Q3 2025 Simon Property Group Inc Earnings Call
Greetings, welcome to Simon Property Group third 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 during the conference, please press star zero on your telephone keypad. Please note. This conference is being recorded. I will now turn the conference over to Tom Ward, senior, vice president, investor relations. Thank you, sir. You may begin.
Thank you, Sherry.
And thank you all for joining us this evening.
Caller, David Simon chairman chief executive officer and president, Eli Simon Chief Operating Officer and Brian mcdaddy Chief Financial Officer.
A quick reminder that statements made.
Call May begin forward-looking statements within the meaning of the Safe Harbor of the private security litigation Reform, Act of 1995.
And actual results May get some material. We do a variety of risks and certainties and other factors.
We refer you to today's press release in our SEC filing for a detailed discussion of the risk factors related to that smaller group of students.
Today's date.
Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included within the press release for supplemental information. In today's Form AK filing,
Both the press release and the supplemental information are available on our IR website at investors simon.com for conference call this evening will be limited to 1 hour for those who would like to participate in the question. Answer session. We ask you to, please respect our request to hear yourself to 1 question. Please introduce David Simon. Hi, good evening. Yeah. I'm obviously pleased with our financial and operational performance for the third quarter.
Our results were driven by solid fundamentals.
Higher occupancy.
Accelerating Shopper traffic, strong retail sales.
Not a positive supply and demand Dynamics, all contributing to strong cash flow growth.
We are pleased to have acquired the remaining interest in Tal and Rielly Group.
That we didn't know and are excited about the opportunities to hand enhance.
The operational efficiency and increase.
The noi from the assets and deliver long-term returns to our shareholders.
I want to thank Bobby and Billy Tobin.
And the entire TRG team for our successful partnership over the last 5 years.
I'm now going to turn it over to Eli, who will discuss.
Uh, the terrific TRG transaction.
And update on our development activity and Brian will cover a third quarter results.
And other various goodies. There you go. Eli. Thank you. As mentioned, we completed the acquisition of the remaining 12% interest in TRG that we did not previously owned in exchange for 5.06 million. Limited partnership units.
We are pleased with the outcome, having acquired these high quality assets at an overall cap rate of over 7 and 1 quarter percent, not taking into account, any operational efficiencies and improvements.
These iconic assets further enhance the quality of our overall portfolio and we are now in a position to P pursue new growth and value creation opportunities for this portfolio.
The portfolio has strong operating metrics including 94.2% occupancy, average base minimum, rent of 72.36 cents, per square foot, and retailer sales of approximately 1,200 per square foot.
This transaction will be accretive in 2026 as we assume management responsibilities and integrate the assets, with the full benefit realized in 2027, given all of the operational aspects of running on our platform. This is expected to add at least 50 basis points to the going-in overall yield.
TRG will be consolidated, and the acquisition will be accounted for as a business combination.
This will require remeasurement of our previously, held Equity interest to fair value.
Resulting in a really big non-cash. Non- ffo game to be recognized in the fourth quarter of 2025.
Now, turning to development.
In the third quarter, we began a construction on several new projects including a second phase of residential at Northgate station.
And expansion of the West and Austin Hotel. At the Domain retail and experiential additions at Brea Mall, King of Prussia, and the shops. At Mission Viejo
At quarter end or share of the net cost of development projects. Across all platforms was 1.25 billion dollars for the Blended yields of 9%.
Approximately 45% of net costs are for mixed-use projects.
In addition, our new development and Redevelopment pipeline continues to grow with exciting New Opportunities ahead including a major full price retail and mixed-use project in Nashville where we will be unveiling our vision later this week.
I will now turn it over to Brian who will walk through our third quarter results.
Thank you, Eli.
Real estate ffo was $3.22 per share in the third quarter compared to $3.05 in the prior year. 5.6% growth domestic and international operations had a very good quarter in contributed 26. Cents of growth driven by an 8% increase in lease income.
As anticipated.
Interest expense combined were a 9 Cent drag year-over-year.
Increase 5.1% year-over-year for the quarter in 4.2% for the first 9 months of the year.
Portfolio NOI, which includes our international property, grew in constant currency by 5.2% for the quarter and 4.5% for the first 9 months.
Retailer demand remains strong as we signed over 1,000. Leases total approx totaling, approximately 4 million square feet, during the quarter.
Approximately 30% of our leasing activity represents New Deals, reflecting continued, strong demand across the portfolio.
the malls and Premium Outlets ended the third quarter at 96.4% occupancy, an increase of 40 basis points sequentially in 20 basis points year-over-year, the Mills achieved a 99.4% occupancy, an increase of 10 basis, points sequentially and 80.80 basis points from the prior year,
average base, minimum rents, increased 2 and a half percent year-over-year for the malls and the Premium Outlets while the Mills saw a 1.8% increase.
Retailer sales per square foot for the malls and the Premium Outlets were $742 for the quarter.
Importantly.
Total sales volumes increase more than 4% in the third quarter, Shopper traffic and retailer sales. Accelerated sequentially reflecting the impact of a successful back-to-school season.
Occupancy cost at the end of the quarter was stable at 13%.
Third quarter funds from operation were 1.23 billion or 3.25 cents per share compared to 1.07 billion or $2.84 per share. Last year.
Some of the increase was due to Improvement in OPI compared to last year.
Please see the ffo reconciliation included. Our supplemental today for details on the year-over-year, changes in SSO per share.
Starting to the balance sheet and liquidity during the quarter. We completed a dual tranche us.
Offering.
A total of 1.5 billion at a combined, average term of 7.8 years and a weighted average coupon rate of 4.8%.
During the first 9 months of the year, we completed 33 secured loan transactions, totaling approximately 5.4 billion dollars.
The weighted average interest rate on these loans was 5.38%.
We ended the quarter with approximately 9.5 billion of liquidity.
turning to our dividend today, we announced
$2.20 per share for the fourth quarter, a year-over-year, increase of 10 cents or 4.8%.
The dividend is payable on December 31st.
Now, turning to guidance, we are increasing our full year 2025 real estate FSO guidance range to 12.60% to 12.70% at the low end and a 10% increase at the midpoint.
Thank you. We are now available for questions.
Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2. 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 1 moment, while we pull for questions.
our first question is from Michael Goldsmith with UBS, please proceed
Good afternoon. Thanks a lot for taking my question. In the prepared remarks, you mentioned the opportunity for operational efficiencies and improvement for the Topman assets twice, and that you should help improve the yield by 50 basis points. So, can you share some of the specifics of the opportunity from bringing these assets fully onto your platform?
Hello.
Hi, we're able to hear you.
Uh, so
can you repeat the question? We didn't get it all.
Yeah, absolutely. And the prepared remarks you mentioned the opportunity for operational efficiencies and improvements for the Talman assets twice and and that you should help improve the yield by 50 basis points. So, can you share some of the specifics of the opportunity from bringing these assets onto your platform?
yeah, I mean
When we?
Bought the original 80% of Talman.
The only real, um, operational efficiencies.
We got was eliminating public company costs.
obviously, uh, they had a
full operational. Team running those assets.
and we'll be able to add them to our platform that um,
You know, very little cost and then I um and then from an operational, enhancement Point uh point of view, we bring our expertise and development Redevelopment um leasing marketing.
Um brand Ventures and we put all that together and you know, that's what we do for a living. So we've
we've helped out but not at to the point of
Uh, how we would if we actually ran the property day to day.
So now we put them on our, we bolt them onto our platform, that's easy.
And then we run the properties day to day and we bring
all that we um Can can um bear to a a portfolio like that.
And that's where we see, um, tremendous amount of upside. We look at the occupancy, it's lower than where we're, um, where we're at. And um, we think we can bring it up to our level.
Uh, and then we've got all our asset management techniques, property management capabilities that are going to just grind higher cash flow. That's what we do for a living.
that's why we've been the acquirer, that's why we've been successful time and again
and um, you know, if you look back at this
portfolio, um, and you look at, um,
The entire transaction.
Um, you know, we're going to be at a centrally, an 8.
when we, um,
uh, when we add, uh, the portfolio, the the assets to our platform,
and that and you look at the quality of the assets,
That makes for a terrific deal which you guys need to understand.
Um so it's at a much higher cap rate than strip centers or Trading.
Uh, much better growth rate than strip centers or Trading.
uh, that that I've seen and, you know, these assets have been around 70 years
You know, that's the other thing to step back. So, take data centers data, centers trade, at a 4 and a half cap rate,
And we don't know.
Nobody knows what they're going to look like in 5 years. What we do know is that good models have been around 7 years, 70 years, not 7 years, not 17 years but 700 years
so, uh, we made a hell of a trade and that certainly 1 of the reasons why I think the Talman
wanted to um, convert this last 12% into
Into our units, which is convertible on a 1 1, basis to our stock.
Because they've seen the, you know, the our ability to execute and perform at levels that no 1 else has in our in our peer group.
Thank you very much. Good luck in the fourth quarter.
Yeah, be excited.
We?
All good. Thank you.
Our next question is from, Alexander goar with paper Sandler. Please proceed.
Hey, uh, good afternoon out there. Eli, welcome to the public earnings call. Uh, thank you. So,
If you indulge me a little bit, if we take the implied cap rate of the shares issued on Friday, it's sort of a little over a 6, but you spoke about an 8 which sounds like, you know, the existing assets were producing a lot more, uh, you know, the overall versus the final buyout trade, but then you spoke about an, you know, the initial 50 bit increase.
You know, once it's on Simon's platform, but presumably, there's a lot more growth over the next 5 or so years that presumably that 8 goes higher. So 1, can you help us understand, you know, sort of the pricing of the final 12 and how that relates to the 7 and a quarter that you initially spoke about. And then, over the next few years, presumably, this cap rate is going to be much higher than an 8.
Yeah, so let me just unpack it a little bit, I'll be a little more clear. So if you look at we we had 4
um,
4 transactions within the Taliban group. We had the initial 80
We had the 2 24% and then the 12th.
if you look at that on today's numbers, today's numbers, that's basically a little over a 7 and a quarter cap rate
Um, if you add what we think will bring in.
Uh, operational synergies efficiencies slash enhancements.
Uh, that's where we get to north of a
And then obviously, Alex, you're right. Then you have all the intrinsic growth.
uh, of the portfolio, which we're not, you know, that'll just be year after year growth, because I think these assets
By and large have a, you know, a higher skew of quality.
Than you know, just the Simon only course all that.
So they skew a little higher growth than we do, you know? We did historically. So we would expect our top analy growth to accelerate because of adding that in so that so that hopefully that impacts if you.
Really, we are focused on the 12th percent.
Um, not including the operational enhancements where in the 6 and a quarter to 6 and a half cap rate if you just want to focus on that 12%.
Okay. Alright. Explain it. Yeah. That's that it it's what we
Thought uh initially but obviously, all the pieces adding up, uh, to get us. How, how you think about it? I told you, I told you a lot more only because it's you, I told you a lot more information than I normally would. Okay. I'm sure Flores will will ask a lot more details than I have. So I'll uh, I'll I'll stand back. So thank you for your. Thank you, David.
Okay.
Our next question is from Caitlyn Burrows with Goldman Sachs, please.
Um, hi everyone. Uh, congrats on the quarter and recent announcements and yesterday, July to the earnings call. Um maybe on the sales results, they increased in the quarter uh which was great to see. Could you give any detail on how widespread that was? Did a couple of tenants Drive numbers 1 way or the other? I know you have initiatives to upgrade the tenant base, maybe shrink where it makes sense. Um, so just whether we're starting to see some impact from those initiatives,
Hi Kaylin, this is Brian um you know quite honestly throughout the quarter you saw a widespread increase across all 3 platforms. Um and you know the the tenant tenant base uh certainly you know, was was productive in the quarter. Um, you saw certain categories out the form, you saw a luxury come back a bit. Uh, certainly athleisure outperform even the apparel category. So certainly the back to school season was a robust
This is our portfolio. Uh, even you saw some positive, uh, inflection in some of the Torah oriented centers. So we are starting to see it kind of widespread across this totality of the portfolio. Sequential Improvement. Both in traffic and in sales. Yeah, Kayla. I would only add that I think. Um,
um,
You know, like I said last quarter, I believe we're still not, from a sales point of view.
Hitting on all cylinders.
um, what I did was I did what we did see is that
The kind of the higher-end consumer. Obviously, I don't have to, you know, you have as good a DA data as we do at Goldman.
Results.
In the, you know, the higher income, uh, oriented centers. Um, the value oriented centers.
Uh, we were more flat to, you know, um, kind of, you know, 18 along. So you didn't see the entire portfolio, Brian's, right. The
Border was okay.
Uh, at least stabilized, so it's not hitting on all cylinders, but it's okay. Florida remains to be very strong.
uh, you know, the 1 area that, um, you know, we're seeing and I think everybody's seen is that you're, you know, Las Vegas from a tourist Market is
Underperforming. You see it from the casinos?
Obviously, we have a lot of properties—great properties—but they're not.
You know they're not copying the sales growth that we would expect, and then Brian is like, "We did see stabilization in the luxury, which is good."
But um and again the higher income properties are doing better the the 1 cavitt.
I have the number off the top of my head so we're we're seeing other performance, you know? Look we don't worry about that because Vegas assets are great and Vegas does go up and down and
Um, you've you've clearly had Canadians that don't go to Las Vegas and other people that are you know that are uh not going at the frequency uh that's happening. But um, no concern there, but right now it's kind of in a cross.
Thank you.
Our next question.
Received I uh good evening everybody. Uh, Brian or David, um, you've generated a very strong noi growth here to date
You know, 5% for the quarter.
I guess given the solid leasing environment you're seeing you know just trying to see if you can keep up this sort of same storm momentum in 26 or even do better.
Assuming a, uh, sort of a similar retailer sales environment, curious on your thoughts. Thanks.
Well, uh, the team, um, is doing our
I think we invite Alex over here. Right, so we invite you in, in this invite you. But um,
Uh, the team is going through.
So, you know, the property by property root canal. Okay. So, I'm glad the report shows no cavities.
No need for root canal. Uh we feel really you know when I'm being told and what I'm saying from the numbers uh really positive, the team is Juiced energized.
so we feel I'm not going to give you a number but um,
You know, we feel really good about 26.
in terms of our ability to produce Continental high growth as you know,
We'll do that in February uh, with our earnings.
Uh, guidance, but um, you know, the team is feeling good that, you know, we'll have another, you know, obviously the, you know, there's external factors that, uh, that we don't even control. I'm kidding. Um, but um,
We're feeling really generally positive about what we're seeing, right? Brian. Yeah. No, that's the report back that we're in the middle of grinding out. We'll get back to you in February, but I think there's a an optimism.
Now you are you've been going through all these. Yep. And it's and it's across the portfolio, not just the the you know the PowerHouse centers but really across the portfolio, a lot of exciting uh new things in store for next year.
Thank you.
Sure.
Our next question is from Greg mcginness with Gosha bank. Please proceed.
Uh hey, good evening.
So, from our perspective and despite our expectations terrorists have had seemingly little impact on Shopper retailer Behavior to date and David. I know you previously mentioned that maybe the holiday season is when we start to see some impact to retailer financials. But we were hoping, you know, for an update on what you're seeing in your retailer discussions and regarding your expectations on any impact to leasing, uh, and or tenant Behavior.
From the troops, right? So, um,
that, um,
president Trump and president, she had
on the
Chinese discussion is positive for our retailers.
Even though.
You know, believe that terrorists will have an impact.
Uh, we have not yet seen all of it.
And I think some of that.
you know will as I said, last time, I mean, it's pretty consistent story, some of that would be
Passed on to the supplier.
Some of that will be eaten by the retailer and some of that will be passed on.
To the consumer. So you know, there's just... there's just...
Um, in many cases the inability for retailers to eat that.
Entire Terrace. Um so they're going to have to you know pass it on or renegotiate better. Um better vendor deals um and I still believe we still haven't seen.
Um, the full impact of it. So uh, I think your question is appropriate.
I think it's still.
You know, if baseball goes to, what is it at, I mean okay, 18 innings? You know, so, so, let's assume it goes to State 9. I think the tariff...
If I had to, like, put an ending on it, I'd say.
5 or 6.
You know, I mean, it's just, you know, gut feel, so it's not scientific. Um,
So we'll have to see, um, and I do, and I do worry that it it, I do worry.
that it will put more pressure, you know, on the smaller.
You know, the smaller retailers um or that you know, they're not the man with retailers that we all think about, right? Because they have the they have the ability to to um
You know, to handle it and try and use this as an opportunity to squeeze and increase market share. So.
You know we're still in the middle of the game. It ain't over. Uh hopefully it is a 9 Inning game. It doesn't go to 18.
Um, but I don't think the final chapter, you know, how about all these analogies? But I don't think the final chapter has been there.
So we're still cautious on that.
Let let me just end by saying, you know, from a supply and demand point of view.
No, just from our leasing. We see, absolutely unequivocally.
No change apart.
You know, from the retailers that are looking to, to grow their footprint?
Great. Thank you.
Thank you.
Our next question is from Craig Melman with City. Please proceed.
Hey guys. Um David maybe going back to your comments earlier about you know the value Mall kind of the foot traffic going on there versus your
Here in malls, as you look at 26. I know you guys said you feel very good but in the tenant demand is you guys approach conversations with tenants who are looking at both high-end and kind of the value segment from some of that crossover.
Do you feel like you guys are losing a little bit of momentum in the ability to push net effectives? At the value side of, um, the portfolio or...
The inflation over the last couple of years just pushed the OCR to a point where you still feel like you're able to get pretty good upside relative to maybe where you're pushing into luxury or the higher-end mall.
Yeah, I I
say I I traffic for the kind of the evaluation centers is is is is up, so it's not the traffic, it's just really the conversion. I think that consumer is being a little more cautious.
Um, but I think you pinpointed, I mean, we have low ocrs there.
Uh the demand again the re retail Demand on that on that portfolio. It was still very positive. So no
you know, no no change of um,
yep, no, no, no different point of view, but, you know, we, we do have to be sensitive because, um, you know, the
The higher-end.
Retailers, I don't know the higher end consumers, I should say so it's not it's not um it's not where we skew but again demand is good and it's not a there's not really no change of um mood or potential there, but it is sales are not moving.
Uh, you know, as um, they're not increasing at the rate that the full price.
uh, better higher end centers. Are that's it.
So I think that, you know, the outlet consumers being a little more cautious, but let's see what happens is. You know, this Christmas. I mean, you still got you still got things going for the lower end, consumer lower gas, price,
Hopefully lower uh you know electricity prices for the time being until all these data centers get built. And that's another interesting thing, we need to talk about is a country. Um,
But, uh, I think it's...
Um again it's we're just you know, the sales are not hitting.
Like Vegas, like a couple of the Border Northern borders, uh, thing. We're just not hitting on all cylinders. And the reason we say that is to show you that there's more juice
Uh, in the orange, right? Is it orange or lemon orange? So there's more juice there. It just we're not we're not getting all of it at this point.
Our next question is from Michael Griffin with evercore. Isi, please proceed.
Great, thanks. Um, I wanted to ask on the, uh, the new leasing in the quarter. Brian. I think you mentioned, it was about 30% of the total leases, uh, executed. Is this y'all proactively looking to get ahead of of leases that might expire in a year or 2 and, and upgrade the credit quality and can you also give us a sense? If you're seeing more of those, you know, new tool Mall Concepts coming in the portfolio. And lastly, anything you can comment on, on leasing spread for that. Would be helpful. Thank you.
Well, I'll just let Brian answer most of it. And I'll say the new to...
You know uh Concepts. I mean man is opening the store we're in discussions with them from Google's opening stores. Uh word contact with them Netflix. You guys going to the opening tomorrow uh at King of Prussia or is it next week next week? Um so Netflix is you know uh I I encourage everyone to go check it out. Um uh they're opening their Flagship destination.
Store, um, at 10, your price for next week. So there's more and more
Um, uh, uh, you have a boo-boo, the boo-boo. Yeah, pop more addicted, Princess Polly, a bunch of pennants, and what they see is they can open a budget source with us.
and so we're having really great conversations in our in our new business leasing so the the so I can give it to the rest. But so the new I new ideas, new experiential experiential uh stuff. We're doing, we're doing new Apple Stores uh as well. Uh they open the delamo has a good example. We've been working at dealer, you know, 5 years or so. So I think, um, it's very encouraging. What we're seeing on the new
Um, storefront, we're doing still doing a lot of new restaurants with, um, you know, high-end operators. So you know that's, that's going very well. We opened, uh, Formula 1 at Forum Shops.
Uh, one of their second or third operations. Uh, two-level flagship store and a bunch of people there for the opening as terrific, small pictures.
so, just on the new, um,
concept of new storefront, um, you know, between the restaurants and the metis of the world, the Netflix, the Googles
You know, that are all working on that, I think. Um,
You know, it's it's very, very positive, very positive. So lots happening on that front.
Uh, 26 is expiration. And so, I think it's coming from a variety of places, you know, certainly on the last several calls, you've heard us talk about improving the merchandising mix in that 30%, statistic is really encapsulating, our our desire and ability to do that.
So and I'll give you a simple example, we have a great mall.
Um,
I probably shouldn't. Yeah, I'm not going to name the tenant, but I'll give you some bread, count breadcrumbs, but it's a great mall and a great southeastern City, a great southeastern City, not Atlanta, that's a great southeastern City, but another great southeastern City, not Atlanta, that we're um um and this goes to your point, are you, are you even if you have a lease are you satisfied? The answer is no. So we're taking 1 Tennent that has a lease
Uh, we're actually downsizing them, moving them to another space.
um,
uh, uh,
Um, a retailer in there and I'll leave it at that. I was going to give you a little bit more breadcrumbs, but I don't want people yelling at me. So, uh, which is a good example of even though we had leases on those states were taking 1 down downsizing 1 tenant moving bringing in another 1 and that's what our folks do. That's 1 of the great things that we see in the TRG.
Call.
Uh, and we'll be a lot more aggressive in doing that.
you know, uh, because you're never
You're we should never be satisfied.
That we've executed the mix.
You know, at the, um, at the, at the rate that, um, you know, you've always got to change it for instance, you know, talk Forum Shops. I think it just recently opened, um, we had that uh, H&M store there. Uh, we replaced it with Zara.
Uh, beautiful store, uh, big investment uh, that they had and that changes the whole kind of the Center Court. There are familiar with the asset
Uh, which is, you know, which is truly exciting. So, um, so, uh, absolutely. And that's 1 of the, like I said, 1 of the interesting things that we see
in, um, in the TRG portfolio and then and then in our assets across the, you know, Spectrum, whether it's the outlet centers,
Um, or the full-price malls.
Great. Thanks so much.
Thank you.
Our next question is from Juan Sanam Bria with BMO Capital markets, please proceed.
Hi. Good afternoon. Um, I was hoping maybe to talk a little about a little bit about technology. Um, you know, a lot of things in society seem like they're in flux. And Retail is, you know, that not excluded, their talk about, uh, chat GPT agents or agentic agents that can do some of the shopping.
Um, bypassing people just curious on how you guys are trying to position for this and your thoughts on how this may evolve. And if you see it as a risk or an opportunity or both,
well, you know, you have to assume everything's a risk. So
I do think.
Uh, bringing AI.
into the, um,
you know, the equation we'll have a
A pretty big impact on how e-commerce has done.
Uh, but we offer something much broader than e-commerce.
So would you be a e-commerce?
Um you know, I was going to put us out of business for the last 20 years and you know, here we are standing just to give you an example. Uh, I saw Talent here had ibida this quarter of like adjusted e but that whatever that means of 400 million and or even done this quarter was a billion 6.
So now Talent is market cap is 500 billion and ours is, you know, 65 billion, you know, if you include the units right Tom. So that's pretty good math, right? So, you know, again, I do think that people that
shop the e-commerce shoppers.
We are definitely going to use AI tools, you know, to, um,
You know, to to eventually, to use AI to replace the way they shop online today.
For 70 years. Remember, we've been in this business
70 years.
Okay, not 5. Not 20.
You know, but in this, we have survived this product.
Has survived.
70 years.
And I will tell you our half life is greater than the new fangled data centers that are being done today. Because I think they'll figure out how to do them smaller and more efficient.
3 to 5 years now. Okay. And I know nothing, but that's my question. I know nothing. But that's my time. So uh going back to your question. So it it will have an impact on the e-commerce. I think it's going to um absolutely
um, uh, continue to make
Us great at what we do, and that we're going to have to create real shopping.
Uh holistic shopping environments and and and and and other way to look at it is look. Um, so there's a lot of talk about, you know, going to and and I you know I was at the CEO of some of the other day when she was kind of interested in but put that aside
You know, there's a lot of talks that people are going to be working 3 days a week.
So and the potent potential. Um,
Gdh GDP impact of AI. Could be 15 trillion or trillions of dollars, right? So the way I look at it, I look at actual positive. So if you let's say we all work, now I'm going to still work 5 days 8 days a week, right? Well, I'm going to make more at least 7 8 days a week, but
Let's just hypothetically take the point that it's only 3 days a week.
Work. Okay, 3 days a week.
Now that you work, you're going to have a lot more free time.
We've created this great, uh, wealth. You know, our GDP goes from $18 trillion to, you know, $25 to $30 trillion. That means money in people's pockets. I think we're going to go to the mall and shop. What else are they going to do? Okay. So they can only yell at their kids that much when we play "You suck."
So they're going to go to the mall to shop and spend their new.
Your new sound, well, that's going to eat through this economy.
Now, what we have to do is just create these great environments.
And ultimately, you know, we'll use AI like everybody else to enhance our loyalty to enhance our uh, shop Simon to enhance our search efforts to connect with the consumer. And you know uh we'll talk to chat to key and ask them what would her or it whatever what would you do to them all to make it better and do all this stuff?
But I'm looking at it, positively, we lasted 70 years.
We're only going to work, 3 days a week, we're going to create 12 trillion dollars of value.
And people are going to go to the mall to shop.
Because what else are they going to do? Okay.
You see what I'm saying?
Yes, hopefully. Okay, so in in any of that but we're you know, we're experimenting how to do it. We uh are we've got a friend called Harvey that uh, we make we make create the first AIC CEO.
now, I'm not saying he's going to replace me, but he could replace 1 of our
No divisions or elsewhere, so stay tuned, uh, you know, I won't use it effectively like we've used everything else.
Thanks David.
Thank you.
Our next question is from Vids T-Bone with Green Street Capital. Please proceed.
Hi, good evening. Um, I wanted to follow up more time on the toddman tap rate. Um, just specifically if you look in the way I'm looking at it, just the purchase price is just over 1.5 billion. If we use Friday's close for the you know, op unit Value, Plus incremental debt.
yeah, we told now, we told you the numbers
uh, events at this point in our career, we're not going to
We're not going to mislead you or the public; your cap rates are too low for certain assets, but not too high for ours. And we told you where the cap rates are.
So okay. And we told you where the accretion is
And, you know, we told you everything there is to tell you about that, that deal. You know, they've had a lot of growth this year. They've got growth uh, next year and, um,
And, um, you know, we've told you everything in there to tell you. I will tell you, I think your cap rates.
For our asset base is too high.
Um I think your peers at Green Street have uh the product that is too low compared to ours. Our growth is better and um the longevity of our asset base you don't factor in that, you know, our assets last 70 years.
Okay. No, that's fair. All right, thank you.
Thank you.
Our next question is from hendel St. Just with Missoula Securities. Please proceed.
Hey, uh, good evening. Thanks for taking my question. Uh, David good to hear from you Eli? Welcome to the call. Um, my question is on corporate structure. Um, congrats on the internalization of, um, the remaining part of TRG, but I'm curious if there are any changes or shift in how you're thinking about your investment in your European platform clip here.
Earlier this year, you bought an asset in Italy off balance sheet outside of Clip Here. So I guess I'm curious if you're happy to own more assets outside of Clip Here. Um, but then I also wanted to add it seemed like recently you opted to convert some of the Clip Here exchangeable note holders into stock, not cash, which might suggest you have a longer-term hold for that stock. So maybe help us reconcile those two dynamics and how you're thinking about the Clip Here platform. Thank you.
well, we bought the ball which has nothing to do with the, uh,
Which is a luxury Outlet Etc. And uh, to the middle is too, and it's actually on balance sheet. It's on balance sheet, right? So I thought that
Yeah, so that has nothing to do with Clay Pierre. Um, you know, Clay Pierre.
Look, uh, it's been a great investment for us. We evaluated all the time we did get some as, you know, we issued the convert, uh, we do it. 3 years ago, 3 years ago. Um, uh, we got conversion, notice we did we did, uh, settle in shares.
And you know, we looked at the value weight that um that investment um you know uh continually and we'll continue to do that but it's been a very good investment. We've had a lot of value to that organization. I think. Um, you know again the market should appreciate rear clay here, go back, let's turn the clock back.
10 years ago, where clay Pierre was.
And look at where it is today.
And, uh, or strategic input vision.
Guidance.
Created the new clay here that exists today, says a... um,
You know, that's a that's a
position to
succeed.
Uh, in um, European full price retailer with with the best.
And that's all, you know, I mean again the management team did a great job but we hired them in. Okay. So, um,
so, you know, but at the same time, we have a fiduciary duty to
To uh continue to add value Klay pyram while we're on the board while we're on the board. At the same time, we have the fiduciary duty to our assignment shareholders.
To look at all of our investments to see if that's the best allocation of our capital. And we will continue to do so.
I appreciate that David I guess I just wanted to to clarify because I mentioned the asset in Italy you bought because you bought it on balance sheet and not in clip here. So I guess I was curious if you were happy owning more assets outside of clip here in Europe. Thank you.
yeah, I I
we would we would probably okay. I'm sorry if I misunderstood so we would probably
to um,
You know, again, this could always change, right? But we've kind of decided that if there are full-time assets,
to acquire uh, to acquire
Uh, while we continue to hold our clay pair investment, and stay on the board. That that clay here would do that.
On the other hand, if it's, if it's in the outlet world, you know, uh, because we we look at Outlets worldwide, you know, we have outlets in Asia. Obviously, North America, both in Mexico and Canada us obviously, um, several companies and countries in Asia. Um, that we would look at those for our own accounts to sign an account. Okay? And I'm sorry, I misunderstood your question.
That's helpful. Thank you.
Our next question is from Mike Mueller with JP Morgan. Please proceed.
Thanks. Um, so Calvin's use the secure debt strategy for the portfolio ever since the 98 restructuring. Do you think you'll be unencumbered a number of those assets over time and as a follow-up, are there. Any parts of that portfolio that look like they're sell candidates today?
Mike was Brian, um, you're right, they did go to a secured strategy over time. I would expect that over time. We will unlock that and use our unsecured uh, uh Capital, uh, to un encumber assets uh, in due course, um, to further improve our incumbent asset base which is already incredibly powerful. Um, as far as the the the calling on balance today, I think we're comfortable where it sits, but we naturally evaluate things uh frequently and so that could change over time. But for now, I think we're in a good.
Got it. Okay, thank you.
Thank you. Thank you.
Our next question is from Ronald Camden with Morgan Stanley. Please proceed.
Hey, thanks. It's Adam on Fearon. I think we had always looked at the dividends or post-CO, as you know, I think you guys are sort of targeting getting back to that pre-CO dividend level. You know, you're now past that. So I guess just sitting here today, how do you sort of stack rank the capital allocation priorities? I know you've talked about sort of the development of obviously the Class A assets, but also I think you've talked, you know, in recent quarters about some of the Class B.
RB plus development opportunities or redevelopment opportunities as well. So just, you know, sitting here, the different options in terms of capital allocation, how do you sort of stack rank those: dividend, buyback, potentially development, redevelopment, etc.
Uh, good. I actually thank you for that. I forgot we had passed our code. All right, good. Good morning.
Well done.
so, um,
Look, I think 1 of the things.
That you'll probably, you know, we do have a buyback open, right? Obviously we can't find that now. But 1 of the things you'll see from us, most likely,
Which is not in the numbers, but we, you know, we issued, 5 million units, shares. So, we'll look to quarter that
You know, over you know, we're not issued, we don't, we have a balance sheet that does not need to issue equity.
So, um, now as part of the deal talent and family really wanted units, equity. So I think over time, obviously subject to market conditions.
Uh, we'll look to quarter.
I you know um at least at least um want to get our sheer level back.
To kind of where it was pre issuance.
Uh, for the TRG deal, now that's subject to the market conditions.
Will be very smart about it. I can do everything else, uh, but that so, that, um, that is moved up the the, you know, the, um,
You know, I still think we're going to want to grow our dividend.
um, and obviously, if I think I said last time, you know, the development stuff
Does take.
You know, time to, you know, to to put the capital to work, you know. Um, we don't move as fast as these data centers that just go up, you know, 9 months. Um, but um, I think quarter Rising that 5 million issues.
You know, it has moved up to the top of the choice.
But that does not mean that the capital redeployment.
In the portfolio slows down. We're very we're and and and you're right the pointing out that that, you know, we all get in these classifications Bay your mind is B. Plus we're going to put it where the capital is a creative to that property value. You know we don't use Green Street cap rates, we use David Simon's, Cat rates.
And over my career, I've been more right than wrong. So now we can do it. We can do a chat. TBT.
Poll who's got the better cap rates, I'm going to go with David for the time being but I've been proven wrong. Um so we we we're blowing and going and we've got some really
Exciting, big things on the horizon to do with capital and just to name a few, you know, we bought out.
Saratoga.
Which is a huge, massive thing to a great center, which should be a 4.5% cap rate.
um,
But that doesn't worry us; we're not going to our development. Yield is going to be greater than that—much bigger than that.
Um, but we've got Fashion Valley, we've got bokeh, we've got Barton Creek. These are just 2 or 3 that are popping later in the week. The team will be in announcing a really Landmark deal in Nashville and a great site in a great City that we have a a very important presence in now.
complemented by this crg asset that we now have cooperation control with
Is a very good asset and Opry Mills, uh, as an example, which is a very good, very good Mills and a distinct trade area. So that'll be our new ground-up development that we're, uh, really excited about. So it's pretty much status quo other than we're going to be moving up the, the, uh, you know, I don't want another 5 million shares up.
Okay.
Great. Thanks so much for the time. I appreciate it. Sure. Thank you.
We're going to run a little bit over. We got 2 more questions.
Our next question.
From Flores' statement with Vladimir Thalman, please proceed.
Hey guys. Uh, thanks. Um, I, I know, we're running late, David. Great to hear your voice, uh, Eli again. Uh, I'm I'm not be the first 1, to, to welcome you. But, uh, good to, to have you on the call as well. Uh, and David, I love your, uh, your passion. Um, question for you. I'll try to keep it relatively short here, but, uh, your Sno pipeline, could you talk about that? And I, I know that caring is dropped out of your top 10, tenants list presumably, but they haven't closed. Any stores is that just you haven't signed new leases or they they haven't opened new stores in the portfolio and maybe talk a little bit about in that Sno, how your your luxury is training. On how you expect that to Trend, Maybe?
As far as it's Brian, the Sno pipeline is 310 basis points as of 9:30.
Um, and you're right, Terry did drop out of the top 10. It's just simply because we opened up more stores with other retailers and...
Force them above the current rankings. So, it's really a reflection of the robust activity that's on the ground from a leasing perspective. Carry is still a very important tenant, and you know, over time we would expect to continue to see them move around to the top rankings. As you look at that 310 basis points, there is a substantial amount of luxury in there; it's probably to the tune of about 50 to 60 basis points of the total 310.
So the luxury cohort of tenants continues to favor our portfolio and we continue to see growth with us.
Thanks, Brian. And again, we've got, you know, um,
Um, you know, our occupancy is pretty high, but a lot of this new stuff is retained, and obviously, you know, Forever 21.
Um, is having, you know, releasing All That Space is having an impact on the yes, it has no.
Right, that's correct.
Thanks.
Thank you for.
Our final question is from Tau Octus Shana with Deutsche Bank. Please proceed.
A bit more value-oriented and just kind of curious if there's, you know, opportunities to kind of monetize that, or it's just the world through Mercury right now to really have an opportunity.
Well, um,
You know, we'll see how that transpires, but I will, I will, I will compliment the team at Catalyst. They're doing really terrific work at a number of the brands—not all. You know, some of the brands are, um, you know, again, it's not perfect sailing there, but they're doing a great job at J.C. Penney, a great job at Aerie, a great job at Brooks Brothers, and a really good job at Lucky. Um, so we've been very pleased with.
How catalyst?
Has integrated the various brands that, uh, that words are is really. This is the first nine months to.
If you go back, it really happened in early 2025.
So, um, they're doing a terrific job. Uh, it's stable, good results. Um, obviously, um, out of Forever 21, which was, uh, you know, as much as we tried to say that, you know, we couldn't primarily because you've, uh, it's anonymous, you know. And now that the, you know, we would have had a fighting chance had we not.
numbered from the demands, but
You know, we uh, we couldn't overcome that. Um, you know, now, thankfully it's it's changed and uh, at least it puts uh domestic retailers on a, you know, an even footing with um, you know with certain foreign retailers. So long story short Catalyst to do it a terrific job and like everything else look if it. Um, you know, it um I would say, will always look at, you know what, what the best options are.
Uh, but for this, for the time being, it's in good step.
And again, they skew for direct. I got a few of the brand few few towards the lower income, and I will say this lower income.
As the higher income, as well as is, you know, they're looking for value. So value can be, you know,
Value is in the eye of the beholder, but you know, you’ve got to give the consumer today value.
Whether they're, uh, they're a high high income consumer, or a lower income consumer values, the game name of the game.
And, um, and and, and I think catalyst is recognized at, in a providing, a high-end like, at the Brooks Brothers, and it's a kind of, the more moderate arrow and, um, you know, and and Penny. So, so, it's all good.
Well said David. Thank you.
Thank you.
There are no further questions. I would like to turn the conference over to David Simon for closing remarks.
Okay, we have a very active quarter.
We're going to have a very active fourth quarter.
So, more good stuff to come.
And, um, thank you very much for your interest and your questions. Thank you.
Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.