Simon Property Group Q1 2025 Earnings Report

Simon Property Group EPS Results

• Actual EPS: $2.95
• Consensus EPS: $2.91
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: $3.56

Simon Property Group Revenue Results

• Actual Revenue: $1.47 billion
• Expected Revenue: $1.34 billion
• Beat/Miss: Beat by +$131.63 million
• YoY Revenue Growth: +2.10%

Simon Property Group Announcement Details

• Quarter: Q1 2025
• Date: 5/12/2025
• Time: After Market Closes
• Conference Call Date: Monday, May 12, 2025
• Conference Call Time: 5:00PM ET

Simon Property Group (NYSE:SPG) (NYSE:SPG) is a self-administered and self-managed real estate investment trust (REIT). Simon Property Group, L.P., or the Operating Partnership, is our majority-owned partnership subsidiary that owns all of our real estate properties and other assets. In this package, the terms Simon, we, our, or the Company refer to Simon Property Group, Inc., the Operating Partnership, and its subsidiaries. We own, develop and manage premier shopping, dining, entertainment and mixed-use destinations, which consist primarily of malls, Premium Outlets, The Mills, and International Properties. At June 30, 2024, we owned or had an interest in 230 properties comprising 183 million square feet in North America, Asia and Europe. We also owned an 84% interest in The Taubman Realty Group, or TRG, which owns 22 regional, super-regional, and outlet malls in the U.S. and Asia. Additionally, at June 30, 2024, we had a 22.4% ownership interest in Klépierre, a publicly traded, Paris-based real estate company, which owns shopping centers in 14 European countries.

Simon Property Group Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Greetings, and welcome to the Simon Property Group First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to introduce Tom Ward, Senior Vice President, Investor Relations.

[Thomas Ward, SVP - IR at Simon Property Group]

Thank you, Joe, and thank you for joining us this evening. Presenting on today's call are David Simon, Chairman, Chief Executive Officer and President and Brian McDade, Chief Financial Officer. A quick reminder that statements made during this call may be deemed forward looking statements within the meaning of the Safe Harbor of the Private Securities Litigation Reform Act of 1995 and actual results may differ materially due to a variety of risks, uncertainties and other factors. We refer you to today's press release and our SEC filings for a detailed discussion of the risk factors relating to those forward looking statements. Please note that this call includes information that may be accurate only as of today's date.

[Thomas Ward, SVP - IR at Simon Property Group]

Reconciliations of non GAAP financial measures to the most directly comparable GAAP measures are included in the press release and the supplemental information in today's Form eight ks 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 one hour. For those who would like to participate in the question and answer session, we ask that you please respect the request to limit yourself to one question. I'm pleased to introduce David Simon.

[David Simon, Chairman, CEO & President at Simon Property Group]

Thank you, Tom. Good evening, everyone. We're off to a good start for 2025 with results that exceeded our plan. We completed the acquisition of the mall luxury outlets in Florence and San Remo, Italy and opened our first outlet in Jakarta, Indonesia. We continue to enhance our retail real estate platform through development, redevelopment and acquisitions.

[David Simon, Chairman, CEO & President at Simon Property Group]

Our A rated fortress balance sheet with over $10,000,000,000 in liquidity sets us apart. And we have the lengthy track record of adapting our capital allocation and operating strategy to confront and take advantage of diverse macroeconomic cycles. And now I'm going to turn it over to Brian, who will cover our first quarter results, and we'll take it from there.

[Brian McDade, Executive VP & CFO at Simon Property Group]

Thank you, David, and good evening. Real estate FFO was $2.95 per share in the first quarter compared to $2.91 in the prior year.

[Brian McDade, Executive VP & CFO at Simon Property Group]

Domestic and international operations had a very good quarter and contributed $0.14 of growth, driven by a 5% increase in lease income. As anticipated, interest income, land sales and lease settlements were $0.10 lower year over year. We signed 1,300 leases for more than 5,100,000 square feet in the quarter. Approximately 25% of leasing activity for the quarter were new deals and approximately 80% of the leases expiring through 2025 are complete ahead of last year at this point in time. Balls and premium outlet occupancy at the end of the quarter was 95.9%, an increase of 40 basis points compared to the prior year.

[Brian McDade, Executive VP & CFO at Simon Property Group]

The mills occupancy was 98.4%, an increase of 70 basis points compared to the prior year. Average base minimum rents for the malls and outlets increased 2.4% year over year, and the mills increased 3.9%. Mall and premium outlet retailer sales per square foot was $7.33 per foot for the quarter. Occupancy costs at the end of the quarter was 13.1%, driving domestic NOI, which increased 3.4% year over year for the quarter and portfolio NOI, which includes our international properties at constant currency, grew 3.6% for the quarter. First quarter funds from operation were $1,000,000,000 or $2.67 per share compared to $1,330,000,000 or $3.56 per share last year.

[Brian McDade, Executive VP & CFO at Simon Property Group]

As a reminder, the prior year results include $0.81 per share in after tax net gains, primarily from the sale of the company's remaining ownership interest in ABG. First quarter results include a $0.17 per share loss, primarily from the noncash unrealized mark to market and fair value adjustments on the Clay Pier exchangeable bond. This is offset by a $07 gain on the sale of securities. The non cash loss on the derivative is due to the outperformance of Claypierre stock price, which increased 11% in the first quarter. The first quarter also includes an after tax loss of $05 per share related to Catalyst Brands restructuring costs.

[Brian McDade, Executive VP & CFO at Simon Property Group]

Turning to our development activities. At the end of the quarter, development projects were underway across all platforms with our share of the net cost of $944,000,000 to an blended yield of 9%. Approximately 40% of net costs are mixed use projects. We expect to begin construction on additional projects in the coming months, including a residential development at Bray Mall and new retail dining and outdoor spaces at the shops at Mission Viejo, both in Orange County, California, as well as the redevelopment of a former department store at the Fashion Mall in Keystone in Indianapolis into dynamic mixed juices. Starts for this year will be approximately $500,000,000 Turning to the balance sheet.

[Brian McDade, Executive VP & CFO at Simon Property Group]

We were active in the first quarter, where we completed 12 secondured loan transactions totaling approximately US2.6 billion dollars The weighted average interest rate on these loans was 5.73%. At the end of the quarter, we had net debt to EBITDA of 5.2 times and our fixed charge coverage ratio was incredibly strong at 4.6 times. And as David mentioned earlier, we are well positioned to allocate capital and be opportunistic various economic cycles. Turning to the dividends. Today, we announced our dividend of $2.1 per share for the second quarter, a year over year increase of $0.10 or 5%.

[Brian McDade, Executive VP & CFO at Simon Property Group]

The dividend is payable on June 30. Turning to guidance for 2025. We are reaffirming our full year 2025 real estate FFO guidance range of $12.4 to $12.65 per share. As we stated in February, when issuing our initial full year 2025 guidance, our range reflects real estate FFO and does not include OPI. We expect the results to trend towards the middle of the range given the current macroeconomic and tariff uncertainty potentially impacting retailer sales.

[Brian McDade, Executive VP & CFO at Simon Property Group]

With that, thank you to everyone. David and I are available for your questions.

[Operator]

Thank you. And the first question comes from the line of Steve Sakwa with Evercore ISI. Please proceed.

[Steve Sakwa, Analyst at Evercore]

Yes. Thanks. Good evening, David and Brian. I guess, know the tariff situation has certainly been de escalated, but I'm just curious what sort of conversations you are maybe having with retailers kind of leading up to today's announcement? And how do you think it impacts, if at all, the leasing?

[Steve Sakwa, Analyst at Evercore]

And I guess, Brian, you sort of talked about sales, but I guess what are you baking in for sales today maybe versus three months ago?

[David Simon, Chairman, CEO & President at Simon Property Group]

Yeah. Hi, Steve. So let me take that and Brian can add color. So just on the new lease, when we ask obviously every week to the leasing team, but it's only affected four deals that I am aware of from one European retailer because they were worried about the import cost bringing over goods from Europe. And it wasn't big deals, but that's the only one.

[David Simon, Chairman, CEO & President at Simon Property Group]

Other than that, at this point, it hasn't really affected any demand. And we're hopeful that it won't because as you know retailers are looking long term on these stores. At some point, we're all hopeful that this stabilizes. Projecting and predicting sales is really difficult because to the extent that there is a retailer that imports goods from China, even with today's reduction in tit for tat, you're still talking about 30% tariff, which is material. And at this point, many retailers are either holding off bringing into goods from China, which could affect their inventory levels, trying to source it elsewhere, which they may or may not be successful with.

[David Simon, Chairman, CEO & President at Simon Property Group]

And so it's a relatively big unknown to the extent that there's a reliance on China even on today's recent news. And given margins, those tariffs in the 30 ish percent are I think are going to give retailers pause whether or not they can afford to have goods shipped to them from China. To the extent that it is in the more flat 10%, I think it's really retailer dependent. I think they're going to probably operate business as usual. Think they'll try to pass a little bit on to the consumer.

[David Simon, Chairman, CEO & President at Simon Property Group]

They'll try to get the manufacturer to take some of it. And they may eat some of it as well. But it shouldn't affect how they operate and how they inventory their stores. But China still is a big unknown. So that's why as Brian said in his comments, look, our sales were relatively flat.

[David Simon, Chairman, CEO & President at Simon Property Group]

If we were relatively flat, as you know, we have a history of certainly beating the midpoint and always trying to achieve the upper end and even higher. It's impossible for us to say what sales are right now, just because we don't know inventories. I mean, I think we're going to obviously land within our original guidance, which is good given all the uncertainty. But we're thinking that inventory levels could be affected because of the China tariffs even with these reduced ones as I went through. And so I think it has the potential to affect sales.

[David Simon, Chairman, CEO & President at Simon Property Group]

And that's why we're being a little more conservative and we're thinking it's probably going to be more in the midpoint one quarter ish into a very uncertain volatile thing. But I'd also say to

[David Simon, Chairman, CEO & President at Simon Property Group]

you the good news is other than

[David Simon, Chairman, CEO & President at Simon Property Group]

this one anecdote on some small deals from one European retailer, demand is still strong and we haven't seen across the board by any stretch of imagination a reduction in leasing demand. And so that in a nutshell is the latest and greatest. I'm sure if you ask us in a couple of weeks, we might have something new. But you've got retailers that are scrambling. Now remember, the way this thing works is that for retailers, The US retailers pay the tariff.

[David Simon, Chairman, CEO & President at Simon Property Group]

So they can't get the goods on the boat unless they pay the tariff at the time it's delivered to the boat. So that's why you're probably seeing a lot of boats not make the journey over or a lot of inventory at the shores in China. And so it's an unusual situation that we're just going to have to see how it shakes out. Now we're obviously pleased to see that at least the relationship seem to be thawing and seem to be on a more constructive path. But how it all shakes out, I mean, our guess is as good as yours or your economist or anybody else.

[Steve Sakwa, Analyst at Evercore]

Thank you. That's it for me.

[David Simon, Chairman, CEO & President at Simon Property Group]

Thank you, Steve.

[Operator]

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

[Craig Mailman, Analyst at Citigroup]

Hey, good afternoon. Just

[Craig Mailman, Analyst at Citigroup]

as a follow-up there, David, that

[Craig Mailman, Analyst at Citigroup]

was really helpful providing your thoughts. I'm just interested in where you think kind of retailers stand from an inventory perspective in terms of when they do start to run out to the extent shipments from China don't kind of reaccelerate here following the thawing? And have you seen that kind of pull forward in demand in your traffic data here in April and May as consumers kind of pull forward to get ahead of the tariffs? Just kind of curious how you think that plays out for just the cadence of retail sales this year? And the last piece, just how you think the de minimis rule impacts some of your retailers do you feel like they get a market share boost from the loss of that kind of avenue for retail for customers to some extent?

[David Simon, Chairman, CEO & President at Simon Property Group]

Yeah. All right. So let me take it in only because I can remember this when I hope Tom took notes. But de minimis is great for American based companies. De minimis really hurt a number of retailers that obviously paid tariffs and weren't able to avoid that loophole.

[David Simon, Chairman, CEO & President at Simon Property Group]

So and obviously a couple of Chinese companies took real advantage of it. So that is a great outcome. I want to applaud the administration for dealing with this loophole. Hopefully, it continues. And I think that's going to be a material benefit to our retailers to defend themselves against Chinese retailers that shift directly to the consumer.

[David Simon, Chairman, CEO & President at Simon Property Group]

Okay. So that was really, really, really important. Now, with respect to Forever twenty one, I wish they had done it a couple years ago, because it would have leveled the playing field, but it is what it is. Your second question or maybe it was your first. I would say that we don't see in our what our retailers sell all that pull forward that's been talked about.

[David Simon, Chairman, CEO & President at Simon Property Group]

So I think what you have to look at in the first through basically April now, we'll get April sales shortly, but because we're in arrears on that from our retailers. But I'll give you a general thing. First of all, two or three things happened, and I'll touch on traffic. One is that Easter that was in April versus March. So that was obviously very important.

[David Simon, Chairman, CEO & President at Simon Property Group]

So that's why March sales were a little bit higher last year than this year. You had weather issues certainly in the outdoor outlet centers for us in February. Weather was historically bad compared to '24. And traffic through the quarter was I would say down slightly, but when you look at year to date through April, it's actually up year to date because now we've taken into account April. So traffic is holding up.

[David Simon, Chairman, CEO & President at Simon Property Group]

The malls are actually performing above and the outlets are relatively flat. And I would say what we're seeing in the outlet on a traffic point of view is we have assets on the board whether in Mexico or Canada. And obviously, there's been a slowdown in traffic and sales on some of our border. Great long term assets, but currently, with all the rhetoric, we're seeing some traffic diminution on some of the border assets with Canada and our Mexican customers. So hopefully, as that rhetoric dies down, we'll get back to normal.

[David Simon, Chairman, CEO & President at Simon Property Group]

On what and I think your first question retailers basically have the way I understand it, which is not perfect and every retailer is different, I would say they have probably another month or so, maybe longer to decide what they're going to do with respect to China for Q4 inventory. And I've seen a number of retailers have already reduced their exposure to China dramatically. And so as I said earlier, those retailers are more or less taking a 10%, told you kind of how they're thinking about it. But it's business as usual. To the extent it's China, they're either trying to replicate the goods elsewhere.

[David Simon, Chairman, CEO & President at Simon Property Group]

If they can't, they're, I think, holding off on making a China decision. And I think they probably this is squishy. But they probably have a month ish to win if they still are in a holding pattern whether to pull the trigger or not, it could affect inventory levels in Q4. But I think that's so retail idiosyncratic. It's hard for me to make that blanket statement.

[David Simon, Chairman, CEO & President at Simon Property Group]

And then obviously, I think the European retailers have much better control over their production. And I don't see any change coming from them. Think their approach will be more on how they're going to price their goods to the ultimate end consumer. Hope that's helpful.

[David Simon, Chairman, CEO & President at Simon Property Group]

I think

[David Simon, Chairman, CEO & President at Simon Property Group]

I cover all three. Yes,

[Craig Mailman, Analyst at Citigroup]

you got it. Thank you.

[David Simon, Chairman, CEO & President at Simon Property Group]

Okay. Thanks.

[Operator]

The next question comes from the line of Sameer Tanal with Bank of America. Please proceed.

[Samir Khanal, Director at Bank of America]

Good afternoon, everybody. David, I guess given the uncertainty out there and kind of what you said retailers scrambling to make sort of long term decision, has that has your approach changed and kind of how you're dealing with your tenants, whether when you're negotiating leases, whether it's on new deals, whether it's pricing or TIs? I mean, how are you approaching the situation sort of here given the uncertainty out there for tenants to make long term decisions? Thanks.

[David Simon, Chairman, CEO & President at Simon Property Group]

Like I said, the only anecdotal thing is one retailer backing out of four outlet deals that but that's not a big deal to us because they were replacement tenants that we already have leased. Honestly, as I said earlier, it's business as usual. So supply is still very much constrained. Demand is still strong. And the reliance, as I said earlier, from China is much reduced.

[David Simon, Chairman, CEO & President at Simon Property Group]

So right now, I can't guarantee it but right now it's business as usual. I don't think we're doing really anything out of the ordinary dealing with them. Obviously, to the extent they have a specific issue, we'll try to address it. But they have come a long way on their supply chain and been reducing the Chinese imports for a long time. I do worry a little bit about not the bigger ones.

[David Simon, Chairman, CEO & President at Simon Property Group]

Again, we haven't seen I think the bigger retailers have sophisticated supply chains and long term relationships with suppliers everywhere. I do think the main street retailers, local moms and pops we all need as a country to be focused on. I think they could have more again, we haven't seen it. But if I had to venture, if things don't stabilize, which today is a good step. But if they don't ultimately stabilize, I think you'll have potential pressure points on the local mom and pop retailers that are important to the country.

[David Simon, Chairman, CEO & President at Simon Property Group]

And obviously, do lease space to them. So again, hopefully, I'm not anticipating. We're not seeing a problem, but I do worry about that a little bit more than say, y z that has 100 stores.

[Samir Khanal, Director at Bank of America]

Thank you, David.

[David Simon, Chairman, CEO & President at Simon Property Group]

Sure.

[Operator]

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

[Michael Goldsmith, US REITs Analyst at UBS Securities LLC]

Good afternoon. Thanks a lot for taking my question. Can you talk about the back leasing of those Forever twenty one boxes?

[Michael Goldsmith, US REITs Analyst at UBS Securities LLC]

What types of tenants are you seeing interest in taking the space? Those are tend to be bigger boxes. So have you needed to break them up? And how quickly can you get red pigmented?

[David Simon, Chairman, CEO & President at Simon Property Group]

Yeah, look, I think the demand has been really good. We've got basically over half of them leased. With that those economics we've already replaced the rent that Forever twenty one was paying us. So and I think it's a combination of we're doing a lot of business with Primark, Zara's of the world. They're in some cases splitting it up.

[David Simon, Chairman, CEO & President at Simon Property Group]

And we're very focused on it, but we will more than double at the end of the day and it'll take a couple of years, but all in to at least basically 100 stores. But we'll more than double the rent at the end of the two year process. Brian, do you agree with that?

[Brian McDade, Executive VP & CFO at Simon Property Group]

Yes, absolutely. We got about 50 of them addressed.

[Brian McDade, Executive VP & CFO at Simon Property Group]

We think those 50, about half of those start commencement of rent this year, the other half next year with the balance kind of finishing out as we complete our leasing effort, Michael. But to David's point, we do think rents are going to at least double.

[Michael Goldsmith, US REITs Analyst at UBS Securities LLC]

Thank you very much. Good luck in the second quarter.

[David Simon, Chairman, CEO & President at Simon Property Group]

Thank you. Thank you, Michael.

[Operator]

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

[Alexander Goldfarb, Managing Director & Senior Analyst at Piper Sandler Companies]

Hey, good afternoon out there. And David, appreciate your comment about the mom and pop retailers. Pretty interesting, especially given your platform. So a question, if I hear you correctly, it sounds like the consumer is fine despite what we read online in the newspapers, etcetera, recession, job loss, whatever. But it sounds like the consumer is fine, the shopper is fine.

[Alexander Goldfarb, Managing Director & Senior Analyst at Piper Sandler Companies]

Sounds like the real wildcard are inventory levels. So it sounds like restaurants and the other similar services that aren't impacted by tariffs are doing well. So is that correct that we should the real concern to earnings is really about inventory levels and whether they can sell out products and hit percent rents? Or are there other things that are playing into your outlook?

[David Simon, Chairman, CEO & President at Simon Property Group]

No, I'd say it's all around sales. Now sales is more than just inventory levels, right? It's consumer sentiment, right? And that's hard to predict, Alex, as you know. I mean, right now, it's pretty good.

[David Simon, Chairman, CEO & President at Simon Property Group]

Our sales are flat. X2 retailers are basically flat. And again, we don't have April sales, but that's basically flat through March. And again, I explained the Easter being in Q1 versus Q2 this year. So I expect sales once I get April numbers to be up first four months over the year compared to last year.

[David Simon, Chairman, CEO & President at Simon Property Group]

So the consumer, I think, is fine. I do think they're being a little more cautious. And I do think tourism Flapping, waning, what are the different phases of the moon? Waxing, waning, whatever it is.

[David Simon, Chairman, CEO & President at Simon Property Group]

I think tourism to The US is going to be cautious this year, whether it's from Mexican nationals, Canadians, Europeans. I do think, and again, we've just seen a little bit on the border. On the other hand, the dollar is weaker, so maybe that offsets it. But I do think there should be a little bit caution to the wind on just the sales that are generated by non US consumers. And so you put it all together, the economy is clearly a little bit uncertain.

[David Simon, Chairman, CEO & President at Simon Property Group]

You put it all together and it makes it really hard to predict sales right now. But even if it's like I said, we're just thinking it's going to be a little more cautious. That's why we're indicating it's probably more likely. We have this history of beating and raising and we're trying to be realistic given the set of circumstances that we're dealing with. And that's why we're thinking sales.

[David Simon, Chairman, CEO & President at Simon Property Group]

And it's really only sales that have the variability that could ultimately produce us more in the middle of the range.

[Alexander Goldfarb, Managing Director & Senior Analyst at Piper Sandler Companies]

And David, if I could just ask clarification. Your comments on The U. S. Consumer, is that the same for your European and Asian portfolios or those consumers are experiencing different trends in The U. S?

[David Simon, Chairman, CEO & President at Simon Property Group]

They're actually our And it's basically our portfolio on investment in Klepierre. Japan is it's all internationally, it's all very good. So they're not there's their playing field there hasn't changed. So we don't expect whole business, whether it's Europe and or Asia for us is basically stability. So we're outperforming in Europe and in Asia.

[David Simon, Chairman, CEO & President at Simon Property Group]

And obviously there's fluctuations. Korea could be up, Japan could be down. But generally, it's basically according to plan. I don't expect any change there. The US consumer that goes to these places really doesn't drive our business.

[Alexander Goldfarb, Managing Director & Senior Analyst at Piper Sandler Companies]

Thank you.

[David Simon, Chairman, CEO & President at Simon Property Group]

It's more the Germans going to Italy and know, that kind of stuff. Certainly more likely the Chinese go to Europe than they come here. Okay. Operator, I think we're ready for next.

[Operator]

The next question comes from the line of Caitlin Burrows with Goldman Sachs. Please proceed.

[Caitlin Burrows, Vice President at Goldman Sachs]

Hi, everyone. Maybe one thing that's tougher to predict than the tenant sales results is OPI. With that in mind, I guess wondering, David, if you could go through some of the OPI performance in 1Q, kind of talk about what's going on there. And I know they aren't part of guidance, but just trying to understand how some of the revenue and cost synergies that were planned for 2025 are going, expectations for those to progress throughout the year. And then I guess separately would be how the tariff situation could impact JCPenney and the other catalyst brands this year?

[David Simon, Chairman, CEO & President at Simon Property Group]

Again, OPI had improvement. Again, OPI is basically three businesses just so everyone knows it's our e commerce business RGG, ShopSimon, which we own roughly 45%. Our interest in Catalyst Group, which is Penny and the other operating brands, Brooks Brothers, Lucky, etcetera, which we now own remind me 39 and or 50% interest in Jamestown. So that's all it is. That's all it plans to be.

[David Simon, Chairman, CEO & President at Simon Property Group]

And it is what we live and breathe every day though. We're focused on creating value there as we have with ABG and our other OPI investments. So getting to your question, had quarter over quarter improvement in cattle. The other two businesses are stable, fine, going according to plan. The Catalyst brands had real improvement quarter over quarter.

[David Simon, Chairman, CEO & President at Simon Property Group]

As you know, part of that was being not only the synergies that it was achieving in the merger, but also the F21 bankruptcy. F21 is gone and they're getting their synergies. And Penny, in terms of sourcing goods, they have a lot less reliance on China. There is some reliance on China. They're trying to source it elsewhere.

[David Simon, Chairman, CEO & President at Simon Property Group]

And if not, I think they're going to be one of these retailers that has to decide in the next six weeks whether to pull the trigger to bring goods here or not. And obviously, they're negotiating very hard with their suppliers. And they have, I mean the administration is right. They have more leverage in negotiating with suppliers because The US is a big market. But they're in a tricky spot.

[David Simon, Chairman, CEO & President at Simon Property Group]

It's very hard to predict sales for those brands just like it would be for some other retailers. But some of the brands and catalysts like Brooks Brothers is doing great. So they're achieving the synergies that they wanted. The business is on plan. And the bottom line is even with today's uncertainty, we still expect to have again, it doesn't show in our numbers because of depreciation that I've explained to everybody.

[David Simon, Chairman, CEO & President at Simon Property Group]

But we expect Catalyst to have positive EBITDA this year even with all the tariff and economic uncertainty that it's causing going forward. So, again, I would suggest you don't worry about it all that much. That's what we're telling the market, but we're happy to answer any and every question except what the price of a cotton shirt is at Brooksbank. That I don't know. Actually, do, but I don't want to be a know it all.

[Caitlin Burrows, Vice President at Goldman Sachs]

Thanks, David. Cotton board

[David Simon, Chairman, CEO & President at Simon Property Group]

actually is wearing Tom, you look very nice. Okay. That's a good looking shirt, actually. It's better than those. You used to wear those weird shirts.

[David Simon, Chairman, CEO & President at Simon Property Group]

Okay. So I think he's a Brooks Brothers consumer.

[Caitlin Burrows, Vice President at Goldman Sachs]

Thank you.

[David Simon, Chairman, CEO & President at Simon Property Group]

You're welcome.

[Operator]

The next question comes from the line of Greg McGinnis with Scotiabank. Please proceed.

[Greg Mcginniss, Director at Scotiobank]

Hi. Hey, David. Hey, Brian. The balance sheet continues to be in great shape, but has macroeconomic uncertainty reached a point where you're making adjustments to capital plans to maybe become a bit more defensive, whether that's reconsidering certain development activity, CapEx or your appetite for acquisitions or otherwise?

[David Simon, Chairman, CEO & President at Simon Property Group]

That's a great question. And I would say we're still making a long term decision. We're very fortunate to since we've been public, as far as I can remember, even with COVID thrown at us and the great financial recession and everything else. We've never since I've been involved, we've never been over our skis. And we are we haven't even put our on our skis.

[David Simon, Chairman, CEO & President at Simon Property Group]

If I can keep with the analogy. Right? Is that is that the right word? So we're not we haven't even put on our skis recently. Right?

[David Simon, Chairman, CEO & President at Simon Property Group]

So we've been cautious to begin with our now we have all these opportunities. We're very stewardess in them. But I would say, yes, instinctively we're more cautious right now. We are expecting our development pipeline is there, but it's not we're not going crazy with it. I think it'll continue.

[David Simon, Chairman, CEO & President at Simon Property Group]

We are expecting construction costs to increase. So the things that haven't started, obviously, don't start construction till we have to guarantee max price anyway. But the things that are on the docket to start or we're getting through. We're not pulling triggers until we have all the costs finalized and everything else. So I think caution is the word of order, but that doesn't mean we won't buy something or that we won't continue to do our pipeline.

[David Simon, Chairman, CEO & President at Simon Property Group]

But it'd be foolish for us not to be a little more cautious. Hey, Greg, I think the only thing I would add there is as you know, as volatility increases, sometimes for us opportunities increase. And so we have a strong pipeline and we are clinical with our capital as you know. So nothing really materially changed, but obviously a bit more caution relative to the headlines these days. I'll give you a simple example.

[David Simon, Chairman, CEO & President at Simon Property Group]

I was just thinking out loud, but we had one development in Asia. I was going to say it. But it just didn't feel like the right time to do it just because it wasn't material. And it just feels like we should be a little more cautious. And again, don't wanna say that we aren't gonna do a couple of deals here that could even be, you know, nontrivial.

[David Simon, Chairman, CEO & President at Simon Property Group]

But, you know, it it you know, caution is the is is the word of order right now.

[Greg Mcginniss, Director at Scotiobank]

Okay. So if I'm looking at development pipeline, maybe we don't go much above this kind of 1,000,000,000 level for now and acquisitions still on the table, but of course everything depends on the underwriting.

[Brian McDade, Executive VP & CFO at Simon Property Group]

Greg, I would say, and as you heard me in my prepared remarks, we ultimately believe that we're going to start about $500,000,000 of projects that are not included in that $1,000,000,000 spend level. So we are still advancing our projects that are ready to move forward, but we're just doing so thoughtfully.

[Greg Mcginniss, Director at Scotiobank]

Okay. Thank you, Brian. Thanks, David.

[Operator]

The next question comes from the line of Floris Van Dykem with Compass Point. Please proceed.

[Floris van Dijkum, Managing Director at Compass Point Research & Trading]

Thank you. David, you sound very chipper. I'm glad to hear your voice. Can I ask you about the S and L pipeline, where it stands today? I think end of fourth quarter was the two fifty basis points.

[Floris van Dijkum, Managing Director at Compass Point Research & Trading]

Has that grown? And Can you quantify that for us? And what's the timing of those rents coming online?

[David Simon, Chairman, CEO & President at Simon Property Group]

You may ask, but I'm going to have Brian answer.

[Brian McDade, Executive VP & CFO at Simon Property Group]

So it's about 300 basis points today. From S and O pipeline, we're standing about 300 basis points when you run the math on that. It's about $150,000,000 worth of rent at our average rents. But again, that's not all incremental to the existing kind

[Brian McDade, Executive VP & CFO at Simon Property Group]

So it's not all going to be added to the year. We probably believe that the back half of this year, you're probably going to see 30% to 40% of that.

[Floris van Dijkum, Managing Director at Compass Point Research & Trading]

And the bulk of that will hit in '26? Or is there also some spillover in '27?

[Brian McDade, Executive VP & CFO at Simon Property Group]

'twenty six is some 'twenty seven. We are seeing some tenants looking out further or have been looking out further. So some of

[Brian McDade, Executive VP & CFO at Simon Property Group]

that is included in that as well.

[Floris van Dijkum, Managing Director at Compass Point Research & Trading]

And that includes the Forever twenty one spaces as well?

[Brian McDade, Executive VP & CFO at Simon Property Group]

It does. Yes.

[Floris van Dijkum, Managing Director at Compass Point Research & Trading]

Great. Thank

[David Simon, Chairman, CEO & President at Simon Property Group]

you. The ones that are at least signed up.

[Operator]

And the next question comes from the line of Vince Tibone with Green Street. Please proceed.

[Vince Tibone, Managing Director and Head of US Industrial & Mall Research at Green Street Advisors, LLC]

Hi, good evening. Could you discuss trends in tenant sales in a little bit more detail? I'm curious if there are any specific tenants that are categories that are having an outsized impact on the decline in trailing twelve month portfolio sales results?

[David Simon, Chairman, CEO & President at Simon Property Group]

Well, I mentioned one the decreases, I mean, it's a marginal decrease, but yet we don't like to get into specific retailers. We had two that were basically flat if you put those two retailers aside. And again, Easter was not in this worse versus last twelve months of last time. So when you Vince, you cut through it, it is relatively flat. And we had a little the malls were a little bit above.

[David Simon, Chairman, CEO & President at Simon Property Group]

Outlets were a little bit down. And I mentioned earlier, part of that was because of the weather. We had a very tough you probably never experienced it being in Southern California, Newport Beach where it's sunny most of the time. You have other issues there, right? Earthquakes and unfortunately fires.

[David Simon, Chairman, CEO & President at Simon Property Group]

And then again, we had a little softness in some of our border activity. But I would say by and large our top 25 retailers had we're pretty much doing okay and up. So no other than that color, nothing unusual on sales.

[Vince Tibone, Managing Director and Head of US Industrial & Mall Research at Green Street Advisors, LLC]

No, that's great to hear. Appreciate the color. And then one more switching gears. You didn't mention department stores as it relates to any tariff related or inventory concerns. But I would imagine many of their products are sourced from China.

[Vince Tibone, Managing Director and Head of US Industrial & Mall Research at Green Street Advisors, LLC]

I'm just curious, what is your current outlook for department store closures over the next few years? Has it changed at all with any of this macro uncertainty?

[David Simon, Chairman, CEO & President at Simon Property Group]

Yeah. So it depends on the department store. So for instance, if they don't have private label, they really don't have they're not sourcing their own goods. They really don't have the tariff, the China tariff exposure that you might think. So it really depends on which department store you're talking about and how big their private label business is.

[David Simon, Chairman, CEO & President at Simon Property Group]

So if they sell mostly branded goods, then it's really their relationship with the wholesaler. So the wholesaler has to pay the import if they get it from China or elsewhere, how they want to negotiate that between wholesalers manufacturer and what they want to pass that on to the department store. And that's a whole complicated and what the consumer pays. So there's just no way to really know how that all shakes out. And as far as we can see on department store closures, we don't see as you know, we had the Macy's announcement.

[David Simon, Chairman, CEO & President at Simon Property Group]

We had one that was affected by that. It wouldn't surprise me if again you don't see pruning just like you do from every retailer on their store level. But I don't expect any real major changes right now. And again, the terrorist situation is idiosyncratic to that department store and mostly impacts whether or not they have a big private label business.

[Vince Tibone, Managing Director and Head of US Industrial & Mall Research at Green Street Advisors, LLC]

Great. Thank you.

[David Simon, Chairman, CEO & President at Simon Property Group]

Sure.

[Operator]

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

[Michael Mueller, Analyst at JP Morgan]

Yes. Hi. Going back to sales for a second. I know you flagged Easter and two retailers, but would your recent sales trends be materially different either positively or negatively if you look at things on an NOI weighted basis?

[David Simon, Chairman, CEO & President at Simon Property Group]

Yes, I would say we used to always do that. We have I didn't see it. We have it.

[Brian McDade, Executive VP & CFO at Simon Property Group]

We don't do it by waiting anymore.

[David Simon, Chairman, CEO & President at Simon Property Group]

We should do that by the way.

[David Simon, Chairman, CEO & President at Simon Property Group]

But that's another that's me telling my guys. But I would say when I look at it, do. There's no question that the better properties are getting better. So the simple answer to that is sales would be up. And we can give you the specific numbers, but sales would be up if you NOI weighted unequivocally.

[Brian McDade, Executive VP & CFO at Simon Property Group]

100 assets are up about 1.5%.

[David Simon, Chairman, CEO & President at Simon Property Group]

That doesn't that again has Easter in March of last year not April this year.

[Michael Mueller, Analyst at JP Morgan]

Got it. Okay. Okay, great. And maybe one other one on the $500,000,000 of development starts. Think, Brian, you mentioned mixed use components in there.

[Michael Mueller, Analyst at JP Morgan]

How much of those dollars or even the overall redevelopment pipeline of those dollars are directly retail versus some other property type, whether it's office, hotel, resi?

[Brian McDade, Executive VP & CFO at Simon Property Group]

I mean, effectively, 60% that isn't mixed use, quite honestly, Michael. Okay. So 60% retail, the other 40% would be mixed use. So all the other

[Michael Mueller, Analyst at JP Morgan]

Okay, perfect. Thank you.

[David Simon, Chairman, CEO & President at Simon Property Group]

By the way, that's in our share. We have again, we're going to do a big residential development in Bray Mall. But we have a partner for that. So that's 500 new starts is our share. So it's a bigger pipe than just that.

[David Simon, Chairman, CEO & President at Simon Property Group]

It's just we boil it down to our share.

[Michael Mueller, Analyst at JP Morgan]

Got it. Thank you.

[David Simon, Chairman, CEO & President at Simon Property Group]

Sure.

[Operator]

The next question comes from the line of Ron Camden with Morgan Stanley. Please proceed.

[Ronald Kamdem, Managing Director & Head of US REITs and CRE Research at Morgan Stanley]

Great. Hey, just wanted to go back to the guidance and I think some of the assumptions and inputs that have come into last time, appreciate it's still early, but how are you guys thinking about sort of domestic property NOI, bad debt as well as the $0.25 and $0.30 interest cost headwind for this year? Just how has those sort of changed since the last three months? Thanks so much.

[Brian McDade, Executive VP & CFO at Simon Property Group]

No change really. Yes, no. No change in any of those amounts. As you can see the interest income starting to come down, it's about $06 in the quarter. We would expect that to carry forward for the balance of the year.

[Brian McDade, Executive VP & CFO at Simon Property Group]

You will also see some more interest expense come through as we refinance our debt later this year, slightly higher coupons on. But no material change to the other elements of guidance used out at

[Brian McDade, Executive VP & CFO at Simon Property Group]

the beginning of the year.

[Ronald Kamdem, Managing Director & Head of US REITs and CRE Research at Morgan Stanley]

Great. Thanks so much.

[David Simon, Chairman, CEO & President at Simon Property Group]

Sure. Thank you.

[Operator]

The next question comes from the line of Haendel St. Juste with Mizuho Securities. Please proceed.

[Ravi Vaidya, Vice President at Mizuho Financial Group]

Hi there. This is Ravi Vaidya on the line for Haendel. I hope you guys are doing well. Wanted to particularly ask about your luxury tenants. Are you seeing what are what are we hearing from them in terms of sales and foot traffic?

[Ravi Vaidya, Vice President at Mizuho Financial Group]

And maybe has there been any sort of pause or pullback on leasing demand from luxury tenants in particular?

[David Simon, Chairman, CEO & President at Simon Property Group]

Not really. Again, and I think it's it's very brand specific. So you have some that are absolutely on fire, others that are bringing in new designers and updating the brand. But all of that's been pretty consistent for our outlook and what's been going on. They think very long term like we do.

[David Simon, Chairman, CEO & President at Simon Property Group]

So there really hasn't been a change of mood or commitment from those brands. And overall, I'd say the business is now there's always ups and downs, but I'd say overall from a sales point of view relatively flat. So we haven't seen the big sales growth, but I think a lot of that is more you have a few brands that are just in the midst of bringing in new designers and more of updating their brand.

[Greg Mcginniss, Director at Scotiobank]

Got it. Thank you.

[David Simon, Chairman, CEO & President at Simon Property Group]

Sure.

[Operator]

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

[Linda Tsai, Senior Analyst at Jefferies]

Yes, hi. In terms of not seeing pull forward in demand now, do you think there's a scenario where pull forward demand materializes in 3Q if consumers shop earlier for the holiday season, if there's concern that inventories are low or product is more expensive?

[David Simon, Chairman, CEO & President at Simon Property Group]

We have seen that a little bit historically, so I would say it's possible. And if that's the case, margins might be Okay because price for retailers prices could go up. So I do think it's possible. We have seen that in other cases. So I wouldn't rule it out.

[David Simon, Chairman, CEO & President at Simon Property Group]

And I think it's to be determined, but I wouldn't rule it out.

[Linda Tsai, Senior Analyst at Jefferies]

Thank you.

[David Simon, Chairman, CEO & President at Simon Property Group]

Sure.

[Operator]

The last question comes from the line of Omotayo Okusanya with Deutsche Bank. Please proceed.

[Omotayo Okusanya, Managing Director at Deutsche Bank]

Yes. Good afternoon. Just a quick question on the $2,800,000,000 of debt refinancing.

[Omotayo Okusanya, Managing Director at Deutsche Bank]

Wondering if you could just talk a little bit about what that market looks like today? Any big changes in terms, LTVs or how lenders are generally kind of looking at the asset class at this point?

[David Simon, Chairman, CEO & President at Simon Property Group]

Well, I'd say that lenders are very comfortable with the asset class. We've been upgraded with, I mean, we've been upgraded from to stay positive from an S and P perspective. From an unsecured perspective, dollars 1,600,000,000.0 of maturities here, we will refinance that back in the unsecured markets throughout the balance of the year. And on the mortgage side, you continue to see lenders CMBS, life insurance companies and other looking at the asset class and looking to deploy capital given our leverage levels. We are relatively conservative from a financial point of view, as you know, and so that opens us up to an opportunity to refinance.

[David Simon, Chairman, CEO & President at Simon Property Group]

What we did earlier in the year is representative of that. Homegrown is done in the first quarter. I think the market is open for us to continue to refinance. But importantly, we're rolling over our debt. We're not looking for incremental capital.

[David Simon, Chairman, CEO & President at Simon Property Group]

We're not looking to extract excess proceeds to redeploy into our business. We're doing that with our free cash flow. But the good news is good retail real estate has, you know, is, you know, people are very financial they're very comfortable financing them and certainly our company.

[Omotayo Okusanya, Managing Director at Deutsche Bank]

Thanks, David.

[David Simon, Chairman, CEO & President at Simon Property Group]

Thank you. Thank you.

[Operator]

Thank you. This concludes the question and answer session. I'd like to turn the call back over to David Simon for closing remarks.

[David Simon, Chairman, CEO & President at Simon Property Group]

Okay, just thank you everybody. I think we'll talk soon. And I believe at least I do think the mood's getting more certain and more stable. So, we're optimistic about this uncertainty resolving itself shortly.

[Operator]

This concludes today's conference. You may disconnect your lines at this time. Enjoy the rest of your day.

Participants

Executives

• Thomas Ward, SVP - IR
• David Simon, Chairman, CEO & President
• Brian McDade, Executive VP & CFO

Analysts

• Steve Sakwa, Analyst at Evercore
• Craig Mailman, Analyst at Citigroup
• Samir Khanal, Director at Bank of America
• Michael Goldsmith, US REITs Analyst at UBS Securities LLC
• Alexander Goldfarb, Managing Director & Senior Analyst at Piper Sandler Companies
• Caitlin Burrows, Vice President at Goldman Sachs
• Greg Mcginniss, Director at Scotiobank
• Floris van Dijkum, Managing Director at Compass Point Research & Trading
• Vince Tibone, Managing Director and Head of US Industrial & Mall Research at Green Street Advisors, LLC
• Michael Mueller, Analyst at JP Morgan
• Ronald Kamdem, Managing Director & Head of US REITs and CRE Research at Morgan Stanley
• Ravi Vaidya, Vice President at Mizuho Financial Group
• Linda Tsai, Senior Analyst at Jefferies
• Omotayo Okusanya, Managing Director at Deutsche Bank