Simon Property Group Aktie

Everybody, why don't we get started. So good afternoon. Welcome to the Simon Property Group roundtable. I'm very happy to have the Simon management team here with us today. Eli Simon CEO, Brian McDade, CFO. Let me turn it over to you, Eli, with some opening remarks.

Great. Thank you. Samir. It's great to be here. I will keep this brief so we can get to your questions. Overall, leasing demand remains unabated, big picture that the operating environment remains very favorable for us. Retailer demand is strong across our platforms, across categories and across geographies. Retailers continue to prioritize physical stores and demand for our space in our portfolio remains robust. Through the first half of the year, we signed more than 2,300 leases totaling over 9.5 million square feet. Approximately 27% were new deals and our pipeline is running well ahead of last year's pace.

New deal rent per square foot is up 17% versus last year, while TAs per square foot are down 12%. Demand spans apparel, dining, entertainment and health and wellness. And what excites me most is the new and emerging brands coming to our centers from online, from Europe and from Asia. The consumer is showing up and continuing to show up at our centers. Shopper traffic is up and accelerated throughout the back-to-school period.

Retailer sales are also up alongside traffic, and it's broad-based across categories, geographies, and platforms, which are all positive. We continue to invest in our portfolio. We have approximately $1.1 billion of projects under construction at a 9% yield, roughly half of which is mixed use. Another $600 million is expected to start by the end of the year with a pipeline of more than $4 billion behind that. We also continue to reinvest into our portfolio with large-scale renovations and center enhancements. These investments are noticed by our customers and more importantly, by the retail community.

We own great assets and never stop investing in them. We take a long-term view, continually reinvesting for renovation, redevelopment, and enhancement project to make our great assets even better. As a result, many of our properties are more relevant today than when they were developed decades ago. Great assets matter, so does having the patience and discipline to continuously improve them.

Our naturally deleveraging balance sheet gives us tremendous flexibility to fund these opportunities while also maintaining a disciplined approach to capital allocation. So overall, we feel very good about the position of our business today. And with that, happy to get to your questions.

And I'll start, but let's keep this interactive. If anyone has any questions, please chime right in. On the leasing side, occupancy is around 96%. Where do you see the biggest opportunity to drive core growth from here?

The biggest focus, which has always been our focus is to make sure we have the most relevant merchandise mix out there. And that's, I think, what separates us from, frankly, anybody else is that our centers are going to be home to the newest, the greatest, the best brands out there, whether they're coming from online, coming from Europe, coming from Asia, so occupancy has room to grow, no doubt. And I think I said on the last call that we anticipate being above where we were at the end of last year.

We still anticipate being above where we were at the end of last year by the end of this year. But we don't stop then, right? We don't stop and say, okay, we've hit our peak occupancy, we're going to take a break. We say, okay, how do we make these centers better? Where do we move tenants, where do we find new tenants. And so it's that plus the continuous reinvestment in the assets we're developing, we're redeveloping.

We're adding square footage centers. We're adding exterior facing. We're adding outdoor square footage, adding new restaurant pads. And we're doing it across the country in big centers and small centers across different platforms as well. And so when we look at it, we have tremendous demand, tremendous demand for our product today. And so our job is to choose the right tenant and the right tenant for that space and then go to the next center and keep on doing it. And so we're excited. The pipeline remains up 25-plus percent, similar to how it was at the end of the second quarter. And so now our job is to just continue to execute on that.

The leasing pipeline?

Yes.

How is the consumer holding up here, right? Clearly, a bit of noise outside in the macro here, a lot of questions from that perspective. Like what are you seeing across your platform today and kind of whether it's discretionary or kind of necessity, what are you seeing generally?

The consumer has remained healthy and has had 0 slip up from our last earnings call. And if you look the second quarter sales -- comp sales were up, I want to say, 5.7%. Traffic in the first quarter was up 1.3%. The second quarter was up 2% in the quarter-to-date, so July and August, it's up 3.4%. So the consumer is coming. Sales are up. I think our customer, I think most people don't know what the tenure is at, right? I think people in this room understand what the tenure is at, but most people do not.

They understand where their equity book is at. They understand how they feel unemployment is down, wages are up, shoppers are shopping and our sales are up. And so we've seen no change in the consumer back-to-school across the board, across geography, across platform. All the retailers we speak with everyone not just met expectations, but actually exceeded expectations. And so we're very pleased. Obviously, things can change. And so we monitor it in real time literally today, but we have not seen anything to make us think that the consumer is having a material pullback in any way.

So Jeff, please go ahead.

I was just going to say, how does your scale size benefit or help you grab that market share of the leasing? So let's say, there is that new international retailer. How is the business international, domestic interacting to help drive that?

Yes. I mean, listen, scale and share, what we focus on is our relationships, and we think we have the best relationships. And so our job is to make sure we have the best relationships with the retailers. We have a team that goes and gets on the plane and goes to Asia, gets on the plane. I met with a CEO from the U.K. yesterday of a great, great brand that has 1 store today, and I know we'll have 50 stores in the next several years.

And so we view it as our job is to make our properties great, make the properties that tenants want to come in and then go find new and emerging brands. And I think we've done a pretty good job of that. We've got more to do, but we're going to continue to do it. And we look at it and say, there is no doubt that the U.S. is where retailers want to be for growth. I think it's sort of -- that's not debatable anymore, right, with what's obviously going on in the Middle East, for sure, what's going on in China. Obviously, Europe has its own challenges. So there's no doubt that if you want to grow, you have to grow here. And so we like that we're long U.S. retail real estate with those factors.

And Jeff, I guess I would only add to that, like the scale is important, what have you, but it's about relationships, and it's about the bargain that we stand up to our commitments, right? The retailer community knows what they're getting when they do business with Simon across the spectrum. And so that repeat business is really important because that is not the case away from us by and large. And so knowing what your experience is going to be, knowing what the -- that we are going to execute on what we said we're going to do carries a lot of weight in the overall scheme of our ability to generate business.

You talked about scale. I mean you've got a big platform. You launched Simon Media Networks recently, right, which allows brands to connect with consumers. I guess -- and given the amount of consumer data you have out there, like help us understand kind of how you see that enhancing the platform over time?

Yes. I mean, listen, it's, I think, literally launching October 2, right? So we'll see. But we are bullish. We're bullish. We have hundreds and hundreds of millions of visits a year, tens of billions of dollars in sales. There's obviously a handful of really large retail media networks out there. Are we going to be that big? Probably not. But do we think we can have a real business. If you think about our customer is going to the mall or going to an outlet or to shop. That's a pretty high propensity to spend customer. It's generally speaking, of the higher income demographic.

And so I think what we're seeing is since we put out the press release 2 weeks ago, maybe 3 weeks ago now, we had a ton of inbounds. But what's interesting is we had a ton of inbounds, not just from retailers, so that's sort of obvious, but from travel and leisure companies, airlines, hotel brands, credit card companies, right? Other types of companies that sort of say, oh, that's actually a pretty interesting data set to target because if you're going to the mall, you're going to the mall to shop, right? So you know this is a qualified customer. So we'll see.

But this is a sort of the next leg of a journey that we've been investing into our media business and our advertising business at the malls for long before it was cool and people came up with names for their programs. We've been doing this for a long time. We have over 4,000 screens in our centers. We're adding more. We just approved on Monday another -- I forget what it was, 10, 12 centers. We're going to do another set in October. We're continually adding because brands realize this is a great place to capture eyeballs. And so I think it shows that people want to be at our centers. We know the shoppers do. We know the retailers do. I think now the broader advertising community sees that as well.

This time last year, you talked about the app. And I think you started talking about you mentioned that one of the most searched items was -- so I was curious how that app maybe interact business and any trends that you're seeing lately with that data.

Yes, 100%. So yes, so we launched Simon Plus a little bit after this time last year. That was basically done, and we kind of waited towards holiday. It's been awesome. And what's been great is it's giving us great insights of -- I don't like using names, but if you go to store A, you also went to store B and C. And so as we think about our merchandising mix and our discussions with tenants, -- that's really insightful. And that's sort of something that, frankly, nobody else can have sort of that scale.

And then we know what you do online on shopsimon.com. And so we've created this ecosystem, both physical and online that gives us real-world data points on what the consumer is doing. And so we use that for our media network, but also for our own leasing and understanding of what retailers are trending, what categories are trending. And so we use it, our leasing team uses it. We have a new data team that analyzes it, see where things are spiking by parts of the country, by type of platform outlets, malls, et cetera. And so it's pretty cool. We're early days, but we feel pretty excited about the opportunity here to do something that, frankly, nobody else can do.

It gives us an opportunity for first-party data collection, right? We, as a landlord, we're traditionally behind the retailer with the point of sale. But by using our loyalty program and app, you can see the transactional activity that's happening in our assets. And so that gives us a leg up in to Eli's point, to monetize it, but also to better operate our business.

So a decade ago, Amazon and e-commerce was going to wipe you guys out. No one is ever going to a mall again. That obviously hasn't happened. But let me ask you about agentic AI and as one theme and then convenience is another thing. Combining the 2 of them, agentic AI and convenience, I just want my stuff delivered. I don't want to deal with people. There's higher gas prices. I don't want to be bothered. How do you see that the combination of those 2 things today and given where agentic AI is going? And then secondly, a very separate question, but very basic, which of your tenants and brands are you most excited about? And which ones are you most worried about?

This is recorded, right? I hate using names. There's a lot of -- there's -- I would say there's -- I'd say there's a lot of companies -- there's a few -- I don't want to use names, but there are a few companies really targeting the Gen Z customer today that we're incredibly excited about. I mean that we're adding throughout the portfolio. I don't like the same.

But on the agentic AI, I actually think it's fantastic for us. And I think it's fantastic for us for 2 reasons. One is as people become more and more on their devices, not talking to other people, we've seen and coming out of COVID, and we've seen this now for a number of years, people want to do things. They want to come to the center. That's why our traffic is up. They want to hang out. They want to go to restaurants. They want to go to the movie theater. They want to take pictures. They want to hang out with their friends. And that's from all age groups.

Our biggest growth is the most online group, right, the Gen Z customer and even the generation behind it, they're the ones who are driving a lot of the growth in the mall right now. And they're driving it because they're on their phone all day, their teachers are now AI, right? They're not -- they don't have sort of that normal experience of let's go hang out with our friends and sort of this is the place to do it. This is the proverbial Town Square in so many of the communities across the country. So on that end, we feel very excited.

On the other end, if you're a retailer, it is so hard in an agentic AI world to control your brand presentation, right? You -- on your own website, xyzretailer.com, it's very easy to control your brand presentation. Well, now all of a sudden, people are getting there through pick your AI agent, you're not going to be able to show them your full breadth and depth of your assortment of what your brand is about, about right, the packaging, what does the store look like? You can't do any of that now.

Do it online to some degree, but you can't do it -- you can't -- I mean, again, today, and I don't know how you're going to be able to do it in sort of a pure on a ChatGPT. That's just not going to show up. And so that makes stores even more important because that really is the best place to control your brand presentation to say this is what we're about. This is our customer. This is who we're targeting. This is our full assortment of our top merchandise. And I'd say it's your best customer acquisition vehicle. There's no other customer acquisition vehicle that's going to come close to it.

And if anything, it's going to become harder to find those customers on a social media platform, on Google, et cetera. It's going to be a lot harder. And so I think it's actually incredibly bullish for us because you're going to have to -- you want to be a brand and you want to be in business. If you don't have a store fleet that is updated, that's modern, that looks good and that reflects the brand the way you want to do it, you're not going to be able to do it anywhere else.

And so for those 2 reasons, we think this is great for us. We really do. And people can say, right? It's going to go away and that's -- we'll keep growing cash flow and growing NOI in the meantime and paying a growing dividend and sort of in 10 years, it will be the next thing. And then people will say, well, 10 years ago, AI was going to kill the mall and well wherever the next thing is. So we feel really good about it, really good about it.

With the data in last year, again, I think tied to what [indiscernible] was talking about that, the membership program, I guess how is that helping you improve the shopping experience? You talked about how you're using it to help with, let's say, leasing, maybe even development. Is it tying back to what you said earlier, maybe that how you're curating the malls, who you're bringing in, but yes, how is it helping the shopping experience? And is this also early stages that you think over time, you can keep pulling in more traffic to your centers?

Yes. I mean I think 100%. I mean, it's all the data, all the insights, but you're literally -- if you're a member, you're getting rewarded for -- if you shop at any of the stores in the mall. So unlike, if I'm a member of this retailer's loyalty program and I go to the mall and I only go there and I go to 2 places where I only get loyalty. But here, you get -- if you're a member of our program, you get loyalty points for all of it, plus the loyalty points you get from the actual retailer itself.

And then we have the ability -- the customer has the ability to earn the rewards online or in-store. And so it's actually a tremendous value proposition, and we're seeing it. Again, it's not even a year old, and we've added millions and millions of customers. But it's a tool that as it gets more mature and obviously more awareness, people are going to realize, I can get points, I get my Amex points, right? I get my Simon Plus points, I get my retailers points, you could stack it on top of each other.

And then I'm going to go and get a free pretzel or go get a big discount at this retailer or free key chain at this retailer, right? We have thousands and thousands of different rewards on there. So it's cool. And we think it's -- we're as bullish, more bullish than we were this time last year, sort of right before launching as it is today, almost a year into the program.

But I think, Jeff, it is also allowing us to understand the shopping pattern of people and consumer and making sure that we're organizing our stores around neighborhoods. You've seen a big change in our business in the last decade around putting like tenants in similar neighborhoods and shopping next to each other. A lot of that is just informed by our data. And you can see the cross-pollinization of shopping, putting XYZ athleisure brand next to Y athleisure brand.

They don't know what's happening other than what's in their own stores, but we have that visibility, that halo effect of being able to look down and getting better productivity. So we're making better merchandising decisions on just simply where retailers are going in our centers by having a better understanding of the consumer and the traffic patterns we're seeing.

You took back about 1 million square feet of space, right, in the quarter, even with that very strong occupancy you had. But with space you took back Saks boxes, talk to us kind of what's been sort of the re-leasing, where does that stand? What sort of conversations you're having just to give us an idea of I mean demand here.

It's done, right? I mean it was sort of what I said last quarter or maybe I should have been clear, I guess. But I mean we took the $18 million, the $44 million. It's basically all signed, if not out for signature. It's a retailer. We move on. We added better retailers. It wasn't even a blip on our radar. It was normal ordinary course where we got really good real estate back. We're happy when we get really good real estate back, we lease it at higher rents, and we go on with our business.

I mean it's a function of -- it's an indication of where supply and demand in the marketplace is. The fact that we could absorb 1 million square feet and release it in 90 days is really a function of just the backdrop that we're seeing across the -- from the Simon perspective across the U.S.

And that's all rent paying and coming through.

It will come...

End of this year, next year, '28. I mean from a timing perspective. Yes. But it's less immaterial.

Okay. Okay. And then maybe just on the -- as we think about as you evaluate potential acquisitions today, what makes an opportunity attractive to you? Like what kind of spread relative to your cost of capital do you need to see to justify deploying capital there?

Yes. So I would say -- I'll answer the first part. What makes an interesting acquisition opportunity is an asset that's brand accretive that we can add value to and at a fair price. And my personal view is those type of assets should not change in value if the 10-year goes up and down 25, 50 basis points because we're not traders. We're into this business forever and great retail real estate today is more valuable than it was 5 years ago and more valuable than it was 10 years ago and will only get better.

And so we don't -- again, I'd rather buy everything as cheap as possible. Of course, okay, I'm not going to -- I don't want to overpay, but if great retail real estate is available for a transaction, I don't think we're doing our job or I'm doing my job right, but I have a dramatically different view on because the 10-year is 5% today versus 4.3%, whatever it was, 90 days ago because the growth profile hasn't changed. The long-term value and NAV accretion doesn't change. And so I'd like to buy cheaper, obviously, 100%, but we're in this game for the long term, and we'll buy really, really good real estate, really, really good retail real estate and we'll grow cash flow tremendously.

5 years from now, do you think sports and athleisure will make up a bigger or smaller part of the mall?

Bigger. But I mean, it's A little bit. Yes. I mean it's not going to be -- I mean, that's -- I guess I should say I'm not a fashion trend expert, okay? So I think that's part of it. But there's -- I'd say there's a lot more entrants in the space, and they all want to open stores. They all want to open stores as sort of next to each other.

So I would -- if I had to guess, I would say, yes, there are probably those more entrants who want to open more stores. But again, 5, 10, 15 years from now, we'd all be wearing suits and tie again, right? And so that could change, and then we'll pivot. But as long as the fashion trends remain the same, sure, it will be more than it is today.

Are you happy with the current portfolio in terms when you look at demographic changes or spending habits throughout the country, you continue to focus and talk about owning the best centers. Is there a bottom 5% or 10% that you want to try to prune at some point or we're generating enough cash flow or opportunity to reinvest in that?

Yes. I mean the reality is they are -- I want to say -- but by and large, again, you have to -- by definition, you have to rank things, okay? Even though we love all of our assets, the -- most of the -- what one would say is at the bottom is unlevered. And so that's generating a bunch of free cash flow that allows us to reinvest into the assets that aren't at the bottom. It's not really how we think about it.

But sure, I think that is fair to say. But to the first part, when we think about assets today and demographics, I think if you look at our outlet business, okay, you have sort of the powerhouse outlets, right, the ones everybody nationally, internationally knows about the Wood Perry, the Denver Hills. I'll put Sawgrass in there even though it's not an outlet, same principle. Orlando, right, both Orlando assets. Then you have this bucket of outlets that are great outlets, but that are effectively becoming the best shopping center in growing communities.

And so those demographics are actually awesome. You look at the Charlotte Premium outlets, the Denver, Houston, Tampa and the Panhandle and Silver Sands. I mean you -- right, I think that's enough to get the point. But these outlets that maybe when they were built were sort of yes, the 45-minute hour drive time from the core customer. Now when you go there, all you see is housing. And generally speaking, it's cheaper, right, than sort of the more established areas. So it's young families to people that we want at our shopping centers.

And so these -- and we're leasing them as shopping centers, not as outlets. Now a lot of outlet brands, 100% or adding beauty brands to these centers because that's how they're shopping. And so the demographics of an asset today or an asset 20 years ago might be very different than it is today. And so our job is sort of to lease it to where it is today, but also to where it's going into the future. And so as a lot of these other malls that might have been owned by our peers or other people sort of go away, well, we're now making those the Allen Premium Outlets, the Tampa Premium Outlets are just great shopping center where you have the best collection of brands for that market.

And some of the outlet brands see it, too, and they're selling some full price, some outlets, some they don't call it. They just sort of -- the customer goes and says, I love this brand. They have great product. This is the place it's 5 minutes from my house. This is where I'm going. And so our job is to meet the customer where they are. And that's something we're focused on all the time.

I'm surprised at how small Klepierre is now of your overall value, I guess. But can you just spend a minute talking about how you view that strategically and also the other international exposures that you've got the Japan side, does that become so relevant that you get rid of it? Or is there a growth area? How are you thinking about that?

Yes. So Klepierre first, and I'm seeing Jean-Marc, I think, later today. But we love the team. The team is great. Portfolio is great. They've done a tremendous job, the best balance sheet in that sector. At the end of the day, it's an investment for us, okay, which we're obviously on the board. We talk to Jean-Marc all the time. The team is great. We're earning a spread that would probably be very hard to replicate given sort of where they trade and their yield versus how we can finance in the euro market.

If there was something else to do that we like, could we do it 100% and use those proceeds in a tax-efficient way. It's not on our radar, right? But never say never. On the rest of our outlets, in particular, Asia, so 2 things. So one is we're continuing to expand and add new centers, outlet centers in Asia. We have great partners, Shinsegae in Korea, Mitsubishi in Japan, Genting in Malaysia, great partners. There's real opportunity. And so we're expanding in Gotemba and Hanazono, a new development in Daegu in Korea and Yeoju in Korea expansion, Genting Highlands expansion. So, we're actually putting money back. All that money is generated there and its [indiscernible].

So we're not putting any new cash from the U.S. there. But what it's allowed us to do is really create pretty incredible economics on these expansions. So our cash equity yields could be 30-plus percent on these expansions, which is obviously very good. And the other thing that Japan, in particular, does is we have $1 billion plus of assets there that are effectively de-minimisly levered. And so that allows us to potentially access the yen market to offset some of the rate pressures here. And so it's something we're actively going to look at very, very seriously.

And so I think it's -- one is it's pretty -- there's no -- there's definitely no other retail REIT. I think there's only one other REIT that can go borrow in yen, euro, and obviously, dollars. So that's, I think, a real competitive advantage. But two is we talk to our new leasing team talks to the Klepierre team, talks to the different teams on the ground in Korea, Japan all the time. Okay? The Korean beauty business is becoming significant.

And so we are getting the best relationships there at the senior levels in order to talk to them and now add those guys across our portfolio. So it's a -- international is 10% of our business, plus or minus. We like it where it is. Could it go up a little, could it go down a little if we find stuff to do in the U.S., for sure, but -- for sure.

What kind of returns [indiscernible].

I mean it's just -- it's a function of -- we try, right? We try. Things just take, as you can imagine, take time. But those are just stuff that's going to start in the next year, 18 months. Kyoto, we're going to develop at some point in Japan and outlet there. It takes time, unfortunately. But we -- yes, we like the international business. It's a huge competitive advantage.

I think if you just look at the value of our international business, if somebody properly valued it, it's pretty staggering compared to the other public retail real estate companies in the U.S. We have a very big international business, probably not. We don't probably get enough credit for it. And so yes, we like it. We really like it.

It has operating benefits and it has capital benefits to us. And we're harvesting those opportunities. And it really does power brands from Europe, brands from Asia, you're looking at the U.S., clearly because it's a place of growth. And so we have these broader relationships than just in the U.S. And so we can bring -- marry that together to create great economics for us.

I know we're almost out of time, but we had a bunch of incoming on CapEx, right? Tenant allowance. You talked about the [indiscernible]. You've talked about a pipeline maybe $4 billion plus. I guess for the audience, can you just explain the buckets and that -- and just elaborate on some of the comments from the call on CapEx and the trend, like what you're seeing?

The TAs are down, okay? It's as simple to say it. So right, if somebody runs the right math, the TA is down. Now we're doing more leasing, so TAs are up. I think that's good, right? We want to do more leasing. But TA per foot, TA payback, that is down. And again, if you run the right math, which Brian is happy, Tom is happy to explain to people if they have questions on the right math. If you run the right math, TA per foot, however metric you want to look at it is down, just that's a fact, okay? And I don't really know -- I mean, I can understand why. There's the narrative, but it's just not true. So that's part one.

Part 2 is the development. So we're funding -- if you just step back at the company big picture, we're going to generate $5 billion of FFO this year, round numbers, pay $3.4 billion, $3.5 billion in dividends and generate $1.5 billion, $1.6 billion of free cash flow. So we're going to generate $1.6 billion, and we'll probably spend round numbers, $500 million on PA operating capital renovations, et cetera, and $500 million on development. So that, a, that leads $500 million of excess, plus or minus.

But B is that's a naturally deleveraging balance sheet because we're growing, right? So -- which I think is good. And so all those things are good. The development pipeline is we are going to fund it from free cash flow. And again, remember, if we have $1 billion today plus $4 billion, that's $5 billion, we're going to generate $450 million of EBITDA from that. And so that then goes and allows us to have incremental excess free cash flow to go buy back the stock, go do additional pipeline.

So I mean, the narrative is wrong. It's probably the simplest way to put it. But capital will go up as we do more leasing, absolutely. But as a percentage and as on a deal basis, et cetera, it goes down, and we do more development. And when we do development, we make more EBITDA and we make more EBITDA, we have more cash flow to then go to the bottom line that allows us to go do things with it, grow the dividend, grow our buyback program, et cetera, and have a balance sheet that's less than 5x levered.

So again, it's all good. I mean that's the simplest way to say it. It's all good. And we'll just keep -- we'll keep doing it and then you can call Brian and Tom, and they can walk through the math in great detail, but that's what the math is. The math is we're growing cash flow, we're growing NOI, and we got excess cash flow, and we're going to spend it accretively.

Thanks for that explanation, especially on the TA bit. How should we think about the structural versus 96% occupancy cyclical aspect of that? And how far do you think it can go?

On occupancy?

No, not on occupancy. On TA, like how much lower do you think...

It's -- I mean, we have 40,000 leases, right, something like that. It's each deal. I mean it's a function of competition. It's a function of the space. But there are times where if we have great credit, we'll give more money and make more rent. So it's both, right? So we can give somebody more TA and get paid on it.

And if they have great credit, sometimes we'll do it, sometimes we won't, but we don't mind that, right? We don't mind making the appropriate return on that credit. So it's -- it all goes into the pot, right? And again, it's not like a unilateral decision. It's literally a 40,000 leases decision. But the way I look at it is demand is really high. And so when demand is really high, we're able to structure deals with the tenants that work for us and work for them.

We're running out of time here. And we've got a couple of rapid fire questions for you. So one, if long-term rates stay higher for longer, which has the biggest impact on your sector? -- higher refinancing costs, lower transaction activity or less new supply?

Higher transaction costs. I mean higher refinancing costs, I guess.

Number two, over the next 3 years, will third-party capital become a more important source of growth for public REITs than balance sheet capital? Yes or no.

I don't think so. And not for us. So I don't...

REITs overall, maybe...

But not for us. We focus on us.

Yes. For the sector, yes. Less is the best. Okay. And number three is next year same-store NOI growth for the sector higher, the same or lower than this year?

You know what we're going to answer.

Less than ours. I'm not going to change the answer.

Thanks everybody.

Greetings. Welcome to Simon Property Group Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded.

I will now turn the conference over to Tom Ward, Senior Vice President, Investor Relations. Thank you. You may begin.

Thank you, Sherry, and thank you for joining us this evening. Presenting on today's call are Eli Simon, Chief Executive Officer, President and Chief Operating Officer; 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 8-K filing. Both the press release and the supplemental information are available on our IR website at investors.simon.com.

Our conference call this evening will be limited to 1 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 1 question.

May I please introduce, Eli Simon.

Good evening. We delivered excellent financial and operational results in the second quarter. Domestic property NOI and real estate FF growth accelerated in the quarter to 8.5% and 7.9%, respectively. This was driven by continued leasing demand, disciplined execution across all platforms and contributions from recent acquisitions. Shopper traffic accelerated in the quarter and retailer sales volume again grew solidly year-over-year. Further evidence in our portfolio is well positioned and our properties are the places where shoppers and tenants want to be. And with our recently declared dividend, we will have paid out over $50 billion to shareholders since becoming a public company.

Tenant demand continues to be widespread with no slowdown drive from a broad mix of established and emerging retailers across categories, platforms and geographies. During the second quarter, we signed more than 1,200 leases totaling over 4.8 million square feet. The number of new deals signed in the quarter increased more than 20% compared to last year and new deals represented approximately 28% of total lease square feet. Year-to-date through the second quarter, initial base minimum rent per square foot on new deals is up 17% year-over-year, while tenant allowance per square foot on new deals is down 12% year-over-year. We have completed more than 87% of our 2026 expirations and are ahead of where we were at this time last year as we continue to negotiate 2027 and 2028 expirations with many tenants. The pipeline of prospective deals continues to build remaining well ahead of last year's pace, reflecting continued broad-based tenant demand.

Moving on to retailer sales. Malls and premium outlets were $838 per square foot, up 13.9%. Importantly, total sales volume increased 6.6% over the trailing 12 months and 7.6% in the quarter, with comparable sales growth of 5.7% for the second quarter. We continue to host unique activations to high incredible value our portfolio offers. Our fifth Annual National Atlas Shopping Day produced another year of shopper traffic and retailer sales growth with the more than 25% increase in retailer participation compared to last year, with Simon Plus members enjoying exclusive rewards tied to the event. We also built on the momentum around the World Cup, running a coordinated activation strategy across our portfolio that feature fan experiences, watch parties, retailer collaborations and community programming. The shopper and retail responsive types of events underscore Simon's offering, the ability to turn major moments into large-scale, real-world experiences that bring our consumers, brands and communities together.

Turning now to development and redevelopment activity. At the end of the quarter, we had development projects underway across all platforms, with our share of the net cost totaling $1.07 billion at a blended yield of 9%. Approximately 50% of the net cost is for mixed-use projects.

Looking ahead, we expect projects representing more than $600 million of additional net cost to start construction in the second half of this year.

Our development pipeline remains robust with over $4 billion of projects, which we believe will generate attractive returns, enhance our properties and support long-term growth and cash flow, FFO and dividends per share. This is consistent with the results we have achieved on similar recently completed projects, such as Southdale Center in Edina, Minnesota; Brea Mall in Orange County; and Briarwood Mall in Ann Arbor, Michigan.

Over the last 4 years, we have also committed more than $400 million to center enhancements that are either completed, underway or recently approved including common area upgrades, landscaping, lighting and other amenities, creating a more elevated shopping experience. These enhancements are noticed and appreciated by our customers and particularly by our retailers, who value a landlord committed to the long-term success of their stores and the communities we serve. We remain focused on these enhancements alongside our broader development activity our balance sheet allows us to continue reinvesting in our portfolio for years to come.

With that, I will turn it over to Brian, who will review our financial results from the second quarter in more detail and provide an update on our outlook for the remainder of the year.

Thank you, Eli. Real estate FFO was $1.25 billion or $3.29 per share in the second quarter compared to $1.15 billion or $3.05 per share in the prior year period, an increase of 7.9%. Domestic and international operations both performed well and contributed to $0.29 of growth driven by increased lease income, disciplined cost management and contribution from acquisitions. As anticipated, higher interest expense and lower interest income combined were a $0.06 drag year-over-year.

Reported FFO was $3.12 per share in the second quarter compared to $3.15 per share in the prior year period, which included a $0.21 per share noncash after-tax gain, primarily due to Catalyst brands, reconsolidation of Forever 21.

Domestic property NOI increased 8.5% year-over-year for the quarter and 7.6% for the first half of the year. Approximately 120 basis points of growth for both the second quarter and first half of the year were attributable to our acquisition of the remaining 12% interest in PRG.

Portfolio NOI, which includes our international properties at constant currency, grew at 8.3% for the quarter and 7.5% for the first half of the year.

Malls and premium on occupancy at the end of the second quarter was 96%, flat compared to the first quarter and year-over-year, a result that reflects the depth of retail demand as we absorbed approximately 1 million square feet of retailer bankruptcy related space returned during the quarter and successfully be let. The mills occupancy was 98.8%. Average basement rent for the malls and premium outlets increased 6.3% year-over-year, while ADR for the mills increased 12.3%. Occupancy cost at the end of the quarter was 12.5%.

Shifting to return of capital. Today, we announced our dividend of $2.25 per share for the third quarter an increase of $0.10 or 4.7% year-over-year. The dividend is payable on September 30 to shareholders as of the record. During the second quarter, we repurchased approximately 793,000 shares of common stock and approximately 238,000 limited partnership units for a $211 million investment at an average purchase price of $205.10 per share.

On to the balance sheet. During the quarter, we completed 8 secured loan transactions totaling $1.4 billion at a weighted average interest rate of 5.36%. We issued EUR 500 million of senior notes at a 3.65% rate for 5 years, and we closed on a $460 million 5-year term loan priced at SOFR+ 70 basis points, the proceeds of which were used to repay $460 million drawn under our revolving credit facility. We ended the quarter with approximately $9.3 billion in liquidity, and our balance sheet remains incredibly robust with net debt-to-EBITDA below 5.0x in fixed charge coverage of 4.7x. This supports our strategy and our continued execution.

Finally, on to 2026 guidance. Given our results for the first half of the year and our current view for the remainder of the year, we are increasing our full year 2026 real estate FFO guidance to a range of $13.20 to $13.30 per share. That compares to $12.73 last year, an $0.08 increase at the midpoint compared to the range previously provided.

Thank you, and we are now available for your questions.

[Operator Instructions] Our first question is from Caitlin Burrows with Goldman Sachs.

I guess I'm wondering if you can talk about TAs and cash flow growth. You did reference some of the pieces in the prepared remarks. So if you look over a long time period, like the last 10 years, NOI and FO growth have outpaced FAD growth. Year-to-date, it looks like actually FAD growth has outpaced NOI and FFO growth. So maybe that is a change in the trend or maybe the numbers move around. But wondering, can you discuss the outlook for TAs and what they're a function of if the demand and leasing environment is so strong, do you expect to pull back on TAs and is reducing TAs a goal of yours?

Sure. So thanks for the question, Caitlin. So I think when I think about the -- let's just talk about TAs first. That's a function of demand for the tenant demand from the tenants and demand for the space and the supply of available space. Reality is work having a ton of conversations with retailers. Our pipeline today is about 26%. I think it is this time last year, which was over 100 more deals. And when we have those conversations rank the component of it, and TA is a component of it. And there are certain times where it might be a tenant that we want to start a new relationship with, but we're concerned potentially about the credit or we've got their long-term viability. And so maybe say them, maybe it doesn't make sense to pay as much of the TAs what we might pay for some or else, we're more certain about what the performance could be. So I think it's really a function of of mix over the long run. But the reality is supply and demand shows itself in 2 ways in share the seller rent growth and it turns itself in TA. Stepping back, if you look at fund filler distribution more broadly, I think for the year, we're up 9% or over 9% year-to-date, it's a focus of ours, right? Our focus is to grow cash flow growth, and part of the cash flow growth is from the FFO and part of it is from the capital we spent, but what I do want to highlight or reiterate what I said on the call in the prepared remarks, is we are reinvesting back into our centers in a big way, and that is noticeable from the consumers and really from the retailers. Not been to, I don't know, I think it's been to 12 states in the last 3 weeks and seen a bunch of our properties where we have done these transformations. And what I've seen is new leases being signed. There are new retailers coming to these centers because they see a landlord that is reinvested into that space. And when you ask the General Manager what the customer perception been. They say, well, we've got people come up with Cadia, realize this center was still here or the center was still thriving. So our job is to continue to reinvest back into our centers and to make them better from the customer's perspective and from a retailer's perspective, but our job overall is to grow capital growth, grow dividends per share and make our centers better and sort of we throw it all into the calculus. And I think the results have been obviously very impressive so far, and we're looking forward to the future.

Our next question is from Michael Griffin with Evercore ISI.

Eli, I appreciate your commentary around the leasing outlook. Just wondering as you kind of look ahead to really '27 and beyond. You've got rents on in-line shops call it, $60 to $65. I realize you don't quote a mark-to-market on the portfolio. But can you give us a sense as those leases are coming due, are you signing leases in the 70s, mid-70s? Just curious about the trajectory and opportunity there in rent growth given all the demand that you've really highlighted.

Sure. So if you look at year-to-date, I think we've signed new leases at $78 more or less. And -- but what you have to focus on those leases coming due, is a large number of them will renew. They're great tenants. We have great relationships with them. They're important for the center. And our renewals historically speaking, and that's holding true now is sort of in the mid-single digits. And so we'll renew some and we'll replace them if we think that there are better retailers that can perform better and add more to the center. So it's not as simple as saying the $60, $65 goes to $78. But clearly, if you look at the trajectory of where new leases have been signed, obviously, it's a positive story. The supply and demand story is positive, but it's not as simple as just saying take the $60, $65 to $78. But I think really the focus is what's the right retailer for each space. And there's no market rent really in our industry, how we think about it, what's the market rent for that tenant based on how they're going to perform and what they're going to do to the rest of the center. So we think it's a positive story. I don't think it's quite the $65 to $78 in a year, but we look forward to continuing to upgrade -- continue to upgrade the merchandise mix in the pipeline, I think it's 483 deals and a similar number of them or new deals or new tenants as we've done year-to-date, which is 28%. So we feel very good about the time plan and it's our job to continue to execute and continue to grow it over time.

Our next question is from Samir Khanal with Bank of America.

Eli, given that occupancy is at 96% today, I guess where do you see the greatest opportunity to drive NOI and earnings growth, right? Clearly, there's a lot of momentum here. So help us think through the -- about the key drivers of growth, let's call it, over the next 12 to 18 months.

Sure. So first off on occupancy, I think it is important to realize that we are at 96% occupied on the malls and mills -- I'm sorry, in malls and outlet portfolio. We got 1 million square feet space back in mid-May and are the same occupancy level as we were at the end of the first quarter. I think that's pretty impressive, I think, speaks to the strength of the team and the strength of our portfolio, right. When I think about the levers of growth, so to speak, occupancy does have a little bit more to go from here. I don't think we'd ever be at 100%. We wouldn't want to be. We want the ability to move around tenants, but obviously is a little bit more from here. I think, honestly, above where we finished last year, is the team's goal and I think we'll achieve that. The other piece, obviously, is retenanting, taking out lower performers who obviously pay lower rent and replacing them with new, better tenants that pay more rent, given their increased productivity is obviously a focus. And the last piece is our development pipeline. We have $1 billion in the ground today. We have hopefully $600 million plus they'll be approved and start by the end of the year. We're generating 9% return on those investments, which is obviously a very healthy number. And again, when I -- when we quote those numbers, that is only on the capital we're spending on those developments. But if you look at what we've done at Southdale, look at what we've done at Brea, look at Briarwood, there's significant benefit to the rest of the center when we do those developments that are not reflected in those returns. And so that's another avenue of growth for us. But it's really continuing to do what we've been doing, which I think we've obviously done a good job so far, but we have more to go. We're going to continue to reinvest into our centers and continue to upgrade the merchandise mix, but there's a lot of factors that go into our growth, but we feel pretty good about where we sit today.

Our next question is from Michael Goldsmith with UBS.

I think Brian in his prepared remarks talked about 1 million square feet of bankruptcy-related space coming back during the quarter. Can you outline who has been giving you back space? And then also, can you just talk about -- we've talked a little bit about the occupancy and you've been able to keep that flat despite getting all that space back. also talked about how leasing economics are being strong, but can you talk a little bit about the space that you got back on what rents were they? And are you seeing kind of similar to the overall new leasing on this box is just trying to understand the economic uplift from replacing the space?

Sure. So the 1 million square feet basically all of that were the Saks Off Fifth, right? Obviously, a pretty public bankruptcy process. Again, we lease -- so we had effectively no skipping no excuses for lower occupancy, right? We got back to where we are. And again, as of end of the lower at 96.3%. So we are above where we were. But if you look at Saks, not dissimilar to what we talked about earlier this year, if you look at the boxes in the outlets, they were paying $18 million in rent the deals we have signed today are already -- which about half the space are already well in excess of that and the rest are under discussions in near final deals, but we'll basically take the $18 million and turn it into $44 million. The only thing that I'd say is not reflected in '26 or I guess it will be reflected in '26 is that we got those boxes back, frankly, later than we thought we would. We did get them back into the May 15 or May 16, and so by the time, again, we hustled we got to be the sign did leave the side now but that's really going to be a '27 story when those rents start hitting. But yes, it's a good news story for us. But that's really the vast majority of that 1 million square feet of the Saks Off Fifth, which, again, not surprising that we got them back, and I think it's overall, a good outcome. And the replacements have been -- I don't want to use names that I know what's been publicly set or not, but great, great retailers, blue-chip retailers, a number of expansions, frankly, that might have been elsewhere in the center, wanted more space, some carve-ups. But overall, very, very good demand and a lot of them may see adoptions over who to replace them with, but turned out to be a good news story for us.

Our next question is from Greg McGinniss with Scotiabank.

Similarly, along with lines of tenants that you're putting into the centers, you mentioned the substantial retenanting. Could you please provide some details on which tenants or categories you're adding to centers that seem to be resonating with consumers today versus those where you're looking to potentially limit exposure and where you see the tenant watch list where that is today?

Sure. So we are adding frankly across a variety of categories across all geographies, across all platforms. I would say what is most exciting to me is our new and emerging brands, which are across a variety of sectors, includes technology companies athleisure, home, jewelry, very big in the Gen Z, the teen consumer we are adding a ton of new brands there that are, in many cases, unique to the market, unique to our center and really differentiates 1 of our properties where we add these types of tenacity to other properties. And so these brands are coming from online. They're coming from Europe, they're coming from Asia and the beauty space number of deals in the beauty space from Asian retailers coming in the collectible space. Athleisure space obviously continues to grow with new entrants. And so that's very exciting. And when you walk 1 of our centers, you see something new. Do you see something that's differentiated. And I think it's resonating with customers. And when we add these types of retailers, we see increased traffic and not just for the retailers we add, but for the retailers for the rest of the center. And what that delay to frankly, is if you go and look at some of the legacy players in these spaces where we're adding the new emerging brands, they're reinvesting into their stores. Their stores look so much better their merchandise looks better, and it's really a great symbiotic relationship, which we are -- which we're very proud of. The other area of focus, I would say, would be in the restaurant space. We continue to upgrade the restaurants and continue to add restaurants. If you look, we have a number of high-profile developments and redevelopments that have started and will start over the next call it, a year or so, we're going to add probably $400 million to $500 million of incremental restaurant sales from some of the biggest names out there on a regional on a national basis. So again, that's something that we can continue to do to create a fresh environment, an exciting environment and an environment that customers want to go to. So that's really the focus, but the demand is from a variety of categories provided retailers. On the watch list, it's in very good shape, nothing close to material sort of normal course. And the expense up happens, we handle an ordinary course of business.

It's actually an opportunity for us, Greg. It's Brian. The watch is it is a low point. But as we've said now, recapture space does provide us opportunity to bring in better merchants.

Our next question is from Alexander Goldfarb with Piper Sandler.

Eli, I just wanted to go back on your Simon Brand Ventures. I think before you had said that I think it delivers like 200 million and maybe there's a goal like 800 million, but also you have 2 billion people who go through your global portfolio. Just want to get a better sense of, as you look to monetize this -- the visitor count. Is this something that you think is like near term, like in the next call it, 2 years that we'll see a material shift in this revenue increase? Or this is something more of a longer-term initiative? I'm just trying to get a handle on it. I mean 2 billion is certainly a lot of people.

Thanks, Alex. So I don't know if you have access to my e-mails, I guess, I have a RAS press release and I guess I can say now, that will be launched in the next couple of weeks to launch Simon Media Network to really, in a more broad way, take advantage of the first-party customer insights that we are getting. As you said, we have billions of visits a year, probably carried over $100 billion in our domestic portfolio. And so there will be an announcement in the next -- in the coming weeks. But yes, we think there's a real opportunity here to take sort of our whole ecosystem we have, obviously, our digital footprint with Simon. We shop Simon, with Sinosure, our in-house screen network. We have over 4,000 screens, the largest footprint of screens, I think, in the world that we continue to invest in. And then how it takes the data we're going to get into is sign an immediate Howard and create something that's a really, really interesting both for our endemic brands, the retailers at our centers but also for not identifies what access to our consumer who is -- has a high plant shop in to shop and shop a lot and so it's something we are focused on. I don't know about the 200 to 800. I hope it's that. I hope it's more than that, frankly. But it's a business that's growing at double digits, mid-teens percent year-over-year. We're investing into it. We're adding screens. We're adding touch points at our centers. One is because we can make a really good return and have a 1- to 2-year payback period. But two, I think it looks good, frankly. I think when done right, I think it adds to our centers. We have our digital directories allow us to search for real-time inventory through signing search center, which gets great usage. And so it's something that we are focused on. I'm focused on. We think there's a really big opportunity here. Clearly, malls, retail centers at large or having a cultural moment. People realize that they're not going away, young people want to hang out here and there's an opportunity to, I think, really take advantage of that because we can provide to people who are looking to advertise something that really nobody else can and so we're focused on it. Again, I don't know when we think about this over the long term, but we think there's tremendous opportunity to really grow this business. And it's -- obviously, it's a great business today, but we really do think that there's an opportunity to make this business much bigger over time.

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

Hoping you could talk a little bit about your retention strategy? Are you looking to maybe pull that back, given the strength of demand and the ability to drive leasing spreads on new deals, particularly for in-line tenants. And if you could talk about kind of the spread between leased versus occupancy and how that shifted with the 1 million in bankruptcies noted and the lease-up of some of the space subsequently?

Sure. So on the retention side, it's a space-by-space decision that has so many different factors that go into it. So relationship with a tenant. It's -- do we -- what's the replacement not just rent but are they adding to the center. It's a complicated story, but it's something we focus on the team is obviously very focused on downtime, right? We still are running. Yes, the long-term growth. We also obviously have to focus on cash flow in the intermediate term as well. So it's -- I wouldn't say it's materially changing. But to the extent that we think there's an opportunity to replace a tenant with someone who is going to perform better and add more to the center, add more traffic. And then obviously, the rent would be higher as well. We'll look to do it, but it's not like we're going and making a blanket assumption or a blanket call on that. It's really space by space, tenant by tenant, center by center is how we think about that.

On the -- yes.

Juan, we're still trending around 200 basis -- 310 basis points of signs are not open. And really, that got backfilled by the 1 million square feet of leases. So at the delease in fact filed with some of the work we were doing since we captured the Saks outlet business.

Our next question is from Floris Van Dijkum with Ladenburg Thalmann.

Maybe -- obviously, very strong NOI growth, even excluding the TRG 7% plus and sales growth through the roof with 13% plus. Maybe talk a little bit about the breadth of that sales growth and talk, I mean, is this just your top 50 assets carrying the portfolio? Or how is the rest of the portfolio doing? Or what's the bifurcation between your top 50 or 100 assets versus the rest of the portfolio?

Sure, Floris. So it's definitely broader than the top 50, right? It's a pretty broad story. Frankly, the sales trends are pretty similar to what we talked about last quarter that luxury remains very strong on the full price side, for sure. On the outlet side, too, but most of the -- or I would say most, but some of the strength in the luxury or tenants that just don't have outlets. Obviously, the jewelry side, the watch side, that remains very, very strong, continues to grow no real sign of slowdown there. But if you look at the juniors brand, which is targeting sort of the Gen Z customer, we've had 16 straight months of positive comps there, which is pretty staggering obviously, given all the macro noise out there. And if you think about a customer group that could be hit would be that group, and that's continuing to grow both new retailers or new entrants in that space, but obviously, the legacy retailers as well. And so the other trends are still holding restaurants again, are a little bit softer than the rest of the portfolio. I think maybe that economic base, but I think there's also other factors, right, alcohol sales are down that's obviously something we can't control. But the story remains positive. Florida remains very, very strong from Jacksonville at St. John's, obviously, might the Greater Miami area and [indiscernible] and Naples, Orlando remained very strong, even the hand handle continues to grow. That's been a good sign. The border is growing now, but a little bit less than the rest of the portfolio, which impact the outlets more, right, just given that we have more outlets on the order, the borders than full price. A couple of better outlets, again, are growing a little bit lower than the overall primarily due to the international travel, which, yes, it came here for the World Cup, but if you look at our outlet portfolio, Vegas is a key component of that where land is a key component of that, which obviously didn't have both didn't have World Cup matches, but Orlando also coming off of 12 months of 10% to 15% comp growth, so that naturally slowed down a little. But the reality is it's a broad-based story, that, yes, the luxury is very strong, no doubt, but this is not 10, 15 centers caring. This is malls, this is outlet, it is mills. They're all positive comp and traffic up across all of them, too. So that's a good news story is obviously back to school has hit, I don't know, probably 2/3 of the country right now and in the remaining part as we speak. And so that's a good news. And then we look to the holiday season from that.

Our next question is from Rich Hightower with Barclays.

I was curious if you could give us an update on TRG. And I think last quarter, you sort of talked about the level of excitement there and some of the upside? And maybe just give us an update on where we stand there? And when do you think that comp really starts to kind of normalize within the contribution to the whole, I guess?

Sure. So we were as excited, more excited, continue to be excited, all of the above on TRG. So the EBITDA margin you've increased the EBITDA margin on those assets that we made. I remember there's a few of the assets that we don't manage as part of the portfolio. But the assets that we manage, we've increased the margin by 300% this year. And I would say that prior a couple of hundred basis points -- sorry, 300 basis points. There's another couple of hundred basis points to go. And that's everything from purchasing contracts, Campari cleaning, it's a parking, it's marketing and sort of you name it, we're focused on it every dollar we're incredibly focused on it. From a comp perspective, the 120 basis points Brian talked about, that's just surely we added 12% additional ownership, right? So that goes away in the next 2 quarters. And then that does that obviously goes away, right? Because then we'll have owned the remaining interest for over a year. Obviously, you did the deal and of October so that narrows as the year goes on. But we think there's a lot of upside over time. And again, we did not make that deal for the next year, for the next quarter. We made that deal for the long term to own really, really, really good assets and then to do what we do, which is to upgrade the merchandise mix, reinvest into that. We have some really exciting stuff going on at Green Hills and hopefully, we can announced sooner than later, putting significant amount of money into that center, both on a renovation, adding great, great tenants really changing that center sort of like what we did with Southdale in Edina, but in 1 of the best, if not the best market in the country. International Plaza reporting significant renovation to start soon. Cherry Creek, we just finalized our renovation plans there to continue to make the best asset in the market better. So it's a long-term story for us. the additional contribution from the 12% obviously goes away soon. But we look for those properties to have significant runway for growth into the future, we're very happy, and we're very excited about the opportunity with those assets.

Our next question is from Mike Mueller with JPMorgan.

You have about $4.5 billion of unsecured debt coming due in 2H in '27. I think about $1.5 billion of cash. Can you talk about how you're thinking about those maturities in the cash today?

Mike, it's Brian. We're where its focus is always on our balance sheet and preserving our liquidity. We're active across a variety of markets. We've done 2 deals in Europe in the past quarter. Certainly, looking around the globe for interest opportunities. We've not yet accessed in funding with that something we're considering. There's a variety of other capital markets executions that are out there. So we have flexibility, certainly, credit spreads or incredibly tight, obviously, pricing off a higher base rates. But ultimately, there is plenty of capital in the world today to refinance our debt. But certainly, we're still going to be up against a raising interest rate volume or a higher interest rate environment. At the beginning of the year, we guided towards $0.25 to $0.30, the negativity of interest expense on this year. We're about $0.10 into it. So we've got about $0.20 to go for the balance of the year. And that's how the current interest rate kind of market environment, and then it will be headed to next year, to your point. So we certainly are being proactive about our interest expense and managing at [indiscernible].

Our next question is from Craig Mailman with Citi.

Eli, it's always helpful going through the development pipeline and kind of what you guys -- the opportunity you have there at $4 billion. I guess, but as you look at the size of your company, right, $4 billion is 2% to 4% of your total market cap. I'm just -- it's all very helpful. It's all value accretive, but is there a way to, I guess, create a step function in earnings growth from here? I know Brian was just talking about the liquidity you have and you guys are searching the globe. I mean is there any type of opportunity above and beyond the continuing to fix the portfolio, drive earnings from there to kind of grow the platform further and drive maybe that incremental growth above and beyond what balls and retail generally can deliver on a year-on year-out basis?

Sure. So there's definitely opportunity. It's something we're always focused on. The great thing about the balance sheet that Brian mentioned is that we can do and will do all of the above. So you do development and continue to be to reinvest into our properties. We'll continue to evaluate buying back stock. We still love to own more of what we own. I test is the best way to say it. And we know the agented growth profile given that pipeline that you talked about. But we're also not going to do something just to do it. I think I said this last quarter and it remains true is we'll buy stuff and look at acquisitions at accretive that we think we can operate better on our platform, but it has to be the right place. And so we're not going to do something just to add scale I don't think it's the right thing to do. But the reality is we have $9.3 billion of liquidity, we're in a business or on a balance sheet that's naturally deleveraging based upon our free cash flow generation. And so we'll continue to evaluate and if there are opportunities. The great thing is we know we can execute. We have the team to execute it. You look at what we did with Brickell last year, we are -- our year 1 yield there is over 100 basis points higher than our underwriting and that's because we bought really, really, really good real estate at a good price and also because we're operating it, we're leasing it very well, and we're laser-focused on it. So we'll continue to through transactions like that to the extent that they are out there, but we're not going to chase stuff. If others want to chase us, that's fine. But we love our portfolio, we love the assets we own. We'll continue to reinvest and then continue to make those assets better. And if there are opportunities or when there are opportunities, we're ready to go and we can move quick and then add value that way. But we look at it and we've grown NOI 4-plus percent for the last 4, 5 years now, I guess. We have $1 billion in the ground in development. We have $4 billion behind it and much, much more behind that, that we're actively working on sort of the shadow part 2, I guess. So we're focused. We look to continue to grow cash flow, but we're going to do it smartly, and we're going to do it by adding great assets over time. And if nothing is out there that we can transact on, that's fine. We'll do what we do and grow the cash flow of the existing assets.

Our next question is from Vince Tibone with Green Street.

Comparable tenant sales are up about 6% year-to-date, which is much stronger than the last few years. I just -- how should we think about potential upside, the 2026 NOI and FFO growth from over rents, if these strong sales trends continue for the rest of the year, if you could also touch on just kind of what's baked into guidance right now in terms of sales growth for the portfolio. That would be helpful.

Sure. So I would say we've seen no signs of a slowdown at all, frankly. And in fact, traffic, which we have traffic accelerated in July. And I don't think anybody asked about traffic. But traffic was 2%, I think, in the quarter is at 3.6% in July. Good numbers. So like we should say it. But -- so we have not seen any change in sales I would say that sales are the 1 thing that we cannot control. Obviously, there's a lot of macro factors geopolitical political, political, right, with the -- with an election in a couple of months that are out of our control. And so I would say when we think about the guidance, I think it's fair to say that if the sales trends continue, we'll be above the range we guided. But the reality is it's very hard to know how sales are going to perform. Clearly, overage and sales-based rent back-end weighted, obviously, as you go towards the to the holiday season. And so the guidance effectively assumes a slowdown. If we -- if it stays like this, then we obviously will be above that range, but it's -- we don't really feel comfortable guiding the same growth just because it's something we can't control. We can control leasing, we can control how we manage expenses. But we can't control sales. And so although there's nothing that we've seen that would suggest the slowdown eminent, we thought it was prudent to guide with some sort of sales moderation. But again, very strong numbers. If you look at the -- for the 6 months, it's 6.3% comp growth, that's obviously, is very good. And there are a couple of comps in the back half of the year. The malls really started their more positive upward trajectory this time last year. So there is a bit tougher comp to the week. We'll see, but we are hopeful that the consumer is shown to be resilient. Obviously, stock market being at or near record highs is not insignificant, but that's sort of, I guess, the best way to summarize sales. I don't know, Brian, anything?

No, I think you covered it well, Eli. Ultimately, we would expect the current conditions continue, there will be a further contribution beyond our guidance for the year.

Our next question is from Tayo Okusanya with Deutsche Bank.

Quick question. Eli, you kind of -- you mentioned comments before about jewelry being very strong. And I guess everything you seem to read in the news is that diamond prices are going down and the younger generation is not buying diamonds and things like that. So just trying to understand a little bit better why that particular category is doing well. And if there are any categories in particular that you kind of worry about saturation as well?

Sure. So I would say the jewelry space, frankly, for jewelry and watches, it's coming from a variety of price points. It's clearly the luxury, the uber luxury, that's just or honestly more demand than supply of those types of items. So that allows prices to go up. and the consumer is there. But also, there's been a lot of new entrants into the space on sort of more of the, I guess, more affordable price points. So there's a lot of new efforts in this space that we're doing business with that are -- that have great-looking stores, track maybe that younger consumer. And so it's a category that's important for us. I think Again, these things go in cycles, they change over time. But right now, that it's a trend that we are we see, we're focused on. And so it's -- can we continue and expand the relationship and expand the stores with some of the more established players, players in the luxury space, and we have great relationships with and they want to continue to do more and more business with. But also there's this new entrants, again, at a different price point because they're creating really great stores, great environment that they're focused on getting that younger consumer in an environment that is Instagramable right, for lack of a better word. And so it's sort of how we view all of our leases is that we want to go where the consumer goes. And we have a great team. We have boots on the ground. Across the country, we have a great team that's focused on new and emerging brands. So we go where the customers are and want to give them more of what they want. And so that's really what we're doing in that space.

I think you also see, just given the outperformance of the U.S. relative to the rest of the globe that you continue to see larger retailers bringing their product here, their newest and greatest product because this is where the action is. So as long as that continues, we think that the trend line will hold.

Our last question is from Ronald Kamdem with Morgan Stanley.

Great. I just had a quick one, just AI related. We're a couple of months into this journey now. And when you're thinking about sort of your business and as well as sort of the retailer business. Where do you think we are in terms of the adoption of these tools to better understanding where the customer is coming from and starting to see some tangible benefits? Is it still too early to see tangible results? Just curious like how that's been sort of going both for your business and the retailers that you partner with?

Sure. So it's obviously early days. I'm not -- I don't know if it's the first any third inning, but it's definitely early days. I would say from the SPG perspective, I think where we've made leaps and balance ride over the past several months, and there's so much more we can do so much more we can do with our data. We're seeing real efficiencies and insights from our -- think about it, we have, I don't know, 29,000, 30,000 different leases, so many different REAs, so many different documents and joint venture documents, loan documents, et cetera. So we're seeing a lot we can do in that space to be quicker to be more efficient, so much we can do on the marketing front. Again, we have hundreds of centers so many different retailers. And so the ability to create inventory that's quicker, that looks better, is meaningful for us. It's early days. And I'd say the retailers again same thing, right, from over here is that everyone is starting the journey, they're focused on it, but it's not a -- I don't think there's been a sea change and how anybody is operating. I think it's just stepping back bigger picture I think it makes us more bullish on physical real estate, physical retail. I think we've seen it, the younger cohorts, the most excited to come to the mall, lost shop in the mall as individual websites tend to become hard to navigate to from individual retailers, the physical real estate the ability to have their brand representation becomes more and more important. And so that leads to more money being reinvested into the stores, creating a better, more unique experience. So we think it's great for us long term. But as far as adoption and anything like that, it's obviously early days. And we do -- as I mentioned earlier, with the Simon Media network, AI will be a big component of that and our ability to sort through our data better, right, which is a lot, as you can imagine, with billions of visits per year, $100-plus billion of sales, a lot of data and a lot of leases, lot of tenants. And so there's a lot we can do there to be with our Simon Media Network and related entities that's really getting up and running. But overall, we look at this is great for us long term, and our job is to continue to make our properties where retailers want to be and where customers want to be, and that's really what we're focused on.

We have reached the end of our question-and-answer session. I would like to turn the call back over to Eli for closing remarks.

Thank you, everybody, for your questions, and have a great week.

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.

Greetings. Welcome to Simon Property Group's First Quarter 2026 Earnings conference call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to Tom Ward, Senior Vice President, Investor Relations. Thank you. You may begin.

Thank you, Sherry, and thank you all for joining us this evening. Presenting on today's call are Eli Simon, Chief Executive Officer, President, Chief Operating Officer; 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 related 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 8-K filing. Both the press release and the supplemental information are available on our IR website at investors.simon.com. Our conference call this evening will be limited to 1 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 1 question.

I am pleased to introduce Eli Simon.

Good evening. I want to start by thanking all those who sent kind notes following my father's passing. His impact on our company and our industry is truly powerful.

Turning to the quarter. We are off to a very good start for 2026 with first quarter results that exceeded our plan. Occupancy gains, increased shopper traffic and higher retailer sales drove strong cash flow growth in the quarter, reflecting solid fundamentals across all our platforms, the resilience of the consumer and the strength and breadth of tenant demand we have for our centers. Retailer demand remains broad-based spanning new and legacy retailers across a wide range of categories in all of our platforms and geographies.

During the first quarter, we signed more than 1,100 leases totaling over 4.7 million square feet. Approximately 25% of our leasing volume in the quarter was new deals. We have completed more than 75% of our 2026 expirations and are ahead of where we were at this time last year. We have a robust and expanding pipeline of deals that are significantly larger than this time last year, reflecting continued demand from a diverse mix of tenants.

Now turning to development and redevelopment activity. We have projects under construction at 29 centers with our share of net cost of $1.06 billion at a blended yield of 9%. Approximately 50% of the net cost is for mixed-use projects including approximately 1,200 units of multifamily residential at Brea Mall, Briarwood Mall, and Northgate and more than 400 hotel keys at Northshore Mall, [ Rosebel ] Field and the domain. We also have exciting redevelopment of former anchor boxes underway at Brea Mall, and the Fashion Mall at Keystone, where we'll be adding more productive new retail restaurants, entertainment and fitness uses. We have an additional $1 billion of projects, so we'll have the ability to start construction this year, including new developments, anchor redevelopments and international redevelopments and expansions.

Beyond that, we have approximately $3 billion of projects in our pipeline that could start over the next several years. Investments that will make our great centers even better. All of these projects will be funded for maternally generated cash flow we will maintain our track record of discipline in how we allocate capital, rigorously evaluating each project against our return thresholds. We have complete flexibility in our development pipeline. We can be patient and adjust timing depending on construction costs for market conditions. We can also invest countercyclically, delivering product when others can't. These accretive development and redevelopment activities deliver strong yields, enhance our portfolio and drive long-term growth in cash flow, FFO and dividends per share.

Moving on now to retailer sales. Malls and Premium Outlets were $819 per square foot in the quarter, up 11.8%. More importantly, sales growth accelerated. Total sales volume increased 5.6% over the trailing 12 months and 8.8% in the quarter, with comparable sales growth of 6.5% for the first quarter. Our remerchandising efforts are clearly showing through in total sales volumes with strong growth across our portfolio and across categories such as luxury, jewelry, athleisure and juniors.

With that, I will now turn it over to Brian who will review our financial results from the first quarter in more detail and provide an update on our outlook for the remainder of the year.

Thank you, Eli. Real estate FFO was $1.2 billion or $3.17 per share in the first quarter compared to $1.1 billion or $2.95 per share in the prior year period, growth of 7.5%. Domestic and international operations both performed well and contributed $0.27 of growth, driven by increased lease income along with disciplined cost management. As anticipated, higher interest expense and lower interest income combined were a $0.05 drag year-over-year. Reported FFO of $2.91 per share includes $40 million or $0.10 per share of accelerated stock compensation expense which reduced real estate FFO by $0.02 per share and other platform investments net of tax by $0.08 per share.

Domestic property NOI growth was strong and increased 6.7% year-over-year for the quarter with approximately 120 basis points of that growth attributable to our acquisition of the remaining TRG interests. Portfolio NOI, which includes our international properties at constant currency, also grew 6.7% for the quarter. Malls and Premium Outlet occupancy at the end of the first quarter was 96%, an increase of 10 basis points year-over-year. The mills occupancy was 99.2%, an increase of 80 basis points year-over-year. Average base minimum rent for the malls in the premium outlets increased 5.2% year-over-year and the mills increased 9.1%. Occupancy cost at the end of the quarter was 12.7%.

Shifting to return of capital. Today, we announced our dividend of $2.25 per share for the second quarter an increase of $0.15 or 7.1% year-over-year. The dividend is payable on June 30. Also, in the first quarter, we repurchased approximately 965,000 shares of our common stock for an investment of $175 million at an average purchase price of $181.59.

Turning to the balance sheet. During the first quarter, we were active. We completed 10 secured loan transactions totaling approximately $2.3 billion at a weighted average interest rate of 5.25%. We also issued $800 million of senior notes that we used to repay proceeds from to repay our $800 million of notes that matured on January 15. We also amended, restated and extended our $5 billion revolving credit facility at a 15 basis point lower pricing grid, and we ended the quarter with approximately $8.7 billion of liquidity. Subsequent to the end of the quarter, we closed on the refinancing of the Shops at Crystals via a 5-year CMBS loan that was priced at 4.83%, the lowest retail fixed rate coupon CMBS financing completed over the last 4 years.

Turning to [ Clay Pierre's ] exchangeable bonds. During the quarter, we settled the conversion of approximately $174 million of outstanding bonds by exchanging 4.1 million shares of [ ClayPierre ] and EUR 79 million of cash. As part of that, we recognized a noncash non-FFO gain of $64 million in the quarter on the exchange of the [ Clay Pier ] shares. Subsequent to the end of the quarter, we settled additional conversions of $374 million of the exchangeable bonds. Following the exchanges, there are approximately $188 million of bonds outstanding that will mature in November. We currently own approximately 59 million shares of [ Clay Pierre's ] common stock which represents approximately 20.7% ownership. At the end of the quarter, our balance sheet remains strong with net debt to EBITDA of 5.0x and a fixed charge coverage ratio of 4.6x, supporting our strategy and continued execution.

And finally, on to guidance for 2026, given our results for the first quarter and our current view for the remainder of the year, we are increasing our full year 2026 real estate FFO guidance to a range of $13.10 to $13.25 per share. That compares to $12.73 per share last year of real estate FFO and is a 5% increase at the midpoint.

Thank you. We are now available for your questions.

[Operator Instructions] Our first question is from Samir Khanal with Bank of America.

Thank you. Good afternoon, everybody. Eli I guess, as it relates to retailer demand, you mentioned it's very strong, and I assume you have a lot of leverage on negotiations with the tenants here. Maybe talk about the pricing power you have in this environment. I know you spoke about addressing sort of upcoming expirations into '27? So talk about kind of that growth momentum over the next, let's call it, 12 months?

Sure. So first, we don't have any leverage over the retailers. The retailers can go a lot of places. They can open stores, not open stores, go online, go on Amazon. So I would bury the first part of the question that we have any leverage or real pricing power over the retailers. But I would like, I guess, on the second part, on the pipeline. So the pipeline is significant. And what's interesting is the way I look about it, it's really up across all different categories that we're leasing it today. So that's the legacy brand, that's our new business leasing, which are first to mall, first to our portfolio from either PTC online or from Asia, from Europe, et cetera, Luxury brands, that pipeline is up, restaurants are up and the local and regional business is up. So we're really seeing broad-based demand across all our centers, not just sort of the top fortress centers, but really across the portfolio.

And I think I attribute that to the fact that we're making our centers better. We're making them more relevant and the customers, particularly the Gen Z customer wants to come to our centers and you're seeing that in traffic growth, and you're seeing it in the retailer sales. So we're not going to talk about pricing power, have no leverage, but we feel very good about the pipeline and about our conversations with tenants.

And then on the future expirations. So I guess a couple of things. One is we are above where we are in our '26 expirations. It's around 200 basis points or so more than this time last year. But what's interesting when talking to the leasing team is retailers are now willing to talk about their '27, '28, '29 expirations, which historically might have been more of a luxury tenant phenomenon who think much like we do in terms of decades, not quarter-to-quarter, but we're actually hearing from legacy retailers in our existing portfolio non-luxury that actually want to start having those conversations because I think they understand this pipeline, too, and the interest in our space. And so we like having those conversations, and I think they've been productive so far.

Our next question is from Caitlin Burrows with Goldman Sachs.

Maybe just big picture, wondering if you could go through considering the leadership transition, do you expect any changes to Simon's strategy and execution? And is there any change to capital allocation priorities between call it, acquisitions, share repurchases versus buyback, the D3 development pipeline and dividend growth? I know you've been active on all fronts recently.

Sure. As far as leadership changes, this is -- we're operating business as usual. We have the best-in-class team and we're continuing to execute on our business plan. So no change there, and everyone is excited for the future and excited to keep doing what we're doing.

With regards to capital allocations, we look at all of it always. And I guess I'll just go through the different pieces. And so starting off on our development, redevelopment pipeline, which I mentioned. So the current projects underway is about $1 billion. We have about $1 billion that we'll have the ability to start later this year and then at least $3 billion behind that, that we can start over the next several years. And so we look at that each project on a project-by-project basis, incredibly meticulously incredibly detailed, and we evaluate the market conditions at that time, the retailer demand. Do we think it's the appropriate return? And today, we're seeing very good returns there. And doing what we're able to do in this pipeline at 9% plus, we feel very good about adding density, adding mixed uses to our centers, and so we'll continue to do that. But if market conditions change, if costs arise from a construction perspective, we obviously have the ability to stop, to pause this is land we own, and we're going to own forever and so we'll do it at the right time.

[ NextEra's ] acquisitions. Obviously, there's been more transactions in the retail market, which I think overall is great, more capital coming into the sector. When I think about acquisitions sort of -- and I've said this before, but it's 3 key criteria as to make our portfolio better. It has to be brand accretive and that's to be an asset that we can -- or a portfolio that we can add real value, utilize our skills to operate better and it has to be at the right price. And so last year, if you put aside the remaining stake in TRG, we did 3 transactions the mall outlets in Italy, Brickell City Center, obviously, in Miami and Phillips Place in Charlotte. And all 3 of those hit those criteria and frankly, outperforming even what we thought and are very excited about those future prospects.

Next, I guess, you could go to share buybacks obviously, a slightly slower pace in the last quarter. Then a little geopolitical unrest, a little choppiness in the market. And so we are prudent and waited but as we said last year, we issued a little over 5 million shares to do the last 12% of the [ Talvin ] transaction. and we fully expect to buy those back. And so I would expect us to continue to be active. But again, if we do it now great if we wait because we think it's prudent, that's fine as well. And then on the dividend, obviously, the dividend increase. It's been growing at a nice rate. It's something we take tremendous pride in. I'm pretty sure looking at Brian, I think in the third quarter, we should be passing $50 billion paid as a public company, which is a pretty big number. And so that's obviously incredibly important to us.

But at the end of the day, if you think about the business, we're generating [ $1.6 billion ] or so of free cash flow after dividends. And so we have tremendous opportunities and tremendous things to do with that. And if we continue to naturally deleverage because we don't like the opportunities, that's fine, too, which we've been doing. So I guess that was a long winded -- long-winded way to answer, but really, no change in our capital allocation. We continue to evaluate all ideas and all opportunities, and we'll do what's best at that at any given time, which could be all or could be none.

Our next question is from Michael Goldsmith with UBS.

Eli, you mentioned the resilience of the consumer. What are you seeing from the consumer specifically? Or is there any way that they are changing the way they the shop or spend at the centers? And then also, if you have any data on the Gen-Z consumer and how they may be different than some of the other cohorts that would be helpful.

Sure. So I would say the sales growth is really broad-based, right? 6.5% comp for the quarter is a very healthy number. And it's really a cross category. Clearly, the upper end consumer is doing very well. You could look at the stock market that should not be a surprise. And so you're obviously seeing that in the luxury business with some of the brands, frankly, that might have been a little bit softer in the past couple of years now having starting to see some rebound, but really, you're seeing it in the hard luxury and jewelry and watches, really, really solid growth.

But we're also seeing it in the juniors business, which hits that Gen-Z customer both new junior brands, legacy junior brands, all really fired on all cylinders. And I think that's an example of competition is great because some of these legacy brands needed to innovate, needed to be able to compete with some of these new brands. I was that the catalyst office, I guess, last week or the week before, and aero, which is now competing with some new entrants in that space. are doing new things with new influencers that frankly, I had no idea who they were, but I think for the customer they're targeting, it's working. And so we are definitely seeing that across the portfolio.

The only thing I would say that is a touch softer is on the food and beverage side, which is basically was flat from a comp perspective. And so that's probably not surprising seeing some of the earnings from the restaurant groups out there. But whether it's a trading down effect, maybe one less trip out, that is that's the only place we're seeing it, but the rest of it is broad-based growth. Obviously, athleisure still very strong across the portfolio. The only other thing, I guess, I could say on sales is the tourist markets that really rely on the European and Canadian international traveler, that is a touch softer. You look at Woodberry, Woodberry, I think comp was, call it, 2.5% versus 6.6%, that's atypical, right? Woodberry normally, you would say is going to be performing well above average. And that obviously is less European international travel into the U.S. and Canadian is a big part of that.

From the flip side is you go to Florida, and it is from South Florida Panhandle the west side with Tampa and what we have at International Plaza or water side and Naples and obviously, Orlando, which has probably been the best market over the past year. Very, very strong growth there. And then on the Gen-Z customer, I guess, look out in the future, we have some things coming there. But I think the way I look at it is you can see it in the sales. You can see it in these customers or in these retailers that are targeting. They are all growing. They want more space and their sales are proving that they're resonating with that customer.

Michael, this is Brian. I guess the only thing I would add on the Gen-Z customer is they were really the centerpiece of our [ Meet Me At The Mall ] campaign that we launched marketing team 2 years ago, we identified this as being a growing cohort. And we've been investing, we've been bringing the brands to bear that the Gen-Z cohort is looking for. And most of our activations and social aspects are geared towards them as well. And so a big lean in from us. It's been about 2 years, and we continue to see great progress with that consumer.

Our next question is from Michael Griffin with Evercore ISI.

Great. Eli, just curious if you can give us maybe some color on whether it's new or renewal lease spreads and maybe how that compares relative to this time last year? And then if you look at the portfolio right now, north of 96% leased, arew we reaching sort of that structural occupancy? Could we see it go to 96.5%, 97%. Just curious if you can give some commentary there as well.

Sure. So on -- so spreads, I think, is not necessarily the most relevant metric. But what I would -- what I would say on new historically, over the last number of years, we're sort of in the mid-single digits increases on renewals, bounces around up and down a little bit from that number, depending on what package of renewals are signed in any given quarter but that's holding true, and we don't see any real change there. And as I said, we're looking at renewals further into the future. Retailers were asking us about that. And obviously, we're only going to do those renewals, if it makes sense for us as well.

On the new deals, what I look at is the new leases we are signing are 20-plus percent, 20%, 25% above new leases last year. And that is -- obviously, there's -- mix is part of that. But really, it's -- the brands understand the importance of having a great physical representation and our centers are that. And so we're proud of that. And the other thing we're probably more proud of, frankly, is what we call our new business brands are outperforming that increase by, call it, another 10% plus on that. So the best of the best brands whether it's some of these beauty brands coming from Asia. We just opened a Google store at Fashion Valley, I guess this weekend, new athleisure brands, new home furnishing brands. We're able to have rents there that they are able to pay because they're doing the business and because they're generating the traffic and they know that it's great for them, and it's going to help their business grow. So hopefully, that answers the first part on spreads.

On occupancy, it's interesting. If we wanted to we could lease up to 97%, 97.5%. I have no doubt about that. But I think for us, we look at this not metric quarter-to-quarter or even a year-end metric to really what's the right decision long term for these assets. And so sometimes that might be holding space for another retailer that's coming and might be taking a little bit of downtime, which, again, we don't like to do, and we have an incredible short-term leasing program that keeps the occupancy at a good number. But we honestly don't focus if it's 90 -- what? it's 96 now, 96.4 at the end of the year, it's [ 96.2% or 96.6% ]. That's not what I'm focused on. I'm focused on, excluding the Taubman 12%, we grew NOI 5.5% year-over-year, and we've grown it at north of [ 4% ] for the last 4 years. So that's more important than 20 basis points on the margin. But the answer is yes. There is there is room to increase occupancy here, but it's not the be all and end all for us. It's really let's grow cash flow.

Our next question is from Alexander Goldfarb with Piper Sandler.

Evening out there. Eli, just a question on data centers. You guys in the past year or so have spoken about how the B malls have rebounded strong in centers that a number of years ago, you would have sort of used for cash flow now have a second life because of the demand from retailers and there's a renewed vibrancy to them. But as you look at the demand for data centers and presumably some of your centers have excess power utilities or what have you, do you see opportunity where whether they're many data centers or maybe even converting the entire site to data center, do you see this as an opportunity for any of the excess holdings? Or as you look at the portfolio all the malls because of this lack of supply are really their highest and best uses, either as a mall or mixed-use venue?

Sure. So I would say -- the answer to the first part is probably 18 months ago or so, we really scoured their portfolio. As you said, both the combination of again, we don't really use A or B malls, but malls that might have had a lower growth profile for potentially excess land at some other malls to see is there anywhere that makes sense for a data center, we talk to various data center operators. And we couldn't find anything that made sense. And honestly, the power is less available than you would think, especially, obviously, if it's an existing mall that would stay in place. And so it's something we -- with our team, we look at relatively frequently. But to date, we have not found anything.

But to answer the second part, at the end of the day, we're economic animals. And if there is a higher and better use for the data center, that we thought we could sell something and take cash and reinvest it elsewhere more accretively. We would do that 100%. We haven't seen that to date. And as you mentioned, we're excited about the growth prospects there. So it's not like we're actively trying to shed any assets in that regard or try to find alternative uses. We are doing what we said we were going to do. If you look at [ Smith Haven ], for example, we signed a very important retailer there and put in capital to renovate. And now we've seen good growth and good demand. So we'll continue to evaluate, but the demand is there from the retailers really up and down the portfolio. And so we will continue to operate. But again, if someone came and he comes and says, here's a big price for an asset, and we look at it and say there's a better use of that cash, we won't hesitate to sell. It just hasn't happened yet.

Our next question is from Greg McGinniss of Scotiabank.

I was just curious on the integration with Taubman, how that's going, what synergies you're finding and where you see best opportunities for reinvesting into that platform? What's now your platform?

Great. And thanks for asking that. So I'd say from a corporate integration perspective, it's gone according to plan effectively fully completed all the corporate integration by the end of April. So that's done, and it was well done by the team and so we're excited how that turned out. And so now on to the assets, we're honestly probably more excited than we were in November or October, I guess, when we finish. And it's a combination of sort of using our ability to operate centers at a level that increases margin and that's from an operating expense perspective, that's from a marketing perspective, that's ancillary income, that's parking. Obviously, our short-term leasing program, which I mentioned earlier, to be able to be fully integrated. There has been helpful.

And then our leasing department able to lease these centers, which again, obviously, the Taubman team did a great job, but they were leasing these centers for the past 6 years of the transaction. So now we're able to do that. But more importantly or most importantly, I should say, is our ability now with our balance sheet to reinvest into these centers. And that's, frankly, what I'm most excited about and so if you look last quarter, I think a day or 2 after earnings, we put out a press release, and I'll just highlight 3 assets briefly that we mentioned. But in Nashville at Green Hills and Tampa at International Plaza and at Cherry Creek in Denver we're going to invest over $250 million into those centers starting later this year to really make them again, great assets performing great, tenant sales strong and leasing strong, but to make them even better to freshen them up to make them look the same that the refitting as for the performance of the retailers.

And so we have renderings that I've shared with some of the retailers, especially the luxury retailers, all very, very excited. And so now it's our job to go execute that to sort of take the vision and to do to do the redevelopments or do the renovations, which we're in the process of starting very soon.

And then obviously, to the lease to those tenants that we think should be in these centers. And so no different Green Hills than we did at South Dale in [ Dyna ] Minnesota, which I don't know if you've been out there, but what we did was sort of revitalize the whole mall. And these malls we are not in the position that South [indiscernible] was in, they're in a much better position, but we think we can have an equally strong impact from these programs. International Plaza will be an expansion, probably an outdoor expansion revitalized Bay Street, which has great restaurants, we think we can upgrade the restaurant mix. So sort of doing what we've been doing across the rest of our portfolio, now we're able to do it on these great assets. And so it's a big focus of ours sort of a whole of company approach and that's what we've been telling retailers and it's true because these assets should be and will be better. And that's something very exciting for us.

Our next question is from Ronald Kamdem with Morgan Stanley.

Great. Just wondering if you can provide an update on sort of the other platform investments and some of the retail investments they've been performing relative to expectations and your thinking in terms of monetization of that platform. And the follow-up would be, I think part of the thinking was getting a lot of data from the retailers would be valuable. Just maybe can you talk about how that's been sort of helpful in this sort of new age where everybody is focused on AI.

Sure. So I guess if you think about OPI today, is basically comprised of 3 pieces. It's a catalyst, which is obviously the former Spark and [ JCPenney ] businesses. It's [ Rulon Gilt ], which has [ Shop Simon ] in it and it's Jamestown. All 3 are performing at or above plan for the first quarter of the year. I think the teams -- they all have obviously independent management teams. They're doing great. And so from an operating perspective, I'd say it's business as usual, and they're continuing to execute on their business plans. But again, quarter to -- or year-to-date, they've all been effectively at plan.

From a monetization perspective, we're opportunistic sellers. We're not planning on anything if there's an opportunity, and we think it's in the best interest of shareholders, would we do it? Of course, but if not, they're all properly capitalized, have proper liquidity amounts and the ability to run themselves. And so that's what we expect to happen. But if something occurs, that's great, too, and we will not hesitate to monetize if it's in the best interest of shareholders, which obviously we did with our authentic brand stake a couple of years ago.

As far as data, I'd say less data, hard data specifically because obviously, you have privacy issues and whatnot with that, but really on best practices and learnings. And if you think about a couple of departments from our marketing department it's incredibly interesting and our marketing team talks often to the marketing team from [ RulandGilt ] and from catalysts to learn how they're attracting customers, where they're seeing the most efficacy of their ad buys whether it's TikTok or meta or [indiscernible] has big connected TV business, et cetera. And so that's what I would say is we're more focused on. I think it's interesting from a brand perspective, helps us think like a retailer.

So for example, the tariff situation, we're able to understand how catalysts, which is no different than hundreds and hundreds or thousands, thousands, frankly, of retailers in the country are dealing with the tariff refunds and how they're planning for the year. And so I think it gives us insights and data from that perspective but not necessarily hard data that we can monetize because there's real legal implications there that make it tricky. But you mentioned we're learning from them, too. And I think they're learning from us, we're comparing, again, different tools to use different programs, how can we provide more customization for the consumer because these retailers, especially [ RulinGilt ], are really good at that. And so we can learn from that.

So for us, we look at a symbiotic relationship, hopefully, we can add some value to those companies. They can add value to us and we're happy shareholders of those companies and we continue to -- or we expect to continue to be for a while. But if something comes up, then we won't hesitate to do something that's in the best interest of the company.

Our next question is from Floris Van Dijkum with Ladenburg Thalmann.

Eli, thanks for the answer so far. Question on the redevelopment pipeline. Obviously, 9% direct returns appear very attractive, you've got an ongoing pipeline of $1 billion and another $1 billion down the pike. But 1% to 2% of your overall portfolio value or even less, actually, could you maybe talk about what percentage of the portfolio you still have left that is yet to receive cattle? And then maybe the follow-on with the add-on is if the direct returns are 9%, what are the actual returns once you redeveloped? And do you see the benefits in other parts of the center, for example, when you add or rejuvenate a wing, what kind of returns do you -- have you typically seen in age into the immediate incremental returns?

Thanks for the question. So I would say we're investing capital in basically every center, every year, frankly. And so as far as large transformational projects, sort of that if you put aside the $1 billion that's actively under development today, and you call it the $4 billion to $5 billion shadow pipeline, that's on I don't know, probably 20, 25 centers that we're developing at , I think I said 29 centers today. There's for sure others that are not in there. I don't have an exact number, but we -- some of it is because we don't control the real estate that we'd want to control to do the redevelopment or do the densification or the mixed-use addition or whatnot or whatever makes sense for that center.

So I don't have an exact number, but if sort of the fear is that we are running out of things to do. We're not, not even scratching the surface. And again, there will be more opportunities across the portfolio over time. We're not going to go to the extent we don't control piece of real estate that we want -- that we want to develop. We're not going to go and buy it just to buy it to be able to do it today, even though we could, just not the way we think about it.

As far as the other benefits, it's interesting. It's a question that frankly, I talk with the team about often is that we do not underwrite it. And the reason is really need to be intellectually honest with ourselves and say, if we're doing a redevelopment -- I'm in Indianapolis today, so at Keystone, redeveloping the Saks box or the former Saks box, which just started, there will be an impact, no doubt. But we have to look at it and say, okay, for the new money we're putting in, what are we earning knowing that there's going to be a benefit. What I look at is less the less incremental, okay, we got [ $5 ] of new rent on this tenant or that tenant because that sort of day-to-day business and how do you quantify that as hard. I look at sort of, say, what are the customers saying?

And so if you look at new projects we opened in South Dale last year and in Brea, just 2, for example, both fairly fully open. I think the last tenant at Southdale was Tiffany's, which I want to say opened in February. Brea, Dick's did not open until April just opened recently and Lifetime has an open -- and I want to say 1 or 2 of the restaurants are not open. And those 2 centers on a like-for-like basis are performing 1,000, 1,500 basis points above where those similar comp brands are performing across our portfolio. And so that's sort of, to me, the more important metric because they're showing that the money we're putting in, the development we're doing yes, we're in a 9%.

But we're making the center more relevant. If we make the center more relevant, more customers come, retail sales grow, we're going to add new retailers and how do you do the line and cut the line and say well discounts in the return this doesn't. It's really hard. And so that's why we don't include it. But we know it's there, and it's something that gives us comfort as we look at some of these bigger projects that will start over the next year, whether it's Boca or Ross Park or Fashion Valley or what have you.

So I appreciate the question. I wish I had a really good number to show you, but we know it's important. And that's why we're excited about the pipeline. That's why we mentioned on the call is this is an important avenue of growth for us. And I think we've shown we have the ability to execute it. As now we just have to keep doing that in the years ahead.

And Floris, all I would add was that the investment in a project there are multiple projects over time at properties. And so [indiscernible] Field is a great example. We could go down the list of assets that we've redeveloped multiple times over the years and continue to get the appropriate kind of return and the halo effect in the regular part of the shopping center.

Our next question is from Vince Tibone with Green Street Advisors.

Eli, I'm curious where purchasing bake anchor boxes at your centers that you don't currently own rank in terms of capital priorities? And ultimately, how are you thinking about the value of control of those spaces and being able to get the best use in that space from a tenant redevelopment perspective to unlock all the benefits you just talked about versus letting a third-party owner release that, that presumably only cares about the highest unit economics and less about the mall ecosystem. So Simon has been patient and price-sensitive purchased some of these spaces historically. So I'm just kind of curious how you're thinking about it.

Sure. So I guess, on the second part, obviously, say every mall, but most of these malls have RIAs, we have approval rights. So it has to be consistent with the -- again, not to go through the legal language of each one. But so that's in our mind. But really, we just look at it as what's the price and we evaluate each one independently and say, what would we do here? Do we want it back? Do we have leasing demand? We have leasing demand, okay, how do we lay it out? We'd lay it out, how would we -- what's the construction cost of that? What's the return? Do we think it does anything to the rest of the mall sort of the halo effect Brian mentioned that I was just talking about.

And so if there's something we really want, we can go and could call and buy it. But typically, we've seen is we sort of can sit and buy it at the right price and if you look at the price of some of these boxes that we've been able to get, we're very pleased with them. And obviously, then when we run the return analysis, we're very pleased. And so I don't prioritize anything really from a capital allocation perspective, besides does it -- do we have liquidity for it? Yes, but does it fit with our objectives? And so it's something we will continue to do, obviously, is acquire boxes over time.

But we're only going to do it at the right price and sometimes the right price might be a lot higher than somebody else might have and sometimes the right price might be a lot lower than somebody else might have. And that's fine. And and we'll make the decision. Are we okay if somebody else does it? And sometimes, we are okay. And sometimes we're not okay. And then we'll figure out if there's a meeting of the minds and there's a price that we can buy it. So it's something we sort of do day in, day out, no -- no special project just sort of ordinary course business.

And so to the extent we have opportunities to buy it at good prices and have redevelopment plans, we'll buy for sure. And if you look at some of the projects that hopefully we announced over the next year or so, a number of them will be in boxes that we bought, that we think we bought it at an attractive price and allowed these redevelopments to pencil. And so that's what we're focused on and we're in this business for a long time. And so if we get them today or if we get them in a year, 2 years, 5 years, we'll be -- we'll do the right decision for the mall and for the capital -- for our capital allocation.

Our next question is from Craig Mailman with Citigroup.

Clearly, it doesn't feel like you guys have capital constraints here with the liquidity and the free cash flow. Just kind of curious from the platform. How much development do you think you could handle at one time and continue to source new entitlements and new opportunities? Like is there a limit in the near term or do you guys have significant excess capacity?

Yes. I mean from a capital perspective, significant excess capacity for sure, from a resources perspective, at the end of the day, these are all highly local processes, which often involves outside council, outside advisers, et cetera. And so the team is doing a great job. We have a number of projects. I don't feel that's an issue at all to extend. We thought it was an issue. We could add human resources highly accretively given what we're talking about, the potential EBITDA or NOI creation from these assets. And so we feel very good about the pipeline.

I'd say the only thing that's out of our control or we're dealing with local municipalities and villages or townships depending on what the -- where the mall is located, that's out of our control. So if we could find a way to do that faster, that would be great. But unfortunately, you're dealing with elected officials, appointed officials, what have you. And so that's the one thing that's out of our control. The rest of it's in our control, and I feel very good that we can execute on that.

And then obviously, the last piece is we always have the ability to bring in partners on some of the stuff, if we want it. We've done it on multifamily projects. We've done it on a few hotels. We financed some with construction financing. But I look at it and say, as I said, we're generating [ $1.6 billion ] of free cash flow after dividends. And this stuff takes time to build and it doesn't start at the same time. So -- and plus, we're basically under 5x levered now, too. So [indiscernible] leverage is [ 6 plus $1 billion ] of capacity. So that is like not close to a thought in my mind. Brian, anything.

No, look, we're accelerating at the end of the day, Craig, you can see it. You heard Eli talk about it. You have great opportunities ahead of us. And so you should expect us to continue to realize and accelerate on those investment opportunities. we can do things that others can't and quite honestly, aren't. And so what we're delivering today is new product. There is no new product being built, and we believe that's a durable competitive advantage.

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

We've got a quick 2-parter on the core portfolio. First, on same-store NOI, up a robust 6.7% in the first quarter. So I guess I'm curious if there's any change to the initial guide, at least 3%. Can you supply some clear decel here over the next few quarters or maybe we're not appreciating something there? And then maybe can you share some color on the current snow pipeline right now? What's the embedded NOI and when do you expect that to come online?

I'll just do the first part. So the same-store NOI, we don't call it that. It's domestic NOI. And so that 6.7% for the quarter, as Brian said, is really call it, 120 basis points of that is from the 12% stake but we bought in Taubman last, I guess, November 1. And so that will obviously play through our results for the second quarter and the third quarter and a little bit a little bit less, obviously, in the fourth quarter. And so we'll probably have, call it, plus or minus 100 basis points impact on the year. We don't update guidance. We guided to at least 3%. I think we've guided to at least 3% for a number of years -- a number of years now, our job is to outperform that. Obviously, we have a good start to the year, and so we'll just continue doing what we're doing, but we really don't update don't update that guidance besides obviously, I just wanted to clarify about the Taubman or the former [ Talvin ] stake and then Brian on the snow.

Yes. No, snow, at the end of the quarter was 310 basis points, Haendel. Usually, you see an increase in our business in the first quarter and then it dissipates as the quarter goes down as tenants open. But 310 basis points, which was consistent with first quarter at 25 type of level.

Our next question is from Mike Mueller with JPMorgan.

Actually, I have a follow-up on the prior question. How much of an impact did the buyout have TRG buy on your operating stats like the year-over-year sales comps and the 5% base menu rent growth?

Yes. So honestly, we don't look at it. We look at it and say these -- I guess it's 18 assets domestically, right? There are assets, they're Simon assets. Besides the NOI growth, which -- or the domestic property NOI, which is a little skewed from the 12% stake. We don't -- honestly, we don't look at it. I don't know. We don't they're all SPG assets. And so that's the way we operate them. That's the way we lease them. That's the way we account for them. That's the way we think about them. So the honest answer is, I don't know. It did increase it, I guess, maybe, but we don't really think it matters. We think it matters that they are assets that we're operating, and they're part of our cash flow, and we're growing the cash flow.

Our final question is from Rich Hightower with Barclays.

Maybe one for Brian to go back to the Crystals CMBS financing. And as I kind of look through the debt schedule, obviously, you've got a number of secured debt financing is kind of coming due over the course of '26 and '27. So maybe just fill us in with color on the market spreads proceeds and maybe what the -- I'm assuming it's another interest expense headwind as you think about refinancing over the next couple of years given the rates on a lot of these loans. So just help us understand the big parts.

Sure, Rich. No problem. Great question. We -- Crystal was a great execution, 5-year CMBS, 480 coupon which was incredible, probably the tightest coupon we've seen in the last 4 years, but we're pricing off of a higher base rate. So even with that incredible coupon, we're rolling up that interest expense about 60-plus basis points. The rest of the balance of the portfolio refinancing we did on average. The coupon is up are about 50 basis points relative to maturing so we are still seeing interest expense headwinds as we anticipated, while the spreads are at record types, we are still seeing impacts from base rates. But markets are wide open. We've been active in the CMBS market. We've been active in the life market. We've obviously been active in the unsecured market, we expect to continue for the balance of the year.

But the original $0.25 to $0.30 headwind that we expected between higher interest expense and lower interest income is still there. It probably is gravitating closer to the [ 25 versus the 30 ] today where rates are, but there's definitely still a headwind ahead of us balance of the year.

With no further questions, I would like to turn the conference back over to Eli Simon for closing remarks.

Thank you, everybody, for the time today and look forward to hopefully seeing many of you in Vegas or in New York in the coming weeks.

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.

Just lost internet and COO, Eli Simon. This session is for Citi clients only and disclosures have been made available at the corporate access desk. To ask a question, you can raise your hand or go to LiveQA.com, enter code GPC26 to submit questions.

Eli, I'll hand it over to you to introduce the company and team. Provide any opening remarks, tell the audience the top reasons an investors should buy your stock today, and then we'll get into Q&A.

Perfect. Good afternoon, and thank you, Nick and Craig, for the introduction. We appreciate the opportunity to speak with you today. Let me begin with the core principle that has guided Simon for decades, assets matter. When assets are built to last and located in the best market, their longevity generates sustainable growing cash flow. That has been the defining characteristic of our company for decades, and it continues to drive our performance today.

Our assets stay relevant because we continually reinvest in them, redeveloping, densifying and curating the best tenant mix and enhancing the customer experience. This continuous improvement creates a virtuous cycle that extends asset life and compounds cash flow growth. Not many real estate assets last for 70-plus years. Ours can and do through disciplined accretive reinvestment and operational expertise, including most recently at South Dale Center and Edina, Minnesota, where we have reinvented the oldest enclosed mall in the country and made it more relevant than ever.

Our strategy remains clear and consistent: own and operate the best retail real estate in the best markets, reinvest in our assets with high-return redevelopment, densification and mixed-use additions to drive long-term value creation, pursue disciplined accretive acquisitions where we can add value and innovate to enhance both the consumer and retailer experience.

2025 was an exceptional year and a validation of our model. We delivered record results across all key operating metrics, including revenue, NOI, real estate FFO and dividends, supported by strong retailer demand and increasing shopper traffic. We completed $2 billion of strategic acquisitions, including the remaining interest in Taubman Realty Group, our partners' interest in Brickell City Centre and the Mall luxury outlets in Italy. Each of these deals enhances the quality and long-term growth profile of our portfolio.

We completed significant redevelopment and expansion projects, transforming former department stores into high productivity experiential environments and expanding our mixed-use components. Our active development pipeline is $1.5 billion with a shadow pipeline of more than $4 billion that will start over the next few years. Approximately 40% of that pipeline is in transformative mixed-use projects at iconic properties, including the Town Center at Boca Raton and Fashion Valley in San Diego. Our financial foundation remains rock solid with our A-rated balance sheet continuing to be a defining advantage. With more than $9 billion of liquidity and over $1.5 billion of annual free cash flow after dividends, we have the flexibility to reinvest, acquire and return capital to shareholders while maintaining disciplined leverage.

As we look ahead, our conviction remains strong. Demand for high-quality physical retail remains strong and consistent, and retailers know that operating stores is essential to profitable growth and new supply remains limited. Our continually improved portfolio will support durable cash flow growth for many, many years to come. Our strategy is clear, consistent and proven, and our platform is exceptionally well positioned for long-term value creation.

Thank you, and we look forward to your questions.

Great. So if I synthesize that or maybe you can synthesize that down, what are the, let's just say, 2 or 3 reasons investors should buy the stock today?

Yes. The first, as I said in my opening remarks, assets matter and our portfolio is unrivaled. Demand remains strong and consistent across the portfolio, across all categories, apparel, food and beverage, experiential, entertainment and the like. We're coming off a record year, as I mentioned, '25, and that momentum has continued in the beginning of '26, and we look forward to it continuing.

We also have a strong proven track record of disciplined investments, both external growth opportunities as well as our development and redevelopment pipeline, which remains strong and is growing with many very high accretive projects hoping to start over the next 2 to 3 years.

And finally, as I said, our balance sheet is a significant competitive advantage. We generate over $1.5 billion in excess of our dividend each year, which allows us to reinvest that free cash flow into high accretive opportunities and which will continue into the future. So bottom line, I think no one is more cycle tested and has overcome various external threats more than we have, and we are very excited for that to continue into the future.

Yes. Well, it certainly feels like a good moment for retail broadly right now. I feel like the market and the question that we get the most frequently is how could AI disrupt these different businesses. I want to get into Simon specifically, and I know you've been active and on the front foot about deploying AI in different technologies over the years.

But maybe starting more broadly on retail and what you're hearing from your tenants and the retailers directly about the opportunities and risks that they're seeing from AI today?

Sure. I think from the retailer's perspective, it's a potential new avenue of growth, a new avenue to drive sales. But from a physical retail perspective, nobody is looking at it and saying, well, I'm going to replace my physical stores with an AI agent and with my e-commerce only. I think it's been pretty clear and proven at this point that the way to grow profitably is to open stores. It's a better customer acquisition cost. It creates better long-term value. And what we see and when we talk to retailers is they want to open stores. They want to be in the best markets, and that's what our portfolio provides them. And so we're not hearing any negativity from the retailers. And hopefully, it's a positive more sales for them is better.

If they can operate their businesses better, we obviously own stakes in retailers, and so we understand that business. They are going to -- our retail investments are going to find efficiencies operationally from AI, which only benefits us as now we have -- we'll have better financially healthy tenants. So we look at it as a positive and not really focused on any potential negative outcomes.

And then how about internally within Simon, the opportunity to either be more efficient or...

Of course. We look at AI like we do any other investment, whether it's we're looking to partner with somebody, build it internally, buy something. It's incredibly disciplined. We look at every single nickel in the company, however we spend it, whether it's overhead, technology and our capital projects and our operating expenses. And so we'll continue to do the same with AI. We've obviously used it and had success across various departments across our legal department, our marketing department, we have 30,000 tenants or so that all have different needs, different imagery. We have 200-plus properties in the U.S. And so if we can create materials for them, create pitch books, et cetera, faster, that only benefits us.

And then lastly, obviously, on the data side, we have a tremendous amount of data. We're in the early innings there, but really being able to take that data, use it better, use it more efficiently and then ultimately, find ways to monetize it, which we've started to do, very excited about that, but early innings, but will grow significantly from here.

We had a question come in that dovetails on this. What initiatives are you developing around retail media, the use of customer information to synthesize the data, better bring in foot traffic and maybe partner with tenants and retailers?

Sure. So it's sort of -- I look at it as 2 facets, right? One is our internal use. We have better data, better ability to use the data to allow us to lease better. Allow building programs internally, allow us to have a better understanding of what tenants need to be, where, how they will perform, which is only going to make us better operators.

From the use of data going forward, we've launched a retail media network, launched it last year, continuing to grow it this year. But basically, if you think about it, we have 25 or so million people in our consumer database that's built up over time. We launched our loyalty program in November of last year to get more granular data on those consumers. But I think it's a pretty attractive data set for both our retailers, but also a broader universe because that 25 million people is a part of a cohort that spends $100 billion a year in our assets, a couple of billion visits a year, a few hundred million, 200 million, 300 million individual shoppers.

So clearly, that is pretty powerful. We're in the early days of harnessing it. Obviously, AI will help us, but it's something that we're really focused on top to bottom of the company right now.

And maybe beyond the efficiencies at a corporate level, from an operating expense or maintenance kind of preventative maintenance, right, what are you guys doing at the property level? Or what good technology is there out there, if any, at this point to really help modulate heating, cooling expenses and lighting and all the things that kind of go into it and can minimize CAM.

So it's something that -- it's not like we just woke up and saw the word -- letters AI and said, "Oh my God, how is this going to help us operate better." Right? We've consistently over a very long term, invested in different platforms and different ways to be more energy and efficient, run our properties better. So all -- we view that as just a continuation. So what might have been a software program before now might be AI backed, and we're continuing to trial things.

And the good thing for us is when we talk to potential providers, if we find something that works, they see the ability to roll it out across 200 or so assets in the U.S., which means that we're going to get that first phone call when people have interesting ideas, and we take those calls all the time. And we're starting to see interesting results. It's obviously very early, but energy cost is something we are very focused on and think that hopefully, there are real savings to be had there.

And to circle back, in your prepared remarks, you highlighted the $4 billion of potential kind of development, redevelopment within the pipeline. Maybe talk a little bit about how much of that is Taubman related now that you guys have full control of it versus legacy portfolio. And maybe a range of returns or how we should think about that incremental capital spend?

Sure. So I would say, honestly, the $4 billion, I think, has basically none of Taubman because that was sort of in plan before. We obviously announced right after earnings that we have a $250 million 3 projects in Denver, Cherry Creek, Nashville, at Green Hills and Tampa International Plaza. We are incredibly excited about those projects to make really good assets even better that, frankly, should have been done a while ago. We didn't have the ability to do it. Now we are going to do it.

But that $4 billion is the vast, vast, vast majority of it, if not all of it, frankly, is our core portfolio. From the Tower portfolio, if you think about it, they had an independent balance sheet, not the $9-plus billion of liquidity we have. And so some of the assets do need capital. We've highlighted those 3 is where we think we can have the biggest and best returns. But we're going through property by property and have been in the last several months, looking to see where we can merchandise better, where we can make the properties look better. And so we'll continue to do that.

We look at it not as a 2026 story, but these are assets we want to own forever. And that's why we did the deal initially. It's why we bought the next 4%, the next 4%, the last 12% because these assets are great assets that we want to own for a very long time. And then going to your return question, I think the $1.5 billion is at 9%. I would say 2 things on that, right? Obviously, that's a lot of assets in there, right, a lot of different projects. We'd expect the pipeline, the shadow pipeline, I should say, to be similar. But you should note that we're -- I wish we were building multifamily to a 9%, right, but we're not, but we're building at 150, 200 basis point spread. And so if you think about that as a 6.5 or so, a lot of the other projects then are higher than that, right? 40% or so of the pipeline is mixed use.

Then the other thing, which I do think is important to note is when we underwrite that pipeline or provide those public returns, that is truly the cash we are spending in the box of what we are doing, right, whether it's a department store redevelopment, what we did at South Dale, the exterior renovation where we added luxury. What it's not doing is picking up all the other benefits that we're getting throughout the property, which to be intellectually consistent, but that makes that number obviously much higher, right? And you look at South Dale, that doesn't take into account the 40, 45 new tenants we've added since we announced and started construction of the luxury redevelopment, which is now open. And those tenants are outperforming those like-for-like tenants that have been at South Dale for a while are outperforming that same tenant in other malls by 1,000, 1,500 basis points because we revitalized a 70-year-old asset.

And so yes, it's 9%, which that in and of itself is obviously very good, but we do know that there is a lot more accretive returns that are beyond that with what we're doing.

And what's the tail on this from a time frame on that $4 billion? Like when should we expect that to hit? And what is behind it? I know you have Taubman, but as you reevaluate the portfolio and continue to re-underwrite or bring in new assets, what could that kind of additional opportunity be over time?

Sure. So I guess on the first part, on the $4 billion, I'm hopeful that, that starts over the next several years. maybe AI can disrupt how city planning in some of these towns work, so they can be quicker because it's not an issue of our desire. It's not an issue of our capital or the tenant demand. It just takes time to get through some of these processes. But I would expect most of that to start over '27, '28, '29. But then you got to remember that some of these projects at Fashion Valley, that's going to be a 3-year development, right, an iconic asset in San Diego that we're going to add multifamily, flagship retail, world-class restaurants, et cetera. And so I think it's important to note that it's not just when we start, but this capital does get deployed over a multiyear process.

And then behind the $4 billion, we are just scratching the surface, right? Again, it's not -- has nothing to do with capital constraints. It's where is the best use of our time. And that's what this $4 billion has determined, but we continue to look at our portfolio every day because if we're not making the asset better, inherently, it's getting worse. And so we say, okay, where is the next asset that we can put significant dollars in to make it better the next South Dale, the next Brea in Orange County, which is near the end of that significant work. So we think there's a lot behind it. $4 billion, I think, is not too bad, but we'll continue to grow that over time.

And you guys have historically been opportunistic as well on the direct real estate or direct retailer side. I know that a couple of years ago, you pulled back a little bit because maybe you're getting some feedback from investors. But as Saks comes and some others potentially down the road, how interested -- I know you guys already have an investment in Saks, so that's maybe a redundant question. But going forward, like the -- if you have this level of potential redevelopment or use of capital within the existing portfolio that's a little more organic, probably a little derisked, that versus the appetite to continue to be opportunistic.

Just kind of curious how much capital maybe you set aside for those relationship or strategic investments versus the -- just the straight up real estate side?

Yes. I mean I think it's, as you said, opportunistic. We're not looking for it. If somebody calls us, we'll take the call, and we'll look at an opportunity. I mean, from a capital perspective, you got to remember, we have very, very, very little net cash in these deals. We put in a little cash to begin with, and then we've returned a significant amount of it. So earmarking anything would be silly because it's de minimis relative to liquidity we have and the other uses of cash.

And so if there's something interesting, can we do it? Of course, but we're not actively looking at it. Obviously, with our investment catalyst, we're happy, right? I think the management team there has done a great job, but we're not actively looking to do anything. We think we got a great opportunity in our existing portfolio and let's just keep making these assets even better and driving cash flow growth, which is what I think we're the best at.

Any questions from the audience? Opening up for a minute. Nope? All right.

On the leasing side, the demand has been strong. The execution has been strong. As you talk to retailers, the tariff issue, SCOTUS slapped it down and the administration came right back with another avenue. Kind of how is that uncertainty or extra cost essentially factoring into conversations you guys are having as tenants are looking to lease or they're looking to figure out their cost structure and margins and your OCRs factoring all that in?

Sure. So I think a couple of things. First is tariffs and sort of changing supply chains is not a new story. This went on pre-COVID and the First Trump administration and has been continuing to today. So that, I think, from retailers, their flexibility is a lot better than it might have been 20 years ago. And so that's first and foremost.

Second is when we had our earnings call first week in May, so a month or so after Liberation Day, I think we said on the call that there were 4 or so leases that fell out, right, out of -- we signed 4,500 leases last year and 4 or 5 fell out because of tariffs. Well, we're sitting here almost a year later, and the number is still 4 or 5 leases fell out because of tariffs. So we don't see that changing. The conversations we're having are good. Retailers are looking to secure renewals on their space going into the future more because they realize that if they have good space, they want to keep that good space. And so we're working on not just '26 renewals, but '27 and '28 renewals with some retailers in certain circumstances.

So obviously, it's fluid. We're cognizant of it. Could there be some impact on margin? Of course. I think the retailers, though, by and large, have done a good job of figuring out how to minimize it. And we'll see what happens, but we'll be ready to react either way. But as we sit here today, the leasing pipeline is still very strong. It's still north of 15% above where it was this time last year. So even after 10 or so months of tariff noise.

We had a question come in through LiveQA specific to Klepierre. How do you think about the success of that investment and keeping your capital in the deal longer term?

So I think the key word you said there is investment, and we view Klepierre as an investment. And an investment by its definition, we can hold an investment or we can sell an investment. And so that's how we look at it. Obviously, it's been very successful. We're proud of what we've done over the last 14 years. We're proud of how it's performed, but it's an investment. And so we will evaluate it every day and determine if it's an investment we should keep or it's an investment that we have better use of that capital. But otherwise, sort of business continues as usual.

In regards to the exchangeable, I know I think we had talked, you guys have the ability to pay back in cash, you have the ability to put shares. You mentioned you did put a little bit of the investment back, a very small piece. As you guys go forward, how should we expect that debt to be paid off, could you liquidate more of the investment there through the payback of it? Or did you kind of rightsize what you guys wanted to rightsize and now you pay back with cash?

Sure. We'll look at each and every exchange as they come in to the extent they do and then decide at that moment what we want to do. As of the earnings call, we had exchanged 1.5 million shares out of our 63 million, 64 million shares. Obviously, it's not a huge percentage, but we'll evaluate each exchangeable notice to the extent they come in and sort of determine what's best for SPG at that time.

Kind of pivoting a little bit, and it goes back to maybe the investment piece. You guys bought Jamestown a few years ago. It's been quiet on that front, at least externally, right, what you guys are doing with them. Is there anything near term or on the horizon or maybe even in the $4 billion that you referenced that leverages that platform over time? Or how should we think about that relationship going forward?

Sure. It's a great relationship. I was talking to Matt and Michael, I think, on Wednesday or Thursday last week. It's -- I would say the $4 billion is just SPG, right? And I would think of it less as what Jamestown is giving to us versus what we are giving to Jamestown. And so they're working on -- they closed on a transaction in Charlotte not too long ago in the last couple of weeks. They're working on a transaction in Berlin that's closing soon. They're looking at a couple of large mixed-use sports-related developments in Tampa and in Atlanta.

And so we provide input, we provide expertise, maybe down the road, depending on how those deals get capitalized, we maybe provide capital. But it's a great relationship. We're 50% owners, right? So we don't control it by any means. It's an awesome management team who's doing a good job. And so we talk to them weekly at least and to continue to find ways to grow that platform. It's an investment that we're happy we made and we'd like to continue to grow it.

The goal is to grow AUM and ultimately, that is what we're kind of focused on, and we expect to see that in the near future with that platform.

Is there ever an opportunity for you guys to do -- or them to do a fund with you guys contributing assets, taking outside capital? Could that be something down the road? Or is it basically you guys just want an asset management arm, maybe you introduce them to some people they might not know to get their AUM up and kind of enjoy the fees, the high profit margins on that?

Never say never, but I think it's more the latter, right? Because if you think about, by and large, our portfolio, the assets we own, we want to own outright, right, or our share of what we have with partners. And so to contribute it to grow their AUM in a business that we own 50% of versus what we can own and what we can control our own destiny, that's much more interesting.

But we do develop interesting capital relationships with Jamestown, right, they do talk to large institutional investors on the private side that we might not really have a need for, frankly, maybe one day down the road, we do. But that's an interesting angle for us to develop those relationships. We look at it and say, we have boots on the ground in literally 100s of markets or north of 100 markets across the country. And so basically, any asset that Jamestown is looking at to underwrite is the market that we know. And so that is pretty valuable intel when they're looking at going to raise capital and they're talking to the large institutional investors. Not too many people can say that. And so we think it's additive to their platform.

We had a question come in. I know you guys addressed this a little bit on the call, but maybe an update on the expectation for the Saks bankruptcies. How many stores have you gotten back? Do you expect any leases to be bought in auction?

Sure. So you have to separate, right, the Off 5th and the full-price department stores. On the Off 5th, as we said on the call, I think we have 38 stores that pay $18 million. And effectively, they have rejected the vast, vast majority of those. And we're going to take that $18 million. And based on where we are today with about half of those stores, that's a $30 million rent roll. And so based on the rest of the stores, that should more than double the $18 million. All those are in the outlets and the mills. And so that is going well, low paying, low productive space in very good locations. I was at Silver Sands Premium Outlets last week. We're going to take their box. It's in a prime corner of the center. And we have a deal with a great retailer that will do literally maybe 10x the volume, if not more, of what Saks is doing -- Saks Off 5th is doing.

On the full-price department stores, that's early. We'll see. Obviously, we announced at Copley, the Neiman Box that we're going to redevelop and add multiple restaurants that will do over $100 million in volume and new -- additional new luxury retailers. And then we'll see where the rest of the full-price stores shake out. But either way, if Saks remains as a going concern, which I think would be good, generally speaking, for the industry and for the environment, then that's fine. And if something worse were to happen, their stores are in great centers, and we've obviously been thinking about alternative uses. And so we'll just see how the bankruptcy plays out. We're prepared either way, and it's not the first time we've dealt with something like this.

Another question come in. How have tenant sales or traffic trended year-to-date relative to trends last year?

Yes. So through January, both sales and traffic have accelerated where they were in the last couple of months of the year in '25. So it's obviously early February too early to know, to have a read on. But I think anecdotally, similar-ish, but kind of crazy weather in parts of the country that might not normally get it. So don't have a great read on February yet, we'll see. But through January, have accelerated both the growth in sales and the growth in traffic over the last couple of months of the fourth quarter last year.

You guys have done a fair bit of outlet development overseas. Just kind of curious with the geopolitical risk going on and what's going on over the weekend, just does that delay or change your underwriting at all on the decision to kind of put capital outside the U.S. on the margin. I know where you guys own is not where this is going on, but clearly, there's...

I mean obviously, we don't own in the area. So that's not -- and frankly, not really looking in the area, that's not a concern. I mean when we look at international development, which we -- right, our most recent asset was in Indonesia last year, to the extent we're taking country risk, we're going to make sure we're earning the right return. So it's just a higher return threshold, but we obviously evaluate it very, very closely. I don't want to say we scrutinize it more than something we do here because we scrutinize every $5,000, $10,000 decision very closely to make sure we're not wasting money.

But on the international front, we have a few new deals or a new expansion in Japan -- an expansion in Japan, a new development in Korea that is supposed to start later this year. Let's see where the geopolitical environment is. The great thing is we can do it or we cannot do it. And that's funded basically by those portfolios with those partners. So it doesn't really sweat either way. We're not really sweating either way, but we'll just evaluate each one. We have a very stringent criteria when we go overseas. And obviously, it's been incredibly successful so far, and we're proud of the assets we have.

And then in terms of capital allocation priorities, we had a question come in if between expansion of malls, outlets, densification of other uses, how do you prioritize those? And then how do you think about either larger cities or more secondary cities?

Yes. I mean we prioritize all. We do all, we'll do all and are excited about all. And so this is -- there's no issue resource-wise, both in terms of people or in terms of capital at all, right? We're generating $1.5 billion after dividend to fund the pipeline and while naturally deleveraging. So it's not a concern. It's each individual asset, what's the best decision for that asset.

Sometimes like a Boca, just one of my favorite malls, frankly, and one of the best malls in the portfolio. We have an opportunity to do something incredible to add a hotel, multifamily, great retail, great dining. We're going to do it. In other markets, it might make more sense to do sort of a box replacement or maybe a small restaurant outlay, what we did at Mission Viejo, where we added a handful of restaurants outside and a couple of furniture users. So we look at each and every asset, what's the best use of that asset, not where are we putting money because if we do something here, we can't do it there.

And then on development itself, obviously, we've announced what we're doing at Sagefield in south of Nashville and Franklin, which we could not be more excited about, a little bit different than what we've done in terms of the style, truly taking into account the beautiful layout where it is. And -- but retail demand for that has kind of been unlike anything we've seen. in terms of the quality of retailers that are excited about that. So that's obviously going to really start picking up later this year and open in a couple of years. And we continue to look at new development opportunities, less so on the full price side, probably more on the mall side -- sorry, on the outlet side. But those will have to be deals that we want to do that we think generate an attractive return.

Debt spreads have been coming in for the REITs, especially the larger, more highly rated REITs. What's your view on need for capital in the near term? Kind of how should we expect or should we expect you guys to tap that market to take advantage?

Yes. I mean, Craig, we're regular funders in the secured, the unsecured market. I mean we're not raising incremental capital. We're funding our business with free cash flow. So really, it's just replacement debt. Markets are wide open. We did an offering earlier in the year, 5-year offering at 65 over treasuries. In the history as a public company, we've only issued a 5-year tighter one other time. So the markets are open. The secured markets are opening and pricing efficiently.

So ultimately, we will be very active again this year as we are every year, probably have about $10 billion of total financing to do between unsecured and secured. We still do face higher interest rates than the coupons we're rolling off. We benefited during the -- when interest rates were at 0. I was actually kidding with David that we will have rolled off our last 1% coupon next year. And so we are still getting tight pricing, but base rates certainly are elevated relative to recent past.

We have our rapid-fire questions in the session. What will same-store NOI growth be for, let's just say, retail overall next year in 2027?

Less than ours.

Any specific numbers?

Still less than ours.

Will there be more or fewer of the same number of retail REITs a year from now?

It doesn't impact us.

Broadly, do you expect M&A across retail REITs?

We'll see. It doesn't impact us.

All right. Thank you.

Greetings. Welcome to Simon Property Group's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Tom Ward, Senior Vice President of Investor Relations. Thank you. You may begin.

Thank you, Jan, and thank you all for joining us this evening. Presenting on today's call are David Simon, Chairman, Chief Executive Officer and President; Eli Simon, Chief Operating Officer; 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 8-K filing. Both the press release and the supplemental information are available on our IR website at investors.simon.com.

Our conference call this evening will be limited to 1 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 1 question. I'm pleased to introduce David Simon.

Good evening. We delivered strong financial and operational results in the fourth quarter, capping another impressive year for our company. We achieved excellent leasing performance, acquired $2 billion of high-quality retail properties, completed more than 20 major redevelopment projects and opened a new premium outlet in Indonesia.

We reported record real estate funds from operations of $4.8 billion or $12.73 per share. Our results reflect solid fundamentals, strong occupancy, accelerating shopper traffic growth, healthy and growing retail sales, positive supply and demand dynamics, all driving improvement in our cash flow. We returned approximately $3.5 billion in cash to our shareholders through common stock repurchases and record cash dividends.

In our yearly tally, we have now paid approximately $48 billion in cash to shareholders in dividends over our history as a public company. With that, I'm now going to turn it over to Eli, who will discuss our leasing and investment activities, and then Brian will cover our fourth quarter results and our outlook for next year in more detail.

Thank you. During 2025, we acquired The Mall, 2 well-known luxury outlet centers in Italy; our partners' interest in Brickell City Centre, a premier mixed-use property in Miami's rapidly growing central business district; the remaining 12% interest in [ Calvin Realty ] Group we did not previously own in Philips place, a high productivity open air retail center in Charlotte, a market that we know well with significant upside from remerchandising and densification. .

These deals enhance the quality of our portfolio, and we look forward to deploy our leasing and property management expertise, along with our strong balance sheet, pursue new growth and value creation opportunities across these properties. Retailer demand remains strong across our portfolio. We signed more than 1,300 leases totaling over 4.4 million square feet during the quarter and over 4,600 leases for more than 17 million square feet for the year.

Approximately 30% of our annual volume was new deals, reflecting continued strong demand across our portfolio. Now turning to development. We completed more than 20 significant redevelopment projects in 2021, including retail and experiential additions at Southdale Center, Stanford Shopping Center, King of Prussia, and Forum Shops at Caesars and mixed-use additions, including hotel and residential at Northgate Station and Lakeline Mall respectively.

In 2026, notable retail and mixed-use projects scheduled to come online include Brea Mall, Northgate Station First Phase of residential and open air expansion with restaurants and retailers at the shops in Missiniejo; Fryerwood Mall with the new [ harvest ] market, Dick's Sporting Goods and Residential, [indiscernible] shops and restaurants.

We also expect to begin to construction on exciting new projects, including anchor redevelopments Fashion mall at Keystone and Town Center at Bokaro Town, expansions at Toronto, Desert Hills and [indiscernible] are progressing and Sage Hill, our new open-air retail and mixed-use development in Nashville. We also plan to enhance the merchandise mix and invest in meaningful capital upgrades at former TRG assets, including the Mall at Green Hills, International Plaza and Cherry Creek Shopping Center.

At year-end, our share of the net cost of development across all platforms totaled approximately $1.5 billion with a blended yield of 9% approximately 45% of net costs are from mixed-use projects. Our pipeline of new development and redevelopment opportunities continues to grow and now exceeds $4 billion. I will now turn it over to Brian, who will walk through our fourth quarter results.

Thank you, Eli. Real Estate FFO was $3.49 per share in the fourth quarter compared to $3.35 in the prior year, 4.2% growth. Domestic and international operations both performed well, contributing $0.26 of growth driven by a higher lease income across the business. As anticipated, lower interest income and higher interest expense combined [indiscernible] and quarter.

Domestic property NOI growth was strong and increased 4.8% year-over-year for the quarter and 4.4% for the year. Portfolio NOI, which includes our international properties at constant currency grew 5.1% for the quarter and 4.7% for the year. Malls and Premium Outlets ended the year at 96.4%. Occupancy in the Mills ended at 99.2%. The addition of the TRG assets reduced occupancy by 20 basis points from malls and premium outlets and 30 basis points for the mills. We expect to drive higher occupancy at these assets as we execute on our leasing strategy.

Average base minimum rents increased 4.7% year-over-year for the malls and the premium outlets. The TRG properties contributed approximately 250 basis points to this growth. Retailer sales per square foot for the malls and the premium outlets were $799 per square foot for the year. The SPG only portfolio was up 2% year-over-year. Importantly, total sales volumes grew approximately 4% in the important fourth quarter and 3% for the full year.

Occupancy cost at the end of the year was 12.7%. Turning to the balance sheet. During 2025, we completed approximately $9 billion in financing activities, including a dual tranche U.S. senior notes offering that totaled $1.5 billion at a combined average term of 7.8 years and a weighted average coupon rate of [ 4.77% ] and completed -- also completed $7 billion of secured loan refinancing and extension in the year. Subsequent to year-end, we concluded the $800 million offering of 5-year notes with spread of 65 basis points year treasury. We used the proceeds to repay $800 million of notes that matured on January 15, 2026. Our A-rated balance sheet provides a distinct advantage with more than $9 billion of liquidity at year-end and a net debt-to-EBITDA measure of 5.0x.

During 2025, we paid more than $3.2 billion in common stock dividends and repurchased over 1.2 million shares for approximately $227 million. Subsequent to year-end, we repurchased an additional 273,000 shares for $50 million. And today, we announced our dividend of $2.20 per share for the first quarter, a year-over-year increase of $0.10 or 4.8%. The dividend is payable on March 31.

Turning to our '26 guidance. We expect real estate FFO of $13 to $13.25 per share with a midpoint of [ $13.13 ] the guidance range assumes domestic property NOI growth of at least 3% with higher net interest expense of $0.25 to $0.30 per share versus 2025, reflecting current market interest rate conditions. Thank you. We will now open it up for questions.

[Operator Instructions] Our first question comes from Caitlin Burrows with Goldman Sachs.

Maybe on the leasing side, you mentioned that 30% of lease signings last year were on new leases. So could you give some detail on what rents you're getting on new leases and renewal leases and how your pipeline today and depth of demand compared to a year ago, I guess, while keeping in mind the TRG deal and now the portfolio is larger.

Caitlin, it's Brian. Look, I think what we would say to that is certainly 30% is a good run rate for the leasing. We disclosed the new rents on our leases, which are approximately $65 per square foot. We would expect that to continue into 2026

And then just from the pipeline perspective, year-to-date, our pipeline is up about 15% over last year. And that's really broad-based across all categories. So no change in tenant demand, if anything, it's increasing.

Our next question comes from Samir Khanal with Bank of America.

I guess, David or Eli, going back to November, you launched the the Simons loyalty program. Just -- is there any early observations you can share about the program? I mean, as it relates to maybe impact on traffic or retailer sales. Maybe Eli, anything would be helpful from that end.

Yes, sure. So it's obviously early days, but we've been very pleased with the adoption from both a customer perspective but also getting brand excited about it. And so we're still in the membership acquisition phase, increasing engagement. We had a great holiday activation. They got a lot of organic buzz, which was exciting and I think helped to increase traffic a bit. And so as we go into '26, it's more of the same, continue to focus on getting new rewards, new retailers and also partnering with other loyalty programs that are outside of our space as well, working on launching that [indiscernible] part of this year. So again, early days, but we are very pleased with where we are so far.

The next question comes from the line of Michael Griffin with Evercore ISI.

Appreciate all the color so far. Just wondering if you can give some insights maybe into your thoughts around tenant credit or bad debt as it looks at the year ahead. I know there's been some news recently around retailer bankruptcies, but just maybe give us a sense where your head is at from expectations from a tenant credit perspective? Is it better or worse, the same than last year? Anything about that would be helpful.

Sure. Yes. Look, I think the tariffs are clearly having an effect on retailers. So it is definitely putting more pressure on them. And it's not the big guys. I think I mentioned to you this on our last call. I mean it's really it's really -- if you put Costco and Walmart and of course, Amazon aside, and then you have the rest of us, okay? And the rest of us are feeling the pinch. And so it's something that when we had our call last year, obviously, we weren't dealing with.

Retailers dealt with it successfully this year, but kind of -- the full impact will really be '26 because it was implemented who knows in April, I guess. We're still waiting for the Supreme Court to rule which could be a small victory for our clients, but no one really knows. I don't know what market [indiscernible] where the odds are. Actually, let's be an interesting time, while we're here, you can find out what market says about Supreme spring. So they have to deal with it. And it's -- we see it from a catalyst point of view. And I mean, it's going to take a couple of hundred million dollars of EBITDA away from catalysts to pay together.

I mean if you cut through it all because I think Catalyst rightfully so is very focused on doing the best they cannot pass it on the consumer. So it is a real issue and the retailers that we speak to are managing it the best they can. But it is a headwind, and long story short. It's probably put more pressure on retailers than should be, and it's going to end up hurting the small guys. So we're a little more cautious. We gave you our range that was, frankly, we didn't have some bankruptcies in there that surfaced at the beginning of '26 that we felt comfortable to keep the range.

We do our budgets, we finish basically mid-December. So that budget was essentially fixed. We didn't back off it because what Eli mentioned to you the retail demand. But they'll probably be a little bit more. And I would say most of it, if I had to cut to the chase is tariff pressure, which is unfortunate. I hope that answers your question.

The next question comes from the line of Michael Goldsmith with UBS.

We heard a lot about investment and redevelopment from Eli. So maybe can you frame how much incremental NOI or FFO we should expect this year from projects stabilizing either late in 2025 or in 2026?

Michael, it's Brian. I think you should expect about a $30 million contribution in '26 from projects that are going to be complete.

The next question comes from the line of Alexander Goldfarb with Piper Sandler.

[indiscernible] 25% to 32% in favor of policy....

If it does, it's going to be an interesting opinion. David, just going to your point on the question on the guidance set in December, even though that was ahead of Saks and Eddie Bauer, but you still feel pretty good. As you look at the business, you guys have -- there's Simon Brand Ventures, there's parking revenue. I mean there's all these other ancillary revenue sources. So is your view that as presumably the economy grows, all these other revenue levers that you guys have will kick in and be more than sufficient to offset whatever potential tariff disruption that you outlined? Or just how are you thinking about that? Because on one hand, the tariff thing sounds like there's going to be more ripple effects this year as the full year is felt. But the same token, presumably the economy accelerates, you guys have more revenue levers that should come into play and help drive earnings up.

Yes. Listen, I agree 1,000% of your thesis we are seeing -- the most important thing is traffic is up, sales were up. The retailers that don't make it even though [indiscernible] blind tariffs, they're not highly productive retailers. And given that it's our view that we can replace it with more productive retailers or higher rents and take what's going on in [ Saks ] as a simple example. We had a number of Pop Fit stores, and it will be like the Forever 21, even though we don't have all of Forever 21 lease, we are already way ahead of the income for that, and we have upside of another 20, 30 boxes to lease.

So Saks, [ our fifth total ] was paying us around $18 million. We think half the portfolio will pay us third -- and Eli said that I remember the numbers, right? So -- and then we'll -- and those are deals that we feel highly confident on. And then we have the other boxes that we'll generate, so we're not replacing -- we're replacing fifth and Saks in the sense the productivity and the rents are just so cheap that there's a tremendous amount of upside. And it takes time, right? But -- and most of that will all be back end weighted because your GLV sales, and I will be done, who knows, in the spring sometime, we get the space back.

Maybe there's a few that we can get in the fourth quarter, but most of it will show up in '27. So the media sales, tenant demand, traffic is all moving in the right direction. And I like you, I mean, we're bullish on the economy. It's just that the tariffs are -- it's never going to be all systems go. We still see it a little bit on the sales. We had a good bounce back on the border, the north border, Canadians are really pissed off.

So they're not going anywhere in the U.S. So we're seeing kind of the north border, a little weaker than the South border. We also, interestingly, and that saw a little bit of sales disruption in certain markets where we're a lot of ICE activity, which was interesting. But again, tariffs are a headwind, but there's a lot of positive aspects of what's going on.

And most importantly, we're making the properties better, the Simons we'll see some benefits in '26. And as an example, Alex, we just spoke to Chanel in [indiscernible] off to a really good start. And that's -- to make that kind of -- with that kind of retailer who's the best of the very best is just creates so much momentum elsewhere. So in that sense, we're very bullish.

The next question comes from the line of Craig Mailman with Citi.

Just to follow up on the leasing. The pace of leasing has been pretty consistent here and strong. I'm just kind of curious the tenor of the conversations maybe as you're talking to retailers and their demand and appetite to go into Class A and what they're willing to pay for that versus maybe what a same tenant or vertical would be willing to pay for space in Class B. Just kind of curious what the appetite looks like there and the pricing for that.

Yes. Well, we don't -- I mean, pricing is it's just so space market asset driven. It's -- there is -- hopefully, AI will solve it for us, so we don't have to negotiate, I'll just say. Here is the rent that the tenant and the landlord should agree on. And then we can -- I don't know what we do, but we can use that. So I can't really tell you. I mean, obviously, A assets have higher demand, but we're making a lot of progress in the Bs. And we really talk about pricing power. We really talk about you can't force a deal. So it's -- the tenant has to agree, we have to agree, and it's a negotiation -- and I would say how many leases did we do last year, guys.

4,600

No, no by square feet .

17 million

17 million.

Strangely enough, we figured out how to make deals on 17 million square feet, okay? So it's more of an art than a science, maybe maybe I can make it more of a science, but again, it's not pricing power, just what's the right deal for both of us.

I'm mean, I guess, is it getting easier to lease Class B versus maybe 12 months ago?

I think that's a safe statement. And again, if you look at Southdale Mall, a year or 2 years ago, we would say -- this was a C [indiscernible] ], okay? And now we've made it an A. So part of our job is to enhance the quality. And we're -- we don't discriminate on what we're trying to achieve. What we're trying to achieve is make -- if it's in Midland, Texas, by the way, I hope you watch [indiscernible] been to Odessa and Midland, which, of course, I have been a few times. And you really -- it's really -- you really get the feel for. But our job is the Midland, Texas, which does -- used to have a lot of volatility of the oil price, less so today. But to make that the best it can be, at the same time, trying to make sure the best it can be. And that's one of the hallmarks of our company in that we can do that. And it just takes a lot of focus and a lot of energy to do that. But at the same time, we can build an outlet like we did in in Indonesia, right? Very few companies can build in Indonesia and then build a new outlet in Oklahoma, okay? So that's just what we're about.

The next question comes from the line of Greg McGinniss with Scotiabank.

Normally, this question doesn't fall so deep into the question queue, but I think someone needs to ask. So Brian, how should we think about the factors that could drive Simon to the higher or lower end of the FFO per share guidance range, especially considering that you're already absorbing some additional unexpected bankruptcies versus the December budgeting process?

Greg, I think the way to think about it is very similar to how we run our business. We start beginning the year very conservatively and build throughout the year. I think we touched upon a variety of the potential inputs that will drive the outperformance. Certainly, our ancillary businesses, our leasing business, sales, certainly, we've done.

Yes, I would just -- sales to me, could be significant upside. We because you probably know we budget ourselves flat-ish. And so we hit 3% growth, I would hope to be our asset. And to me, we'll have bankruptcies will tenants will be delayed, that kind of stuff. But if we get the tenant sales growth that we hope to get, no, then we'll do better. And I would -- I don't anticipate doing worse than our range.

The next question comes from the line of Vince Tibone with Green Street.

I got 1 more on guidance. Can you just discuss the level of domestic property NOI guidance included in '26 FFO? And then also, if you could just help quantify '25 is a bigger acquisition year than the recent past? Like how much did '25 completed acquisitions benefit or contribute to domestic property NOI in '26?

We're projecting 3% comp NOI growth. The Taubman really is a 27 story because of -- you'll see an announcement from us tomorrow or the next day on some transformations of 3 properties that now that we've got our hands on. We also have the integration, which is a '26 story. So it's -- we obviously issued units as well, and we haven't quarterized that, which is our intent. People made fun of that name but that's legit use of our work. So we really haven't done much of that yet. So we'll be prudent about that. That's not really in the guidance. And the other deals helped a few sets, but they're all early days.

Couple we're pretty small, but all over time will contribute to our growth.

That makes sense. That's really helpful. If I can maybe squeeze in a quick follow-up. I think, Brian, you mentioned earlier I think, $30 million of NOI coming online from redevelopment this year. Is that a net figure, like adjusting for any NOI that's going to be taken offline like some of the Taubman projects you just discussed? Or -- should we model more NOI coming offline than the 30, if you follow me?

It wasn't a net number, no. It was basically our deliveries, the expected yield, there's some timing elements to it as well.

Most of what we're doing, again, is back-end weighted. So that's just, yes, let's verify that number. But that's just a more back end weighted and not the full an NII net initial yield to those properties, those redevelopments. Again, give you examples. And our opening best case fourth quarter, right, best case fourth quarter mission, best case fourth quarter. And I can go down the line, but most of all of that is very, very limited back-end weighted Q4 openings

The next question comes from the line of Floris Van Dijkum with Ladenburg.

So [ quarter rise ], I guess, is an appropriate term. So I guess that's another [ 3 million ] of shares that you could be buying back. It sounds like which obviously would be accretive. My question is more on your -- as I usually ask about your [ F&O ] pipeline and how that is progressing -- and how do you see that trending throughout '26 and into -- as you sign your $17 million of leases. If you can maybe Brian, if you can give a little commentary around that and what percentage of that [ S&L ] pipeline is luxury versus your traditional retailers?

Floris, this is Brian. So at year-end, we were about 2.1% of SNO, which is consistent with the prior several years. As you know, we opened in the fourth quarter, vast majority of retailers and then the momentum builds throughout the balance of the year. So we would expect that number to go up, second, third and fourth quarter.

Yes. I think it's good that, that number -- the way I would look at it is to get to that number being almost stable because that means we're replacing tenants for filling the vacant space, and it's not going down. So there's positive churn in that, which is good. .

So let me just make sure I understand. So 210 basis points of SNO is what it was at year-end. What percentage of that is luxury tenants. If you can give a little bit more color on that?

Yes. We don't get into that. But yes, it's not -- it's not happening, right? They're very selective. They're very focused, but we're we don't really -- it's not anywhere near the majority. It's well less than half. But it's not the size it's the quality. So that's how you have to look at you can add South Dale is a great example. South Dale, again, is probably 1.4 million square feet, 1.3 million, huge number. It's got all sorts of funky basement, the third level space, put all that aside.

What transformed South Dale was essentially 70,000 square feet of high-end leasing. So it's the -- it's the quality, not the quantity. So that's what we should focus on. It's not all they're going to do 500,000 square feet of luxury is. If you can add 20,000, 30,000, 40,000 in the right markets, it makes a real difference. And that's what you should look out for. It's not the actual amount of the SNO.

And David, that's very helpful, by the way. But are there any more Southdales expected in the pipeline?

Yes. Yes.

eli is going to announce something tomorrow or the next month maybe, haven't proved out.

Yes, we think we definitely think there's more to do.

The next question comes from the line of Omotayo Okusanya with Deutsche Bank.

Just curious about deal flow, $2 billion of activity in 2025 was pretty good. Just curious, as you're looking globally what you're seeing out there and how we should kind of be thinking about that in '26?

Yes, I mean, listen, we always look, but we have a very high bar, right? The best way to think about it is it has to be something that is brand accretive to our portfolio. It's something that we can add our expertise, whether it's leasing, densification, property management, running it better and it has to be at the right price. And so last year, we were able to find a few of those transactions that we're very excited about. And are off to a good start. And if there are more of those, great. And if not, we'll continue to reinvest into our existing portfolio, which we're earning great yields and obviously had a big growing shadow pipeline behind that.

Yes. I think with our new development in South Nashville, and all the redevelopment mixed-use pipeline, the bar to buy something for us is it is you don't have to be an Olympic high jumper, but you got to have more [indiscernible], okay? So -- and why I'm saying this is because we are really excited about our redevelopment pipeline. It's not a capital question. It's just then I would say we're going to take just, pops into my head. But take Boca as an example. We finally won the litigation, we were able to buy the building from Seritage, and that development in and of itself could be $500 million. .

And that's just 1 example that pops in in my head, but we have the same thing in Fashion Valley in San Diego, taking the penny building and creating mixed-use and more retail space. So that -- and then we've got the new development in ESCO, which could be $500 million. So what their extension of extension of Toronato.

Deseart Hills.

Desert Hills. So these things are very exciting to us. And so we've got to be -- we have to have similar excitement if we buy some. And that similar excitement has to then be grounded by what Eli said, which is -- [indiscernible] our portfolio, can we add value? What's the game plan? I don't think the one that we bought that we've taken over leasing, we got a lot of great stuff in the works there. and an asset that 10 years from now will be worth $3 billion to $4 billion.

The next question comes from the line of Linda Tsai with Jefferies.

Just a follow-up on the redevelopments. When you engage in them, are you relocating retailers within your existing property or drawing new retailers into the market? Or taking share from other assets in the area?

We are bringing most of the time, you'll always relocate some existing retailers in the existing building. So most of the time, we're bringing new entrants into the market.

And then just on occupancy for '26 versus '25, how are you thinking about that? And does it vary at all across different formats, premium outlets, malls, mills?

Linda, we do expect that there is some upward opportunity in our occupancy for the year across the platforms.

The next question comes from the line of Mike Mueller with JPMorgan.

Can you talk a little bit about the institutional appetite for higher productivity malls. For example, are your JV partners looking to invest more with you? Or are we more likely to see you buy them out?

It's really -- we don't have a lot, to be honest. And what I've noticed it's really partner by partner. And a lot of it depends on how long they held the asset, what's going on in real estate investments, et cetera. So it's hard for me to say it's really one way or another. But there's not a rush to get out. And I would say, it's not a rush to get in.

And if I had to to make it -- if I had to make a simplistic statement, which I'm very confident in, that, right, because sentiment, right, it's kind of more status quo.

The next question comes from the line of Handel St. Juste with Mizuho Securities.

I wanted to ask about luxury. I was hoping you could talk a little bit more about what you're seeing and hearing from luxury shoppers and tenants. The upper end consumer has clearly been resilient, but it looks like some of the luxury brands, LVMH, in particular, might be signaling a bit more caution for luxury this year, some of that obviously tied to tariffs, Chinese spending. So I guess I'm curious, what's your view of expectation for leasing demand and sales productivity from that tenant category for this year?

Sure. I would say, again, it's so dependent upon the company and then within the company, the brand. There are some that are growing. There are some that are still making deals, but a little more cautious. And then there are some that are slightly pulling back. The good news is that the -- what they have all discovered in the -- over the last decade or so is the U.S. is a lot bigger market than they ever thought it could be.

So in the long run, we're all very much dedicated to be an important player here. Their wholesale business is obviously affected by what's going on with [indiscernible]. And that could benefit potentially it might not. So I think as they look at their positioning, they're certainly going out and opining on that. And we're optimistic we'll continue to do business with [ Saks/Nemann ] that will reorg and it will live a better life with a better balance sheet. I'd say generally, it's steady as she goes. Some growing, some peeling the onion and a lot of them just stable. And the great thing about these brands they make long-term decisions. They're really investing in the brand and the really best in the stores. And they don't -- they do it over almost a little bit like us, they do it over a little bit longer horizon than quarter-to-quarter, year-to-year. And we really like being aligned with those kind of high-quality retailers.

The next question comes from the line of Juan Sanabria with BMO Capital Markets.

Just first, a quick follow-up. I think you mentioned that pipeline, the leasing pipeline was up 15% year-over-year. So just curious if that number was benefiting from and if so, with the kind of apples-to-apples number is. But then just the broader question is just on these anchor boxes, how should we think about the potential capital investments for [ Saks and Neimans ] as those come back to you over time? And kind of what you think the -- like the top 5, let say, most likely uses are for those boxes across the portfolio?

Well, yes, the 15% is like-for-like essentially because remember, we literally just took over Taubman leasing 2 days ago. It feels like so that's like-for-like. I mentioned earlier the upside that we see in all Fifth. So we'll see a positive impact from both the tenant mix and the cash flow over time. And then the other I don't think we're going to have that dramatic of an impact, but it's early days there.

And then if we get boxes back, we'll do what we've been doing with dealing with all the Sears vacancies, the boxes we got back from [indiscernible]. I mean the one thing we're very capable of is remanaging the real estate and the boxes. And at the end of the day, it gives us the opportunity to redo the real estate, which is kind of what started with South Dale or how big is South Dale?

[ 123 ]

123? I only have 200 -- how many properties do I have now?

254.

So I only have 254, but somehow I remember it's South Dale, right?

South Dale sale an example, that whole redevelopment was spurred by, I believe [indiscernible] going out of the business. So -- and then we've got the PennyMac, and that's where we put lifetime. .

There's lifetime deals to do. There's house of sports deals to do. There's mixed use to do. There's outdoor additions to do. So it really runs the spectrum. And we'll see where it goes. I mean we don't know yet. So it's early days. My guess is we'll have a better feel for next....

The next question comes from the line of Rich Hightower with Barclays.

Just a small clarifying question on Saks and then a separate question from that, if I may. I think it was reported that Simon's got a $100 million investment in that entity as well. And so just help us understand what happens that and how that investment might, in some way, control the outcome to whatever extent? And then my second question is just updated thoughts, if you have any on the exchangeable euro debt that comes due later this year and the potentiality of putting Klepierre shares to the debt holders there, what the math looks like there?

Sure. So let me answer the second first. We have gotten some redemption notices and we've been issuing shares. Brian wants to pull the number...

1.5 million shares.

So we've issued 1.5 million shares to satisfy the bond when we get it put. So that's what's happened. To your first question, is we did a transaction with Saks Global as part of their funding for buying Neiman Marcus. Now as part of that, we decided we were just going to make that investment unless we got compensated for it. So in case it blew up, we would be home. And so we got the right to terminate 2 leases. We got 2 buildings. And very importantly, and I'm sure you're familiar with [ REAs ]. But throughout the whole entire portfolio with Saks and Neiman, and Alfit, we got the right to build what we want, so we don't have to go hit their approval. In addition, we got the right to take that investment and convert it into a company that's being run by authentic brands group that owns the IP not e-commerce, not stores, but owns the IP for Saks, Neiman, Bergdorf.

So at the end of the day, we felt like we made a good trade. With that said, we've written off our investment at the end of the fourth quarter. But again, we've got the right to build, which can keep you from doing what you want already for years and years. We've got 2 buildings. We got the right to terminate 2 leases if they [ monetary ] to fall, which they are. And then the upside is we own the IP. So we're -- in my personal belief we're ahead of the game, but we went ahead and roll off or invest.

Our last question comes from Ronald Kamdem with Morgan Stanley.

I just had a quick one, putting some of the stuff that came up in the call earlier. Just going back to the domestic property NOI assumptions for this year versus last year, just talking through for the occupancy, the releasing spreads, the bad debt, just putting it all together, high compare versus last year would be helpful. .

Ron, it's Brian. I think if you look, we've now said at least 3% domestic NOI for about 4 years. Ultimately, it's going to all of the things that we've talked about on this call that will drive the performance of the domestic store NOI above where we have a guided to. Ultimately, it's going to be the upside from occupancy upside for leasing and a variety of other types of the business contribute as it has this year and the past several years.

All right. Thank you, everybody. Very good questions. And we will talk to you soon. And Brian and Tom always welcome your thoughts and insight. Thank you.

Ladies and gentlemen, thank you for your participation. This concludes today's conference. You may disconnect your lines, and have a wonderful day.

Greetings. Welcome to Simon Property Group Third Quarter 2025 Earnings Conference Call. [Operator Instructions] 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. Presenting on today's call are David Simon, Chairman, Chief Executive Officer and President; Eli Simon, Chief Operating Officer; 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 8-K filing. Both the press release and the supplemental information are available on our IR website at investors.simon.com. Our conference call this evening will be limited to 1 hour. For those who would like to participate in the question-and-answer session, we ask that you please respect our request to limit yourself to one question.

I'm pleased to introduce David Simon.

Good evening. 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 and a positive supply and demand dynamics, all contributing to strong cash flow growth.

We are pleased to have acquired the remaining interest in Taubman Realty Group that we didn't own and are excited about the opportunities to 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 Taubman 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 the terrific TRG transaction and update on our development activity, and Brian will cover our 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 own 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 7.25%, 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 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 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, adding 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 noncash, non-FFO gain to be recognized in the fourth quarter of 2025.

Now turning to development. In the third quarter, we began construction on several new projects, including a second phase of residential at Northgate Station, an expansion of the Westin Austin Hotel at The Domain, retail and experiential additions at Brea Mall, King of Prussia and The Shops at Mission Viejo.

At quarter end, our share of the net cost of development projects across all platforms was $1.25 billion with a blended yield 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 and contributed $0.26 of growth, driven by an 8% increase in lease income.

As anticipated, lower interest income and higher interest expense combined were a $0.09 drag year-over-year.

Domestic NOI increased 5.1% year-over-year for the quarter and 4.2% for the first 9 months of the year. Portfolio NOI, which includes our international properties at constant currency, grew 5.2% for the quarter and 4.5% for the first 9 months.

Retailer demand remains strong as we signed over 1,000 leases 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 and 20 basis points year-over-year. The Mills achieved a 99.4% occupancy, an increase of 10 basis points sequentially and 80 basis points from the prior year.

Average base minimum rents increased 2.5% year-over-year for the Malls and 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 increased 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 operations were $1.23 billion or $3.25 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 in our supplemental today for details on the year-over-year changes in FFO per share.

Turning to the balance sheet and liquidity. During the quarter, we completed a dual tranche U.S. senior note offering that totaled $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. 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 $0.10 or 4.8%. The dividend is payable on December 31.

Now turning to guidance. We are increasing our full year 2025 real estate FFO guidance range to $12.60 to $12.70 per share. This compares to $12.24 last year in our prior guidance range of $12.45 to $12.65 per share. The updated range reflects a $0.15 increase at the low end and a $0.10 increase at the midpoint.

Thank you. We are now available for questions.

[Operator Instructions] Our first question is from Michael Goldsmith with UBS.

In the prepared remarks, you mentioned the opportunity for operational efficiencies and improvement for the Taubman assets twice and that these 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 on to your platform?

[Technical Difficulty] Hello.

We are able to hear you.

Okay. We got disconnected. So can you repeat the question? We didn't get it all.

Yes, absolutely. In the prepared remarks, you mentioned the opportunity for operational efficiencies and improvements for the Taubman assets twice and that these 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?

Yes. I mean when we bought the original 80% of Taubman, the only real operational efficiencies we got was eliminating public company costs. Obviously, they had a full operational team running those assets, and we'll be able to add them to our platform at very little cost.

And then from an operational enhancement point of view, we bring our expertise in development, redevelopment, leasing, marketing, brand ventures, and we put all that together, and that's what we do for living. So we've helped out, but not to the point of how we would if we actually ran the properties day-to-day. So now we put them on our -- we bolt them on to our platform, that's easy. And then we run the properties day-to-day, and we bring all that we can bear to a portfolio like that. And that's where we see a tremendous amount of upside.

If you look at the occupancy, it's lower than where we're at, and we think we can bring it up to our level. 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 if you look back at this portfolio and you look at the entire transaction, we're going to be at an essentially an 8% cap rate when we add these a little over 8% cap rate when we add 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. So it's at a much higher cap rate than strip centers are trading, much better growth rate than strip centers are trading that I've seen. And these assets have been around 70 years. That's the other thing to step back.

So take data centers. Data centers trade at a 4.5% 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 malls have been around 70 years, 70 years, not 7 years, not 17 years, but 7-0 years. So we made a hell of a trade, and that's certainly one of the reasons why I think the Taubmans wanted to convert this last 12% into our units, which is convertible on a one-to-one basis to our stock because they've seen our ability to execute and perform at levels that no one else has in our peer group.

Our next question is from Alexander Goldfarb with Piper Sandler.

Eli, welcome to the public earnings call. You now get all the enjoyment that David has had over the years. So David, just going back to the cap rate, and if you'll 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 6%, but you spoke about an 8%, which sounds like the existing assets were producing a lot more the overall versus the final buyout trade.

But then you spoke about the initial 50 bp increase 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 one, can you help us understand sort of the pricing of the final 12% and how that relates to the 7.25% 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%.

Yes. So let me just unpack it a little bit. I'll be a little more clear. So if you look at -- we had 4 transactions within the Taubman Group. We had the initial 80% we had the 2 4% and then 12%.

If you look at that on today's numbers, today's numbers, that's basically a little over a 7.25% cap rate. If you add what we think will bring in operational synergies, efficiencies/enhancements, that's where we get to north of 8%. And then obviously, Alex, you're right, then you have all the intrinsic growth of the portfolio, which we're not -- that will just be year-after-year growth because I think these assets, by and large, have a higher skew of quality than just the Simon-only portfolio. So they skew a little higher growth than we do -- we did historically.

So we would expect our comp NOI growth to accelerate because of adding that in. So that -- hopefully, that impacts -- if you really are focused on the 12%, not including the operational enhancements, we're in the 6.25% to 6.5% cap rate if you just want to focus on that 12%. Do you want me to explain it?

Yes, that -- it's what we thought initially, but obviously, all the pieces adding up to get us how you think about that.

I told you a lot more -- only a few, I told you a lot more information than I normally would, okay?

I'm sure Floris will ask a lot more details than I have. So...

Our next question is from Caitlin Burrows with Goldman Sachs.

Congrats on the quarter and recent announcements and yes, welcome Eli, to the earnings call. Maybe on the sales results, they increased in the quarter, which was great to see. Could you give any detail on how widespread that was? Did a couple of tenants drive numbers one way or the other? I know you have initiatives to upgrade the tenant base, maybe shrink where it makes sense. So just whether we're starting to see some impact from those initiatives?

Caitlin, it's Brian. Quite honestly, throughout the quarter, you saw a widespread increase across all 3 platforms. And the tenant base certainly was productive in the quarter. You saw certain categories outperform. You saw luxury come back a bit. Certainly, athleisure outperform, even the apparel category. So certainly, the back-to-school season was a robust one for our business and our portfolio. Even you saw some positive inflection in some of the tourist-oriented centers. So we are starting to see it kind of widespread across the totality of the portfolio, sequential improvement, both in traffic and in sales.

Yes, Caitlin, I would only add that I think like I said last quarter, I believe we're still not from a sales point of view, hitting on all cylinders.

What I did -- what we did see is that the kind of the higher-end consumer, obviously, I don't have to -- you have as good data as we do at Goldman. But clearly, we're in this K-shaped kind of situation. So we did skew better results in the higher income-oriented centers. The value-oriented centers were more flat to kind of inching along. So you didn't see the entire portfolio.

Brian is right. The quarter was okay, at least stabilized. So it's not hitting on all cylinders, but it's okay. Florida remains to be very strong. The one area that we're seeing, and I think everybody is seeing is that your -- 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 comping the sales growth that we would expect.

And then Brian is right, we did see stabilization in the luxury, which is good. But -- and again, the higher income properties are doing better. The one caveat is, as you know, our Vegas properties skewed toward that, and they were not -- their comp sales were intact, I think a little down. I don't have the number off the top of my head. So we're seeing underperformance.

Look, we don't worry about that because Vegas assets are great and Vegas does go up and down. And you've clearly had Canadians that don't go to Las Vegas and other people that are not going at the frequency that's happening, but no concern there. But right now, it's kind of in the trough.

Our next question is from Samir Khanal with Bank of America.

Brian or David, you've generated very strong NOI growth year-to-date, 5% for the quarter. I guess given the solid leasing environment you're seeing, just trying to see if you can keep up this sort of same-store momentum in '26 or even do better, assuming a sort of a similar retailer sales environment. Curious on your thoughts.

Well, the team is doing our -- I think we invite Alex. So we invite you and then disinvite you, but the team is going through the property-by-property root canal, okay? So I'm glad to report no cavities, no need for root canal.

We feel really what I'm being told and what I'm seeing from the numbers are really positive. The team is juiced, energized, so we feel -- I'm not going to give you a number, but we feel really good about '26 in terms of our ability to produce comp NOI growth. As you know, we'll do that in February with our earnings guidance.

But the team is feeling good that we'll have another -- obviously, there's external factors that we don't -- even we don't control, I'm kidding. But we're feeling really generally positive about what we're seeing, right? Brian?

Yes. No, that's the report back. We're in the middle of grinding out. We'll get back to you in February, but I think there's an optimism. Eli, you've been going through all these.

Yes. And it's across the portfolio, not just the powerhouse centers, but really across the portfolio, a lot of exciting new things in store for next year.

Our next question is from Greg McGinniss with Scotiabank.

So from our perspective and despite our expectations, tariffs have had seemingly little impact on shopper or 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 for an update on what you're seeing in your retailer discussions and regarding your expectations on any impact to leasing and/or tenant behavior?

From the tariffs, right? So look, I think the news that President Trump and President Xi had on the Chinese discussion is positive for our retailers, even though a number of them have moved some of their production out of China, but that's a positive.

I do -- I continue to believe that tariffs will have an impact. We have not yet seen all of it. And I think some of that will -- as I said last time, I mean, it's a pretty consistent story. Some of that will 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 there's just, in many cases, the inability for retailers to eat that entire tariff. So they're going to have to pass it on or renegotiate better vendor deals. And I still believe we still haven't seen the full impact of it.

So I think your question is appropriate. I think it's still -- now baseball goes to, what is it, 18 innings now, I mean 18 innings. So I'm not -- let's assume it goes to Stage 9. I think the tariff -- if I had to put an inning on it, I'd say 5 to 6, just a gut feel, so it's not scientific. So we'll have to see. And I do worry that it will put more pressure on the smaller retailers, not the mammoth retailers that we all think about, right? Because they have the ability to handle it and try and use this as an opportunity to squeeze and increase market share.

So we're still in the middle of the game. It is not over. Hopefully, it is a 9-inning game. It doesn't go to 18. But I don't think the final chapter -- how about all these analogies. But I don't think the final chapter has been there. So we're still cautious on that.

Let me just end by saying from a supply and demand point of view, just from our leasing, we see absolutely unequivocally no change apart from the retailers that are looking to grow their footprint.

Our next question is from Craig Mailman with Citi.

David, maybe going back to your comments earlier about the value mall, kind of the foot traffic going on there versus your higher-end mall. As you look at '26, I know you guys said you feel very good, but -- and the tenant demand. As 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 the portfolio? Or the inflation over the last couple of years just pushed OCRs to a point where you still feel like you're able to get pretty good upside relative to maybe where you're pushing in the luxury or the higher-end malls?

Yes. Let me just say, traffic for the kind of the value-oriented centers is up. So it's not the traffic. It's just really the conversion.

I think that consumer is being a little more cautious. But I think you pinpointed it. I mean we have low OCRs there. The demand -- again, the retail demand on that portfolio is still very positive. So no change of -- no different point of view. But we do have to be sensitive because the lower-income consumer, which, again, we don't skew to -- even in our outlet centers, they're skewed toward the higher-end retailers, around the higher-end consumers, I should say. So it's not where we skew.

But again, demand is good, and it's not a -- there's really no change of mood or potential there, but it is -- sales are not moving as -- they're not increasing at the rate that the full-price better higher-end centers are. That's it.

So I think that the outlet consumer is being a little more cautious. But let's see what happens this Christmas. I mean you still got things going for the lower-end consumer, lower gas price, hopefully lower electricity prices for the time being until all these data centers get built, and that's another interesting thing we need to talk about as a country. But I think it's -- again, it's -- we're just -- the sales are not hitting like Vegas, like a couple of the border, northern borders thing. We're just not hitting on all cylinders.

And the reason we say that is to show you that there's more juice in the orange, right? Is it orange or lemon? Orange. Lemon sounds good, right. So there's more juice there. It's just we're not getting all of it at this point.

Our next question is from Michael Griffin with Evercore ISI.

I wanted to ask on the new leasing in the quarter. Brian, I think you mentioned it was about 30% of the total leases executed. Is this you all proactively looking to get ahead of leases that might expire in a year or 2 and upgrade the credit quality?

And can you also give us a sense if you're seeing more of those new-to-mall concepts coming in the portfolio? And lastly, anything you can comment on leasing spread for that would be helpful.

Well, I'll just let Brian answer most of it. But I'll say the new-to concept, I mean Meta is opening a store. We're in discussions with them. Google is opening stores. We're in contact with them. Netflix, Eli is going to be opening tomorrow at King of Prussia -- next week. So Netflix is -- I encourage everyone to go check it out. They're opening their flagship destination store at King of Prussia next week. So there's more and more year-end Labubu.

Pop Mart, Edikted, Princess Polly, a bunch of tenants. And what they see is they can open a bunch of stores with us. And so we're having really great conversations in our new business leasing.

So -- and I'll let Brian get to the rest. But -- so the new idea, new experiential stuff, we're doing new Apple stores as well. They opened in Del Amo. That's a good example. We've been working that deal for 5 years or so. So I think it's very encouraging what we're seeing on the new storefront.

We're still doing a lot of new restaurants with high-end operators. So that's going very well. We opened Formula 1 at Forum Shops. One of their second or third operations, 2-level flagship store, a bunch of people there for the opening. It's terrific, saw pictures.

So just on the new concept, the new store front between the restaurants and the Metas of the world, the Netflix, the Googles that are all working on that. I think it's very, very positive, very positive. So lots happening on that front.

And Michael, it's -- the 30% statistic is new leases. So it is not picking up old stuff. What you've got is just the unabated demand for us to continue to add interesting and new uses. We're also seeing big demand from the existing kind of retailer base, and we're slightly out ahead of '26's expirations. And so I think it's coming from a variety of places.

Certainly, on the last several calls, you've heard us talk about improving the merchandising mix. And that 30% statistic is really encapsulating our desire and ability to do that.

So -- and I'll give you a simple example. We have a great mall. I probably shouldn't -- I'm not going to name the tenant, but I'll give you some breadcrumbs. But it's a great mall in 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 -- and this goes to your point, are you -- even if you have a lease, are you satisfied? The answer is no.

So we're taking one tenant that has a lease. We're actually downsizing them, moving them to another space and putting a leading high-end 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 -- which is a good example of even though we had leases on both spaces, we're taking one, downsizing one tenant moving, bringing in another one. And that's what our folks do. That's one of the great things that we see in the TRG portfolio.

And we'll be a lot more aggressive in doing that because you're never -- we should never be satisfied that we've executed the mix at the rate that you've always got to change it. For instance, talk Forum Shops, I think it just recently opened. We had an H&M store there. We replaced it with Zara, beautiful store, big investment that they had, and that changes the whole kind of the center point, they're familiar with the asset, which is truly exciting.

So absolutely, and that's one of the -- like I said, one of the interesting things that we see in the TRG portfolio and then in our assets across the spectrum, whether it's the outlet centers or the full-price malls.

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

Just hoping maybe to talk a little bit about technology. A lot of things in society seem like they're in flux and retail is not excluded there to talk about ChatGPT agents or agentic agents that can do some of the shopping 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 have to assume everything is a risk. So I do think bringing AI into the equation will have a pretty big impact on how e-commerce is done. But we offer something much broader than e-commerce.

If e-commerce was going to put us out of business for the last 20 years and here we are standing. Just to give you an example, I saw Palantir had EBITDA this quarter of like adjusted EBITDA, whatever that means, of $400 million and our EBITDA this quarter was $1.6 billion. So now Palantir's market cap is $500 billion, ours is $65 billion, if you include the units, right, Tom. So that's pretty good math, right?

So again, I do think the people that shop -- the e-commerce shoppers are definitely going to use AI to -- eventually to use AI to replace the way they shop online today. And the key for us is to create like we have for 70 years. Remember, we've been in this business 70 years, okay? Not 5, not 20. But in this -- we have survived. This product has survived 70 years.

And I will tell you, our half-life is greater than the newfangled data centers that are being built today because I think they'll figure out how to do them smaller and more efficient 3 to 5 years from now, okay? And I know nothing, but that's my gut feel. I know nothing, but that's my gut feel.

So going back to your question, so it will have an impact on e-commerce. I think it's going to absolutely continue to make us great at what we do and that we're going to have to create real shopping -- holistic shopping environments.

And another way to look at it is, look, so there's a lot of talk about going to -- and I was at the CEO Summit the other day, which was kind of interesting. But put that aside, there's a lot of talk that people are going to be working 3 days a week. So -- and the potential 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? Lord, I'm going to make work at least 7, 8 days a week. But let's just hypothetically take the point that it's only 3-day a week work, okay, 3 days a week that you work. You're going to have a lot more free time. We've created this great wealth. Our GDP goes from $18 trillion to $25 trillion to $30 trillion. That means money in people's pocket. I think we're going to go to the mall to shop. What else are they going to do, okay? So they can only yell at their kids that much when they play New Soccer.

So they're going to go to the mall to shop, eat, spend their newfound wealth that's going to eat through this economy. Now what we have to do is just create these great environments. And ultimately, we'll use AI like everybody else to enhance our loyalty, to enhance our ShopSimon to enhance our search efforts to connect with the consumer. And we'll talk to ChatGPT and ask them what we've heard or did, whatever, what we could 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 of value and people are going to go the mall to shop because what else are they going to do, okay? Do you see what I'm saying?

Yes. Hopefully. Simon?

So in any event, but we're experimenting how to do it. We are -- we've got a friend called Harvey that we may create the first AI CEO. Now I'm not saying he's going to replace me, but he could replace one of our divisions or elsewhere. So stay tuned. We'll use it effectively like we've used everything else.

Our next question is from Vince Tibone with Green Street Capital.

I wanted to follow up more time on the Taubman cap rate. Just specifically, if you -- look, the way I'm looking at it is just the purchase price is just over $1.5 billion if we use Friday's close for the OP unit value plus incremental debt. And then trailing 12-month NOI is right around $77 million for 12% of Taubman using your supplemental. So that's more like a low 5s cap rate on a trailing 12-month basis. So I mean, is it really that much synergies to get to the second quarter, second half?

Yes, we told you -- we called out -- we told you the numbers. Vince, at this point in our career, 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.

And we told you where the accretion is, and we told you everything there is to tell you about that deal. They've got a lot of growth this year. They've got growth next year. And we told you everything that there is to tell you.

I will tell you, I think your cap rates for our asset base is too high. I think your peers at Green Street have a product that is too low compared to ours. Our growth is better. And the longevity of our asset base, you don't factor in our assets last 70 years.

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

David, good to hear from you. Eli, welcome to the call. My question is on corporate structure. Congrats on the internalization of 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, Klépierre.

Earlier this year, you bought an asset in Italy off balance sheet outside of Klépierre. So I guess I'm curious if you're happy to own more assets outside of Klépierre. But then I also wanted to add, it seemed like recently you opted to convert some of the Klépierre 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 2 dynamics and how you're thinking about the Klépierre platform.

Well, we bought the mall, which has nothing to do with the -- which is a luxury outlet center in the middle of the two. It's actually on balance sheet. It's on balance sheet. Yes. So that has nothing to do with Klépierre.

Klépierre, look, it's been a great investment for us. We evaluate it all the time. We did get some -- as you know, we issued the convert. Did we do it 3 years ago? 2 years ago? 3 years ago. We got conversion notice. We did settle in shares. And we look and evaluate that investment continually, and we'll continue to do that. But it's been a very good investment. We've added a lot of value to that organization.

I think, again, the market should appreciate where Klépierre go back -- let's turn the clock back 10 years ago where Klépierre was and look at where it is today and for our strategic input vision, guidance created the new Klépierre that exists today that's positioned to succeed in European full-price retailer with the best. And that's all -- I mean, again, the management team did a great job, but we hired the management team, okay?

So -- but at the same time, we have a fiduciary duty to continue to add value to Klépierre while we're on the Board, while I were on the Board. At the same time, we have a fiduciary duty to our Simon 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 clarify because I mentioned the asset in Italy you bought because you bought it on balance sheet and not in Klépierre . So I guess I was curious if you were happy owning more assets outside of Klépierre in Europe?

Yes. We would probably -- I'm sorry, if I misunderstood. So we would probably only look to -- we've kind of decided that the full-price -- again, this could always change, right? But we've kind of decided that if there are full-price assets to acquire while we continue to hold our Klépierre investment and stand the Board, that Klépierre would do that.

On the other hand, if it's in the outlet world, because we look at outlets worldwide, we have outlets in Asia, obviously, North America, both in Mexico, Canada, U.S., obviously, several countries in Asia, that we would look at those for our own accounts, the signing accounts. Okay. I'm sorry, I misunderstood your question.

Our next question is from Mike Mueller with JPMorgan.

So Taubman has used a secured debt strategy for the portfolio ever since the '98 restructuring. Do you think you'll be unencumbering a number of those assets over time? And as a follow-up, are there any parts of that portfolio that look like they're sale candidates today?

Michael, it's Brian. 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 capital to unencumbered assets in due course to further improve our unencumbered asset base, which is already incredibly powerful.

As far as the portfolio on balance today, I think we're comfortable where it sits, but we naturally evaluate things frequently. And so that could change over time. But for now, I think we're in a good place.

Our next question is from Ronald Kamdem with Morgan Stanley.

It's Adam on for Ron. I think we had always looked at the dividend sort of post-COVID as I think you guys are sort of targeting getting back to that pre-COVID dividend level. 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 development of -- obviously, of the Class A assets, but also, I think you've talked in recent quarters about some of the Class B or B+ development opportunities or redevelopment opportunities as well. So just sitting here the different options in terms of capital allocation, how do you sort of stack rank those dividend buybacks potentially development, redevelopment, et cetera?

Actually, thank you for -- I forgot we passed our COVID? We did? All right, good. Well done. So look, I think one of the things that you'll probably -- we do have a buyback open, right? Obviously, we can't buy that now. But one of the things you'll see from us most likely, which is not in the numbers, but we issued 5-million-unit shares. So we'll look to quarterize that over -- we're not issued -- we don't -- we have a balance sheet that does not need to issue equity.

So now as part of the deal, Taubman family really wanted units, equity. So I think over time, obviously, subject to market conditions, we'll look to quarterize, i.e., at least want to get our share level back to kind of where it was pre-issuance for the TRG deal. Now that's subject to market conditions. We'll be very smart about it and we do everything else.

But that -- so that has moved up the -- I still think we're going to want to grow our dividend. And obviously, I think I said last time, the development stuff does take time to put the capital to work. We don't move as fast as these data centers that just go up 9 months.

But I think quarterizing that $5 million issuance has moved up to the top of the charts. But that does not mean that the capital redeployment in the portfolio slows down. We're very -- and you're rightly pointing out that we all get in these classifications of A-, B+. We're going to put it where the capital is accretive to that property value.

Now we don't use Green Street cap rates. We use David Simon's cap rates. And over my career, I've been more right than wrong. So we could do a ChatGPT pull of who's got the better cap rates. I'm going to go with David for the time being, but I've been proven wrong. So 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, we bought out Seritage at Boca, which is a huge, massive thing to a great center, which should be a 4.5% cap rate. But don't worry, we're not going to -- our development yield is going to be greater than that, much greater than that. But we've got Fashion Valley. We've got Boca. We've got Barton Creek. These are just 2 or 3 that are popping.

Later in the week, the team will be announcing a really landmark deal in Nashville at a great site in a great city that we have a very important presence in now, complemented by the TRG assets that we now have full operational control with, which is a very good asset in Opry Mills as an example, which is a very good mill and a distinct trade area.

So that will be our new ground-up development that we're really excited about. So it's pretty much status quo other than we're going to be moving up the -- I don't want another 5 million shares outstanding. Okay? We're going to run a little bit over. We got 2 more questions.

Our next question is from Floris Dijkum with Ladenburg Thalmann.

I know we're running late. David, great to hear your voice. Eli, again, I'll not be the first one to welcome you, but good to have you on the call as well.

And David, I love your passion. Question for you. I'll try to keep it relatively short here, but your S&O pipeline, could you talk about that? And I note that Kering has dropped out of your top 10 tenants list. Presumably, they haven't closed any stores. Is that just you haven't signed new leases or they haven't opened new stores in the portfolio? And maybe talk a little bit about in that S&O, how your luxury is trending or how you expect that to trend maybe?

Floris, it's Brian. So the S&O pipeline is 310 basis points as of 9/30. And you're right, Kering did drop out of the top 10. It's just simply because we opened up more stores with other retailers and forced them above the Kering ranking. So it's really a reflection of the robust activity that's on the ground from a leasing perspective.

Kering is still a very important tenant. And 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 basis points. So the luxury cohort of tenants continues to favor our portfolio and continue to see growth with us.

And again, we've got -- we're -- our occupancy is pretty high, but we're -- a lot of this new stuff is re-tenancy. And obviously, Forever 21, is having -- re-leasing all that space is having an impact on the S&O, right?

Our final question is from Tayo Okusanya with Deutsche Bank.

Eli, congratulations. Welcome aboard. In regards to OPI, just curious what you guys are -- how you're thinking about that business again, is a little bit more value-oriented. I'm just kind of curious if there's opportunities to kind of monetize that? Or is just the world too murky right now to really have an opportunity?

Well, we'll see how that transpires. But I will compliment the team at Catalyst. They're doing really terrific work at a number of the brands, not all -- some of the brands are -- again, it's not perfect sailing, but they're doing a great job at JCPenney, great job at Aeropostale, a great job at Brooks Brothers, a really good job at Lucky.

So we've been very pleased with how Catalyst has integrated with the various brands. That merger is really -- this is the first 9 months. If you go back, it really happened in early '25. So they're doing a terrific job. It's stable, good results. Obviously, out of Forever 21, which was as much as we tried to say that we couldn't primarily because of the de minimis, now that -- we would have a fighting chance had we not suffered from the de minimis, but we couldn't overcome that. Now thankfully, it's changed and at least it puts domestic retailers on an even footing with certain foreign retailers.

So long story short, Catalyst is doing a terrific job. And like everything else, look, if I would say we'll always look at what the best options are. But for the time being, it's in good stead.

And again, they skew toward -- a few of the brands skew towards the lower income. And I will say this, the lower income and the higher income as well is they're looking for value. So value can be -- value is in the eye of the beholder, but you got to give the consumer today value, whether they're a high-income consumer or a lower income consumer, value is the name of the game. And I think Catalyst has recognized that and are providing it at a high end like the Brooks Brothers and at the kind of the more moderate Aero and Penney. So it's all good.

There are no further questions. I would like to turn the conference over to David Simon for closing remarks.

Okay. We had a very active quarter. We're going to have a very active fourth quarter. So more good stuff to come. And 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.

I'll go ahead and get started here. Thank you for joining us. Very happy to have Simon Property Group here. Welcome to the roundtable with the company. Happy to have Eli Simon here, who's the COO of the company; and Brian McDade, CFO.

So Eli, maybe to start off with you, maybe I'll turn it over to you with some opening remarks that you can provide. When I look across the room here, there are people here who aren't familiar with Simon Property Group and from a journalist perspective. So maybe talk a little bit about the company.

Yes. Sure. Thank you, Samir, and it's great to be here with everyone today.

So quickly overview of Simon Property Group. So we have been a public company since 1993. We're a member of the S&P 100, and we're the largest owner of retail real estate globally. Our business today, we have interest in over 250 properties, 212 domestic, 42 internationally. About 90% of our NOI is from our domestic portfolio, which spans 37 states and the remaining 10% from our international portfolio, which is primarily in Europe and Asia, but also includes Canada and Mexico.

Our U.S. business, our domestic business, spans the spectrum from full-price malls to the value-oriented centers in our premium outlets in our mills portfolio. We generate over $4.5 billion in funds from operation annually and pay over $3 billion in dividends each year and today have a dividend yield of about 4.5%.

As a public company, we paid over $47 billion in dividends to date. We take a very long-term view of our business, very focused on disciplined investments and operational excellence in order to increase cash flow growth, funds from operation and our dividend while continuously improving our properties and our portfolio as well as the company overall. This long-term view and this focused approach has allowed us to generate industry-leading returns, and we've generated over 4,300% total shareholder return since we went public in 1993.

So I guess, Brian, I'll turn it over to you for a little bit more about the most previous quarter.

Thank you, and good afternoon, everybody. Good to be with you today.

About 30 days ago now in August, we reported second quarter real estate FFO of about $3.05 per share. Our Q2 results were driven by strong fundamental performance, including occupancy gains, increasing shopper traffic and higher retail sales volumes.

Our domestic property NOI grew 4.2% in the quarter and has grown 3.8% for the first half of the year. Our portfolio NOI, which includes our international investments at a constant currency, grew 4.7% for the quarter and 4.2% for the first half of the year. Occupancy in our Malls and our Premium Outlets was 96% at the end of June, and our reported retailer sales per square foot was $736 on a trailing 12-month basis ending June 30. We continue to see robust opportunities to deploy our significant free cash flow. Work continues on major redevelopment and expansion projects across the globe.

Importantly, we opened a new Premium Outlets in Jakarta, Indonesia earlier this year. We are the one company or one of the companies in the world that can build in Jakarta and domestically all at the same time. This is a key strategic advantage of our growth. Our balance sheet continues to be a differentiator for us and it's one of the strongest in the industry, if not the strongest, providing unmatched operating and financial flexibility to fund our business. This positions us with free cash flow and allows us to create long-term shareholder value by reinvesting in our assets at an accretive yield.

We are bullish about what we've done so far this year and what's coming on the balance of the year and heading into next year. So we are well positioned to continue as a company, very comfortable with where we sit, and we are building momentum throughout the year. So with that, we can certainly open it up to questions, both from the BofA team, but obviously, everybody in the room, feel free to ask questions along the way.

Thank you, Brian, for that.

Eli, just maybe starting off with you. You certainly were promoted to the COO role recently from the CIO role. As CIO, you worked on the Taubman acquisition, also the luxury outlet transactions earlier in the year.

How has that transition been in terms of moving to the COO role? And I know it's only been a month here, but kind of talk to us about kind of the areas you're focused in? Let's call it, the next 3 to 6 months.

Sure. So I would say the promotion, I guess, right, I don't know what it was a few months ago or so. I'm doing what I've been doing, frankly, for a decent bit of time now. So I'd say today, I'd probably split half my time, I'd say on capital allocation. So whether that's new investments, new developments, redevelopments, our mixed-use portfolio, renovations, larger tenant capital situations.

And the other half of the business or other half of my time really on our operations with a particular focus on, I'll say, is our media at large business. So that includes our marketing team, our innovation team, our data analytics team, our Simon Brand Ventures team, which is where we monetize our footfall throughout our domestic centers.

And so in those -- in that bucket, I would say, the thing that we're most focused on over the next really shorter than 3 months in the next couple of weeks, is really launching our loyalty program. So we're in beta right now on Simon+, which is we think is going to be the industry standard for an omnichannel or omni approach to a loyalty program to allow customers to earn points in-store and online on our marketplace shopsimon.com and then be able to burn those points either online or in-store, which we think is going to be a real differentiator from a retailer perspective to want to sign up, want to have their products and some of their awards on our loyalty program.

We're continuing to invest in our data business and our digital business. We have Simon Search which allows you to search real-time inventory from your home to know what's in store today. And the next step in that evolution is to link fulfillment from that. So now that you can go -- be at home, see that, that black dress you want is in store and have the ability to either order it or go to the mall and know it's going to be at the store and pick it up. And so we're continuously investing in that. I have a lot of really innovative ideas and that's going to roll out over the next several months and into next year.

That's great. And just maybe taking a step back here, maybe about the macro and the consumer. A lot of questions about the consumer. Will they continue to spend given, sort of, the tariffs and the spending pressures? Talk to us kind of what you're seeing across the 3 platforms. Are you seeing any differences in spending by the consumer or retailer demand for space at this time?

So on the consumer front, the consumer remains very resilient. Back-to-school is very strong. I live in New York, so I have a little New York bias. But in Indiana and the Midwest, back-to-school starts in July. And if you look at the results that we've seen both in terms of retailer sales and traffic in July in sort of what I call the mainstream centers like a Woodfield in Chicago or Greenwood, Castleton, very strong results, which is really encouraging.

And so we see continued strong retailer demand that's unabated. It's across all our platforms. People know that physical retail is where the consumer wants to be and that our properties are excellent locations for them to continue to open stores.

In the consumer side, I think as we said on our last earnings call, not hitting at all cylinders with really kind of the one exception being our border properties. So we have fantastic properties, both Malls on the Premium Outlet side, on the Canadian border and on the southern border that have been historically our best assets or some of our best assets in terms of traffic growth and sales growth, which has obviously pulled back a little, but still long-term great assets.

And then a couple of the international markets -- international tourism markets have been a touch softer. But even if you look at Vegas, that was in July was down 12%. Our sales were actually up a little bit. So not the normal incredibly robust sales growth from that market, but still definitely getting more than our fair share overall, which is an encouraging sign so far.

By the way, I want to keep this interactive. So if there's any questions, just...

Just to confirm. Say, that's across all 3 platforms, what about regions, and then within the mall or even outlets like between your most dominant to, let's say, least dominant. Any differences to...

Yes. I'd say, regionally, again, besides the border, right, Southern California, Arizona, so maybe not just on the border, but as you go a little bit further north in those 2 states, a little bit softer. But otherwise, again, the middle markets, the middle centers, very, very strong. And the malls definitely outperformed, the outlets in the mills in the last little bit.

But if you kind of normalize the outlet, just happened to be more weighted towards some of the international tourism. And so if you normalize that out, it's much closer. But really resilient consumer across the board and a good back-to-school is what we're hearing kind of across the board.

And I mean on the consumer, if you think about the business, we over-index to the higher-end consumer and that higher-end consumer is really driven by asset values, the exposure to the stock market, what's happening there. That drives their purchasing decisions, and we're still seeing really good uptake from the higher in consumer in the business -- in our business.

It seems as if [indiscernible] the capital allocation [indiscernible] international markets [indiscernible] is that something we should expect?

I think the answer is yes, and I'll have Eli opine upon this. But we've been an international business for a long time. As you look at opportunities to acquire high-quality retail assets whether that's domestically or abroad, it's going to be an area of focus for us. So right now, it's more about the opportunity set. Jakarta was ground-up development versus the acquisition of the 2 assets in Italy. So a little bit different there.

I would expect us absolutely to continue to invest in ground up development in the outlet space globally. And I would expect us to continue to evaluate opportunities to add high-quality retail real estate from an acquisition perspective.

Yes, I think that's right. I think sort of the law of large numbers, right, we're a 90-10 today, it's going to be hard to move that materially that 10% international and materially above that. But as Brian said, we're always evaluating opportunities and we look at what's the best risk-adjusted return. And it's not a, we're only going to do international, we're only going to do domestic, we're only going to buy, we're only going to develop or redevelop. We can do all when we think is good risk-adjusted returns, then we'll do it.

How much outlet opportunity is there in the U.S. right now domestically, you think?

For new development?

Yes.

I would say -- funny, we had a capital committee meeting 2 weeks ago. And there were a couple of opportunities presented early stages that we were evaluating. I would say one was more interesting than another. So it's onesies and twosies. There's not a lot, we had announced or have announced right in Nashville.

I'd say more to come, but that site might almost be too good for an outlet based on the retailer demand we're hearing. And so we'll still continue to evaluate opportunities. We have a team that looks at it, both here, Canada and Mexico, throughout Asia, Southeast Asia and Europe. So we'll continue to evaluate, but it's not a tremendous number of markets that really are lacking today.

I know, Brian, you talked about the leasing environment being robust. It's strong. Had you -- I mean, talk to us kind of -- I know you guys are all focused on deal review meetings that you said on.

Like, talk to us kind of how is that conversation in these deal review meetings? And how much of sort of '26 expirations have you taken care of at this point or rather addressed?

Yes. We're about 25% through our expirations for next year which is ahead of where we would have been last year. I think that's a function of retailers' desires to continue to secure high-quality locations, which is really the driving force of our leasing environment.

When we -- the ability for us to put together a high-quality real estate with our capital position really is a differentiator for us. And honestly, the retail backdrop and the leasing environment is as robust and unabated as it's been in the last 18 to 24 months.

Retailers are still looking to secure the very best locations. There's nothing new being built that we just discussed. And if anything, supplies leaving the system, given creative destruction, assets that are over-levered or finally being foreclosed upon and being revitalized into other things, but that's taking supply out of the market.

So retailers as they're looking to grow their business in the U.S. have a shrinking pool of opportunities. And so they're looking to secure those opportunities over long periods of time. And so our leasing environment is as good as it's been in a really long time. That's a function of the quality of our assets and the ability to put capital back into them. And it's broad-based across a variety of categories of retailers from food and beverage and entertainment uses, which are really proliferating at our mall assets and our full-price assets, to the athleisure categories, which you continue to see expansion with new entrants into that category.

So 10 years ago, it was lululemon, now there's an incredibly deep roster of high-quality companies that are looking to access our type of space. So the environment is robust as it's been. And thankfully, we're in a position to meet that demand kind of where it is.

So even if sort of you hear about luxury pulling back in terms of demand for space, you have all these other categories sort of pretty active, right? Is that...

Absolutely. And I would say that candidly, luxury isn't materially pulling back at least that we're not experiencing that.

Certainly, they've had more volatilities in their sales. And there's certainly individual brands that are going through their own respective challenges. But as a whole, I think the luxury category continues to grow and is looking to secure space in our assets over long-term periods of time.

Just a question on your initiative with Simon+ and Simon Search. So the Simon+ is aimed [indiscernible].

Can you talk a bit more about what that investment is from the retailer's perspective. [indiscernible] are you seeing that translate into higher retail sales? Can you quantify?

Sure. So I guess first Simon+ is a week or 2 in beta. So we haven't really seen results, but I would say what is interesting from the retailer's perspective is today, speaking as a landlord of Simon, we know that somebody went to Apple and somebody went to Abercrombie, but we don't know if you went to Apple and then Abercrombie. And so now we're going to be able to know that you went to this store and you went to that store, and that's real data and real analytics that we're going to be able to share with our retailers to help get them excited to help them improve their sales as well.

And so from our perspective, our focus is really on marketing, on getting the customer acquisition in the loyalty program, which we're really launching kind of on center literally in the next week or 2.

And then from a retailer's perspective, it's what exciting rewards can you have on our platform. And so there's a lot of opportunity there, whether it's spend $100 get 10% off, but it could be a bag tag. It can be a free pretzel, right? There's a lot of opportunities to engage with our customer. And we're hoping that this is a really robust ecosystem where retailers will want to put their best foot forward because they know that we have a qualified customer, right?

When somebody comes to the mall and they're buying, they know that they're going to come back to that mall and they're going to buy it again. And so we think that's a pretty compelling story. And we have, I don't only, [indiscernible], but 500-some-odd rewards already, and we're in beta. And so once retailers see and once customers go and say, well, why don't you have a reward on Simon+ XYZ retailer, we think there's going to be more and more of that sign up as we really go live.

On Simon Search, it's been really interesting. We get 10 million to 12 million searches a month on there. And from a retailer's perspective, it's -- we think, again, it's hard to quantify, but we think it generates incremental business because if I know that, that black dress is there in store, in my size, and I don't have time to order it online or sold out online, I'm going to go, right? And so we think that's pretty interesting. From our perspective, we get very interesting insight from that.

So if you look this was in February, and I was kind of looking at the top searches and the 3 top searches on Simon Search were dresses. Okay, Pretty generic phrase. Jeans, also generic. And Labubus, right? And so -- this was as before, right, the Labubu craze was taking over and now we have 30-some-odd deals that we're working on with pop mart.

And so we actually are generating real insights from this, understanding what our customers are searching for. And we think that overall helps our retailers because it gets repeat visits and it's better for our consumer.

Investment is by marginal [indiscernible].

Yes. I mean, yes, very, very marginal.

[indiscernible] How do they provide that [indiscernible]?

So we -- so it's a pretty easy API that it takes a couple of weeks, and we get their live feed, and we have, I don't know, upwards of 100 retailers today. And there's nobody else that has that. So if you're a retailer and if you're considering 2 locations, the access to Simon+, the access to the Simon Search, not to mention we have the balance sheet to put money into our centers, continue to reinvest in our centers, make sure that they have the best newest food and beverage offerings, the most innovative retailers that's a competitive advantage that we use when we go and try to get tenants to come into our centers.

It allows us to drive performance of those tenants at the end of the day, right? And it allows us visibility to the pop mart was a great example where we -- because of our infrastructure, our digital infrastructure now, we identified a trend within the -- from the consumer level and we can meet that from a leasing perspective by working with the retailer to kind of open up to stores.

So really, we're getting it from a variety of perspectives, and it's really giving us a new aperture on how we can run the business.

Is it already [indiscernible] growth?

So our current database is around $20 million on the -- what I'd call the old, the original and which, for lack of a better word, was a glorified coupon book, right? And so now it's -- we're hoping to have a real significant number and have tons of commerce flowing through there. And obviously, as that happens, we're just going to learn more and have more opportunities to serve our customers better.

[indiscernible] with the level of data you have or you need more scale in dominant centers?

Yes. I mean again, it's been a week or 2, right? So -- but yes, I think in the last July. So I guess, a little over a year ago, we kind of saw the road map of Simon+, we actually really decided we're going to really invest in the data. So we hired our first true data analytics person to run that group and kind of starting to build that out, knowing that Simon+ was on the road map into '25 and into '26. So it's something that we think is going to be pretty significant for us and for our retailers in the coming years.

So just getting started. We built the infrastructure for it. And so now as we collect the data, we're going to be able to capture that, Jeff. So yes, data is the new currency in the world that we live in and everybody is looking to monetize it or you have more of it. I think we've built out the digital infrastructure to support the business going forward.

Brian, just turning to maybe operations. I mean, you've done a good job on the occupancy front, right? I mean it feels like a lot of demand there. Help us understand in terms of occupancy, how to think about that maybe across your platforms over the next 12 to 18 months, how much room there is to push here?

Sure. Look, I think if you look at the mall and premium outlet business, roughly 96% last quarter. The previous high was 97%, which was a 2014 number. It's going to take a little bit, but we think the facts on the ground would lead to that there is the potential to exceed our all-time high, certainly in the outlets in the mall business. When you pivot to mills, mills was 99% occupied, effectively fully occupied.

So that portfolio has done incredibly well. And -- lastly is the Taubman portfolio, which was roughly 93%, which was down a touch, they were replacing some Forever 21 stores. So we would expect that to snap back closer to 95% by the end of the year. So there is opportunity to drive occupancy.

You've also heard us talk about the merchandising mix, which is important, which is really taking lower productive tenants and replacing them with higher productive tenants in the world we're living in today.

And so we may churn some occupancy. So you may not see big increases in occupancy, but we're doing so with better productive tenants that ultimately, over time, will be more economically viable for us.

Right. And it feels like we're in a great environment here for the mall business, right, in terms of activity and leasing that we're seeing. I mean, this year, you had Forever 21, Claire's. I mean, what do we -- how do you think about sort of that watch list in the next year? Is there anything that...

So those were certainly the 2 that we're on at the beginning of the year. We've not added throughout the year, which is relative to the kind of the fundamentals that we're seeing in the business. Traditionally, look holiday season is the make or break. And so we traditionally rerank our tenants, call it February after you have final results for the year and the holiday season.

But as of where we sit today, we don't see any new risks emerging in a meaningful way. I actually think that the Forever 21 and the Claire's situation is really fundamentally, we absorbed 1.8 million square feet of bankruptcy from those 2 entities in the second quarter and still increased occupancy 10 basis points. So I mean, that dynamic on the ground is probably underappreciated in that respect.

And increase rent significantly.

Right. And how is -- I'm not sure how much data you have sort of back-to-school and I mean holiday, like how are you thinking about inventories into the holiday season? And what are you hearing from retailers?

So far, as Eli said, the back-to-school holiday season, depending on where you are geographically starts in July and kind of ends in September. In those early return states, if you would, the Midwest, Indiana we have seen outperformance from back-to-school, both in sales and in traffic. And if you listen to some of the retailers that have reported in here in the last couple of weeks, I think they're reporting something similar.

The consumer is engaged the consumer is buying. It may be more discerning than it has been in the past, but they are still spending. Certainly, event-based things. So back-to-school holiday is an important part. And then the upper end consumer continues to spend given the value of their assets continues to go higher.

On the inventory front, we're not hearing anything. Retailers are planning for a normalized inventory and for a good productive holiday season.

In terms of the balance sheet, talk to us kind of as we think -- again, as we think about next year, some of the maturities coming up and are you planning for those maturities given kind of the interest rate environment here?

So it's a great question. We were just active here in the last 3 weeks in the unsecured debt markets. We raised $1 billion at a blended rate of 4.7% between 5- and 10-year money. So the unsecured side is incredibly wide open. Spreads, quite honestly, are as tight as they've been. We issued an [ 89 ] over in our 10-year. The only other time we priced tighter was in [ '96 at 82 ] over. So spreads are incredibly tight on the unsecured perspective.

But certainly, we're pricing off a much higher base rate than when we -- our existing debt is rolling from. So as you look at next year against that, we've got unsecured debt that's rolling in the context of 3.5%, and we just reprinted at 4.7%.

So there is definitely interest rate headwinds. Last year, we talked about those being between $0.25 and $0.30 on the year. I would expect a similar order of magnitude for next year as you just kind of look at what's rolling in the rate differential. But the markets are certainly wide open. We have access on the unsecured side, certainly domestically, but also to the euro and the yen market. We've not issued in yen historically, but have in euro and would expect that we could access some of those markets certainly next year or balance of this year into next year with some of our maturities.

And then on the secured side, it's kind of all over the place to some degree. The CMBS market is open, both the conduit and the SASB market, so bigger loans and the SASB are pricing incredibly well. Earlier this year, we refinanced Houston Galleria at a sub-50% LTV with a spread in the low 100s, and so that's got a 5.5% handle coupon on it. it was a 3.5%, right?

So at the end of the day, interest rates are going higher, and we'll be a bit of a headwind. Again, next year relative to -- similar to what we saw this year is what I would say.

But maybe talk a little bit about external growth, right, given sort of the current cost of debt, I mean even sort of the transaction environment, I guess what -- talk about potential property acquisitions that potentially could look interesting. And maybe generally talk about what does that transaction market look like for A malls today?

Yes. So on the transaction market, we have, I think, a relatively simple philosophy when we evaluate where we're going to buy, okay?

So first off, it has to be really good real estate that we think improves the franchise value. Two, is we think that there's going to be an ability for our operations teams, our leasing teams, et cetera, to improve it. And three is at the right price. A price that we think we can make money on the long run. We're not -- we don't have to buy to buy for buying stake. We're going to buy for compelling opportunities that meet those criteria.

If you look at the 2 larger acquisitions that we did over the past 9 months, the 2 mall luxury outlets in Italy and Brickell, both met those criteria and very excited about those and both -- I guess, all 3 of those assets, they're growth prospects.

So on the overall transaction environment, do I think there's going to be a flooding of Class A malls trading? Probably not. But if there are opportunities, we will evaluate and if they meet our criteria, we think we can make a good return on it, then we have the ability to be active. And if not, we have plenty to do with our existing portfolio. But we're going to keep on doing what we're doing with our existing portfolio. And if we see opportunities we'll be able to participate, but it's not a do one or the other, we're going to do both to the extent that the math and the returns make sense.

Are the return rationals [indiscernible] accretive year 1...

Yes. I mean I think generally speaking, yes, accretive year 1. And at the end of the day, we want to increase NAV over the long term. Obviously, on a development that's -- you're hoping that you're building to a spread outside of what the cap rate is, that's pretty -- that math is pretty easy.

On an acquisition, either it's on the buy side, the purchase price is such that there's embedded NAV growth or as we think we can really improve cash flow, combined with the good purchase, get you the NAV growth.

But that's really -- that's really how we think about it. I'd say if you look historically over 32 years as a public company, we've kind of bought or done transactions at 125 to 150 basis points. Outside of our 10-year cost of capital or 10-year debt financing costs, generally speaking, some higher, some lower. So that's somewhat of a rule of thumb. But really, it's asset-specific, deal specific, and it's got to make economic sense. We don't need scale just for scale's sake.

[indiscernible] in the last year or so, are you seeing more...

I would say you definitely have seen more activity on the strip center, quasi lifestyle center space, there's definitely been some activity we've looked at and participate in for a variety of reasons. In the sort of the more traditional Class A malls space, whether it's a willing seller or it's at a price that doesn't make sense, there clearly hasn't been as much robust activity in that space.

But obviously, it takes 2 to tango for transactions to occur.

And I would just say that usually, you've seen a lot of smaller transactions, the stuff in the $100 million to $300 million kind of ZIP code of stuff. Usually, that's what builds into bigger things, right? You see some more activity, more clearing prices at those kind of assets and levels, which usually unlock opportunities kind of for the larger assets.

Talk a little bit more about the decision to invest again in your malls.

Yes. I think it goes -- it's a couple of things. One is our B malls are other people's A malls, right? So we don't view it that way, right? We view it as different malls have different places in different communities. And I think we've mentioned, right, the Smith Haven example, that's a dominant mall on the eastern part of Long Island.

You can call it an A mall, B mall, you can call it whatever you want, but it's growing. That catchment area is growing, super good demographics, and we can invest incrementally at really attractive returns, adding top-tier retailers. And so when those situations line up, we're going to do it. you can look at Tacoma.

Again, call it A mall, call it B mall, you call it a very good mall with a great location, and we're adding some restaurants outside that will open in a month or 2, because we thought it was really interesting risk-adjusted returns. It benefits the rest of the property, and we believe in that asset in the long term. So we don't look at A, B, C, whatever, we look at where can we invest and make money and have good returns.

And I think importantly, the driver of this investment is the tenant community, right? They want to be there. They wanted to be there. They wanted a store there. So we -- it unlocks the opportunity for us to invest. I mean this isn't a spec investment in our part. We're doing it with the demand in the marketplace. And so there is demand from those retailers for those B assets, if you would.

We -- this is more of a pet peeve for me, but As and Bs and Cs. We grade those assets based upon relativeness to other assets, not relative to their markets. So a $450 foot asset may be the best market in that asset. It may be an A, but it looks different than shops at crystals in form. The relativeness I think, is lost in the gradient there. And so it is -- that is an important asset for us. The retail community was the driving force of our investment, and we were in the position to have the capital to invest which is also very important, right? The tenant community is coming to us because of our capital position to grow with us.

I mean you guys generated a lot of cash flow annually. Like when you think about that use of cash? I mean is that -- what are the priorities as you kind of rank them?

So just kind of level set, right? In a given year, we're going to generate after our dividend about $1.5 billion of cash flow. Certainly, the redeployment of that capital back into our assets is first and foremost priority, making them better. And so any given year, you're going to see $1 billion to $1.5 billion of committed development spend. Now their 24-month project. So half of that goes out the door in any given year from a cash perspective.

So $1.5 billion of free cash flow, $750 million of it funds our redevelopment program, which are yielding roughly 9% unlevered yields. And so making our -- growing our dividend, returning capital to shareholders investing in our core business, but accretively.

And then we have other opportunities, acquisitions, certainly, we can delever the balance sheet, if necessary, just given not facing higher interest rates. The balance sheet is in a great place. We're approaching 5x net debt to EBITDA and may actually crest over that by the end of the year given the EBITDA growth and no need to they seek external funding or capital to drive our business because we're using internally generated funds.

And so as we rank order kind of capital priorities, it's -- again, it's an [ end ] conversation for us. It's not in [indiscernible]. We're not doing acquisitions or reinvesting in our business, we're doing both simultaneously.

Any questions? Okay. So I have to ask the rapid fire questions.

All right.

All right. So number one, when the Fed starts to cut rates, the short end how do you think the borrowing rates will react? Number one, decline stay flat or potentially rise?

I guess if the Fed cut and raise they, by definition, have to fall borrowing rates at least in the front end I think overall, though, long end rates will stay probably pretty anchored on where they are today.

The 10-year...

10 years probably anchored more on growth and inflation expectations versus what the Fed is traditionally doing or at least historically, that's how the economic model worked. So I would say kind of no change in long-term rates relative to what the Fed is doing.

Okay. Number two, majority of companies last year talked about ramping up spending on AI initiatives. So how would you characterize your plans over the next year higher, flat or lower?

From a spending perspective? We'll spend a little bit more next year than we did this year, for sure. We're kind of filling our way through it like so many organizations and industries are. But it's clear that there is opportunity by using AI to drive cost structure changes and/or greater productivity from our human capital assets.

Okay. Number three, same-store NOI growth next year. Higher, lower or same for the industry?

I would say higher.

Thank you very much.

Thank you.