there'll be more of that replacement of existing tenants with new tenants going forward. It's really going to drive the performance of the portfolio. And it's across all of our asset classes. So the mills still, even at a high occupancy, you know, the tenant demand is still strong, and we're able to replace underperforming tenants. And I think you can say the same across the outlet and the mills businesses. I mean, excuse me, the outlet and the mall businesses as well.
So Flores, I'll start with the Sno. It said 340 basis points at the end of the quarter, um, as we think about, and you've heard us talk, uh, you know, about occupancy. It's the optimization of that occupancy is where we're kind of at an appointment in the cycle now, and so it's really finding merchandise, mix and finding tenants that make us the properties better. And so there will be more of that replacement of existing tenants, with new tenants going forward. Uh, it's really going to drive the performance of the portfolio and it's across all of our asset classes.
David Simon: Yeah. And TAVA, no, there's no TRG, no real, you know, they, it's a smaller portfolio, so a swing here and there has a bigger impact. A couple of Forever 21. So, as Brian mentioned in the text, we lost a million eight square feet in bankruptcy. 1.7 of that was Forever 21. That has a bigger impact on a smaller portfolio. And that's really what transpired at the TRG level.
So, the Mills still even at a high occupancy, you know, the tenant demand is still strong and we're able to replace underperforming tenants and I think you can say the same across the outlet in the middle of businesses. I mean excuse me, the outlet in the mall businesses as well.
Yeah and Calvin know there's no the TRG no real, you know. They it's a smaller portfolio. So swinging here and there has a bigger impact
A couple of Forevers 21. So, as Brian mentioned in the text, we lost a million and eight square feet in bankruptcy. 1.7 million of that was Forever 21, which has a bigger impact on a smaller portfolio. And that’s really what transpired at the TRG level.
Analyst (various, see below): And in terms of occupancy, is 99 your your goal now internally? Do you think you can get that on the platforms as well?
David Simon: You know, I mean, I want every space leased with the highest productive tenant. I think, you know, it's an interesting tidbit. 99.3, I don't get excited about it one way or another. You know, next quarter, it could be 90.95 or it could be 99.21. And I think it's neither here nor there, okay? They're doing a good, the team's doing a good job, though. You know, I don't know.
And in terms of occupancy is is is 99 your, your goal now internally. Do you think you can get back to the other platforms as well? You know, I mean, I want every space raised about, you know.
With the highest production tenant.
Um, I think you know it's an interesting tidbit 1993, I don't get excited about it 1 way or another, um, you know, next quarter. It could be 995, or if it could be 99.21. And I I I think it's neither here nor there.
Okay, they're doing a good job, though. Give them a pat on the back.
Analyst (various, see below): Thanks, David.
David Simon: Thank you.
Thanks David.
Thank you.
Sherry (Operator): Our next question is from Vince Thiebaud with Green Street Capital Markets. Please proceed.
Analyst (various, see below): Hi. Good afternoon. I was a bit surprised Simon was not more active acquiring JC Penney boxes from Copper Property Trust. Like, just big picture, can you discuss how you're currently thinking about, you know, the importance of owning and controlling additional anchor boxes at your centers and, you know, how that, how your appetite to to acquire these may vary based on center quality, you know, near-term redevelopment prospects? You know, just love to pick your brain on on that, on that topic.
Our next question is from Vince Tibo with Green Street Capital Markets. Please proceed.
Hi, good afternoon. Um I was a bit surprised Simon was not more active acquiring JC Penney boxes from copper property trusts like just big picture. Could you discuss how you're currently thinking about, you know, the importance of owning and controlling additional anchor, boxes that your centers, and, you know, how that how your appetite to, to acquire these may vary based on Center quality, you know, near-term, Redevelopment prospects, um, you know, just love to pick your brain on on that, uh, on that topic.
David Simon: Yeah. Well, again, this is complicated matter, so I'm not going to talk about it specifically, but it's really, it's really up to Catalyst. We don't have any particular right to buy it. It's really up to Catalyst to, you know, mayor, you know, has a right to buy it. I'm not going to really get into that scenario. What happens? We've been very active on buying boxes and redeveloping our centers. I think everybody knows that. But as I said earlier, purchase price matters. And you know, we.Are
Yeah, well, again, this is a complicated matter, so I'm not going to.
Talk about it specifically, but it's really up to Catalyst. We don't have any particular right to buy it.
It's really up to Catalyst about, you know, the mayor, you know, has a right to buy it. I'm not going to really get into that.
Um, scenario.
David Simon: very focused on paying the right price on any given particular, scenario. But, again, you got to be careful this going from from what Prosko is selling to Simon Property Group. There's a company called Catalyst who operates those stores. We're a shareholder in it, and it's a complex matter. And beyond that, other than to say, we've been very active in buying boxes, you know, since, you know, since, you know, since, you know, all the various restrictions that are, you know, have been going on. But we're going to pay the right price.
And you know, we are very focused on paying the right price.
On Any Given particular. Um,
Um, scenario. But um again you got to be careful.
That's going from.
From.
What Proco is selling to Simon Property Group.
There's a company called Catalyst that operates those stores.
Where a shareholder in it.
And it's a complex matter, and beyond that.
Other than to say, um, we've been very active in buying boxes.
You know, since, um, you know, since um, you know, since you know, all the various restrictions that have, you know, been going on, but we're going to pay the right price.
Operator: Now, that, that just to maybe to summarize and confirm, is it kind of fair to summarize that it seems like there's probably more complexities in this structure versus, you know, this is not an indication that Simon is less interested in buying anchor boxes or, you know, the appetite has changed? I mean, that's kind of what I read through. I just wanted to kind of confirm that's a fair categorization.
David Simon: Yeah. You can confirm. First of all, it's the relationship with Prosper, which is Catalyst. We have no relationship. We signed the property group has no relationship with Prosper. Nothing. So we have a relationship with Catalyst because they're, you know, in some cases, they're a tenant to us. In some cases, they're not a tenant to us, but they operate adjacent tenant store, you know, or malls. So you can't go from, from, you know, whatever the name of that copper retail to Simon Property. You can't make that link and say, "Oh, Simon's not interested in the box." Would I be interested in all the Opco boxes? No, not necessarily. Would I be interested in the Simon boxes? Potentially, sure. But then I would fall back on what the right price is. You follow what I'm saying, then? You can't go from there to Simon Property Group.
No, that just maybe to summarize and confirm, it's kind of fair to summarize it. It seems like there's probably more complexities in this structure versus, you know. This is not an indication that Simon is less interested in buying anchor boxes or that the appetite has changed. I mean, that's kind of what I read through, but I just want to kind of confirm that the fair categorization. Yeah, you can confirm, first of all.
It's really, it's likewise a relationship with.
Article, which is cabinets.
We have no relationship. We, Simon Property Group, have no relationship.
With Pro.
Not. So we have a relationship with Catalyst because they're, you know, in some cases, they're a tenant.
To us in some cases, they're not a tenant to us uh but they operate a JC Penney store in our malls.
So, you can't go from.
From you know whatever the name of that copper retails, copper retail to Simon Property, you can't make that link and say, oh Simon's not interested in the boxes.
Would I be interested in all the...
Optical boxes.
David Simon: That's it. There's a there's a step function in there. Okay? So, but the simple answer to your question is, do not read, you're right. Do not read, any intent from Simon Property Group due to that transaction. And we'll see if it even closes. You know, you know, deals get announced if they don't close. Tariffs get announced, but they don't close. You know, let's see what closes when and how, and we'll take it from there.
No, not necessarily would I be in interested in the Simon boxes potentially short but then I would fall back on what the right prices the following. What I'm saying? This it's not you can't go from there to Simon Property Group. You have to, there's a there's a step function in there, okay?
So the simple answer to your question is do not read.
Uh uh, you're right. Do not read.
Uh, any intent from Simon Property Group due to that transaction.
Now we'll see if it even closes, you know.
You know, deals get announced, but they don't close.
Terrorists, get announced, but they don't close, you know, let's see what closes when and how, and we'll take it from there.
Operator: Great. Thank you. Appreciate all that, Carter.
David Simon: Thank you.
Great. Thank you. Appreciate all that color. Thank you.
Tom Ward: Our next question is from Handel's seat, just with Mizuho Securities. Please proceed.
Our next question is from Handle Seat, just with Missoula Security. Please proceed.
Brian Mcdade: Hey, good, good evening out there. David, I guess I was intrigued by your commentary earlier that the cap rate for the purple asset was higher than recent open-air strip asset cap rates. So I guess I'm curious if that's more of a unique dynamic to this transaction because you were, I guess, the only logical bidder here, or perhaps you have some additional color or thoughts you'd like to share on the asset pricing for top quality malls versus quality open-air. And then any thoughts on what you see as the long-term opportunity, either from a mark-to-market or densification opportunity at Brickell? Thank you.
David Simon: Yeah. I just think we're great at finding opportunities. And we don't, you know, we don't, we don't participate rarely do we participate in auctions. Auctions get, you know, when our friends at Eastville or, or what are some of the others, Avalo, Coachella, when they run a process, man, they're going to find usually it's pretty, you know, it's it's pretty tough. We like, we like to, we like to find opportunities. And I have all the respect in the world for those guys. They're doing their job. But we like to, you know, we like to, we like to figure out how to do it without that. And, you know, and I think the market does not recognize the value of something like Brickell. Brickell should have been sold at an auction at a higher price than what we paid.
Hey uh good. Good evening out there. Um Dave I guess I was intrigued by your commentary earlier that the cap rate for the purple asset was higher than recent open air strip asset cap rate. So I guess I'm curious if that's more of a unique Dynamic to this transaction because you were, I guess the only logical bitter here or perhaps you have some additional color. I thought you'd like to share on the asset pricing for top quality models versus quality open air. And then any thoughts on what you see at the long-term opportunity, either from a Mark to Market or a densification opportunity at brickl. Thank you.
Yeah, I I just think we're great at finding opportunities and we don't you know, we don't we don't participate. Rarely do we participate in auctions, uh auctions, get uh you know when our friends at Eastvale or or uh what are some of the other Brokers you know when they run a process man? They're going to find. Usually it's pretty, you know it's it's pretty tough. We like, we like to we like to find Opportunities.
Uh, I have all the respect in the world for those guys; they’re doing their job. But we like to...
You know, we like to figure out how to do it.
Without that. And, um,
You know, and I think, um,
um,
The market does not recognize.
The value.
uh,
something like Brickle.
Brickle should have been sold at an auction.
at a,
um,
David Simon: But the market is mispriced when it comes to high quality. And Brickell's not going to close by any stretch of the imagination. But if the market misprices big retail, and this isn't as a roof, but a moving roof, so it got all sorts of stuff to it. But the market mispriced, which is good for us because we could take advantage of it. And I'm letting the cat out of the bag, which is probably pretty stupid. But the market absolutely, unequivocally, misprices big enclosed shopping centers. Because if you look at the cash flow growth and the longevity, forget about it. But, you know, but that's that's fine with us, and it's good for us.
higher price than what we paid.
But the market,
uh,
It's mispriced when it comes to high quality. And, you know, brick was not a closed-by-age structure imagination. But.
if the market misplaces big,
Retail that. In this case, it has a roof that's a moving room, so that all sorts of stuff goes through it.
uh, but the market mispriced
Which is good for us because we can take advantage of it. Letting the cat out of the bag, which is probably pretty stupid, but the market absolutely, unequivocally missed prices.
Big enclosed.
Set shopping centers.
Because if you look at the cash flow growth for the longevity,
Forget about it. But, you know, that's fine with us, and it's good for us.
Tom Ward: Our next question is from Ron Camden with Morgan Stanley. Please proceed.
Brian Mcdade: Hey, just coming back to domestic property NOI. I see 3.8 year to date. I think you talked about at least 3% for the year. And then you made some interesting comments about how whether it's tariff or the strong dollar may be holding back some of the centers. Just wondering if you could just comment on how you guys see that shaping for the rest of the year and if there's any way to quantify what sort of this headwind is is doing to that number so we get a sense of what a true run rate can be. Thanks.
Our next question is from Ron Camden with Morgan Stanley. Please proceed.
Hey, just coming back to domestic property. Noi. I see 3.8 year to date. I think you talked about at least 3% for the year and then you made some interesting comments about how whether its tariff or the strong dollar maybe holding back some of the centers just wondering. If you could just comment on how you guys see that shaping for the rest of the year. And if, if there's any way to quantify, what sort of this headwind is is doing to that number. So we get a sense what a, a true run rate can be thanks.
David Simon: Yeah. Look, we're outperforming our year to date, even with the volatility of the, you know, the tariffs that were announced in April. The consumer is holding on. We don't update our, you know, our guidance for once in a while. There's a lot of people who have been to it. But, you know, we're very confident we're going to beat that number and have a very strong year. And, you know, like I said, I think leasing demand continues unabated. Sales is always a little bit out of our control. But, you know, we'll have to, you know, we'll have to see how that evolves. And, you know, the, you know, we're seeing pretty good sales results even up to today and a pretty good back-to-school season. So, you know, we'll see how the rest of the year shakes out.
yeah, look we we we're out performing our year to date um even with the volatility of the uh
Um, you know, the tariffs that were announced in April, the consumer.
Um, is is holding on, and we don't update our, you know, our guidance for up in a line. There's a lot that goes into it.
Um, but, you know, we're very confident we're going to beat that number.
And have a very strong year.
And, um, you know, like I said, I think, uh, you see the man continues unabated.
Um, sales are always a little bit out of our control.
Um, but you know, we'll have to, you know, we'll have to see how that, uh,
How that evolves. And, um,
you know, the the um,
You know, the, the, the, the, you know, we're seeing pretty good sales results even up to today in a pretty good back to school. So you can sell, you know, we'll we'll see how the rest of these shakes out.
Brian Mcdade: Thanks so much.
David Simon: Sure.
Thanks so much.
Sure.
Tom Ward: Our next question is from Linda Tesai with Jefferies. Please proceed.
Our next question is from Linda to Sia Jeffries. Please proceed.
Sherry (Operator): Hi. I'm just thinking with in response to Alex's question earlier, you were discussing acquisitions in the context of deepening relationships with retailers. What are some of the examples of this? Because I would think that you have a lot of negotiating power with the majority of retailers.
Hi. I think it was in response to Alex's question. Earlier, you were discussing acquisitions in the context of deepening relationships with retailers. What are some examples of this? Because I would think that you have a lot of negotiating power with the majority of retailers.
David Simon: Well, we really, I mean, retailers have all the power because they can they can go across the street or, you know, or or close the store or go online, you know, leave the market. So, it's, but the more product you have available to them, the better the relationship. So it's just a commercial relationship. If, you know, if IBM sell, if Microsoft sells out that, you know, Outlook to, you know, to a big company, they're going to be able to sell other products to that company. So, you know, it's no different. You know, we're, you know, if we could talk about 20 things as opposed to 3 things, it just means we'll have a longer meeting. And maybe, and if they have confidence in our ability to deliver a good product, you know, maybe we'll have 21 things. But, you know, don't kid yourself.
Well, we really, I mean, reach, reach those retailers, have all the power because they can they can go across the street or, you know, or or close the store or, um, go online.
uh,
You know, leave the market. So, um, it's um, but the more product you have available to them, the better the relationship.
It's just a commercial relationship if um, you know, if IBM sell, if Microsoft sells out, like out, Outlook to, um, you know, to a big company, they're going to be able to sell out of product to that company. So, you know, it's no different. You know, we're, you know, if we could talk about 20, things as opposed to 3 things, it just means we'll have a longer meeting and maybe. And if they have confidence in our ability to deliver a good product,
David Simon: These retailers have, you know, all the leverage because they can close stores and go across the street or leave the market or do their business online. And, you know, that's, that's, and you know, we're the one begging for the new business. So I just think the more product you have, the better you are, and the more likely you are to have, more senior focus from that retailer. Just like, you know, if you're selling widgets, if you, you know, if you're, you know, if you're, if you're, you know, have a have a bigger portfolio, you're able to to spend more time with the customer. And that, you know, that's just, that's just commercial common sense. And, you know, that's, you know, they have faith in our ability to, deliver a good product, and have confidence, you know, that we'll, operate the center appropriately.
You know, maybe we'll have 21 things. But, you know, don't teach yourself. These retailers have, uh, have all the leverage because they can close doors and...
and um,
You know, um, um, you know, that's—that’s—and, you know, we’re the 1.
Begging for the new business, I just think the more product you have, the better you are.
And the more likely you are to have.
Uh, more senior Focus.
From that retailer, just like, you know, if you're someone, which is, if you, you know if you're uh.
You know, if you're, um,
You know, having a bigger portfolio allows you to spend more time with the customer, and that, you know, that's just...
That's just commercial common sense. And, you know, they have faith in our ability to.
uh, deliver good products.
David Simon: And, you know, that's why we're able to do a lot of repeat business. I don't know. There's no, you know, there's nothing more to that than that. But believe me, they got the leverage because you don't have to operate the store.
Um, and have confidence, you know, that we will, um, operate the center appropriately. And, you know, that's why we're able to do a lot of repeat business.
Uh there's there's no you know there's nothing more to that than that but believe me they got the leverage because they don't have to operate the store.
Sherry (Operator): Thank you.
Thank you.
Tom Ward: Our next question is from Hong Zhang with JP Morgan. Please proceed.
Brian Mcdade: Yeah. Hey, David. I mean, you've talked about how you expect Brickell to be great because people are moving from New York and Chicago over to the area. I guess, I guess have you seen the opposite impact in your New York centers, like, say, Westchester or Roosevelt Field?
Our next question is from Hong Jiang with JP Morgan. Please proceed.
Yeah. Hey, David. I mean, you've talked about how you expect Brickle to be great because people are moving from New York and Chicago over to the area, I guess. Have you seen the opposite impact in your New York centers? Like, say, Westchester or Roosevelt Field?
David Simon: Well, first of all, Brickell is really, really good. So just to, you know, this is not a troubled asset, right? Because, so I just want to, you know, just just want to make sure you understand that. your second part, your second part?
Well, first of all, Brickle is really, really good. So just to know, this is not a troubled asset, right? Because, um,
So, I just want to, you know, this just wanted to make sure you understand that.
Brian Mcdade: I I guess, are you seeing a negative impact in your New York assets like Roosevelt Field, Westchester if people are migrating outside of out of New York?
Um, your second part of your second part.
I guess. Are you seeing a negative impact in your New York assets, like Roosevelt Field and Westchester, if people are migrating out of New York?
David Simon: I don't think it's going to affect Long Island. I think New York City, I'd be nervous about.
I don't think it's going to affect Long Island.
Operator: Urban environment.
David Simon: Yeah. I mean, I do, I do, you know, there is a lot of a lot of great stuff from New York City, but I think the suburbs, you know, but by the way, we've seen the suburbs have a renaissance, you know, kind of how they do the code, right? So I think the, and I think the suburbs of New York City and suburban New Jersey, Jersey City, Long Island, Westchester County all could benefit, you know, depending on, you know, the, you know, what happens with the city. But, so I don't think it's, I don't know if it's a New York issue. More I think it's more of a New York City issue.
Um, I think New York City has these nerves about it, urban environment? Yeah.
I mean, I, I, I do, I, I, I do, you know, there's a lot of lot of great stuff in New York City, but I think the suburbs
um,
You know, uh, but by the way, we've seen the suburbs have a renaissance.
You know, primarily to the coast, right? So, um,
I think that the suburbs of New York City, I think that the suburbs of New York City,
And Suburban New Jersey.
Uh, Jersey City.
Um, Long Island Westchester County.
All could benefit.
Um, you know, depending on, you know, the
The, you know, what happens with the city, but um, so I don't think it's, it's I don't know if this is a New York issue more; I think it's more of a New York City issue.
Brian Mcdade: Got it. Thank you.
Got it. Thank you.
Tom Ward: Our next question is from Teo Okusanya with Deutsche Bank. Please proceed.
Our next question is from Tau, Oklahoma, with Deutsche Bank. Please proceed.
Tom Ward: Hi. Yes. Good evening. I am curious about the the secured loan transactions this quarter. again, you guys have an A-minus credit. a lot of your peers are kind of doing unsecured around, you know, 5%. Curious why, you know, you guys decided the best thing to do was, the secured loans at 5.84. I don't know whether that's a duration thing, but I'm just curious.
David Simon: Mortgage financing.
Tom Ward: Yeah, that's a mortgage financing question.
Uh, yes, good evening. Uh I am curious about the the security loan transactions this quarter. Uh, again you guys have an A minus credit, a lot of your peers are kind of doing unsecured around, you know, 5% curious. Why? You know, you guys decided the best thing to do was uh to secure loans at 5.84. I I don't know whether it's a, that's a that's a duration thing. I'm just curious.
Brian Mcdade: Yeah, the mortgage financing.
David Simon: Yeah, but it's with the JV partner, so we wouldn't want to use our balance sheet.
Yeah, that's a mortgage for me. Yeah, the mortgage financing.
Tom Ward: Got it.
David Simon: For a JV partner.
Tom Ward: I mean, 10-year unsecured debt for us today is right around 5%. So on the unsecured market, we're right on top of the market where others are issuing.
Yeah, it's for the JV partner. So, we wouldn't want to use our balance sheet for a JV partner. I mean, 10-year, unsecured debt for us today is right around 5%.
David Simon: It should be, I agree with, I agree it should be 4%. I agree with President Trump. Interest rates should be lower.
So, on the end of your market, we're right on top of the market. Where others are issuing, it should be.
I agree with, uh, I agree. It should be 4%. By the way, I agree with President Trump: interest rates should be over.
Tom Ward: I hear you, David. Thank you.
I hear you, David. Thank you.
Tom Ward: We have reached the end of our question and answer session. I would like to turn the floor back over to Chairman Dave Simon for closing remarks.
Thank you.
David Simon: All right. Thank you. Hope you enjoyed our call. And I know Tom and Brian are available for follow-ups.
We have reached the end of our question-and-answer session. I would like to turn the floor back over to Chairman David Simon for closing remarks.
Tom Ward: Thank you. Thank you.
Um, and I know Tom and Brian are available for all of us. Thank you. Thank you.
Tom Ward: Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
Thank you. This will conclude today's conference. You may disconnect their lines at this time, and thank you for your participation.