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 publicly traded real estate investment trust (REIT) that owns, develops and manages retail real estate properties. Its core business activities include acquisition, development, leasing and property management of regional malls, outlet centers and mixed‑use retail destinations. The company operates retail brands that include high‑profile regional shopping centers and the Premium Outlets platform, and it provides services such as tenant leasing, marketing, property operations and capital projects to optimize asset performance.

Simon’s portfolio spans a broad mix of enclosed malls, open‑air centers, outlet properties and mixed‑use developments, and the company pursues redevelopment and repositioning to adapt properties to changing consumer and retail trends. The company has built its business through a combination of development, strategic acquisitions and joint ventures, and it operates properties across North America with a presence in international markets through outlet and partner arrangements. Its assets serve a wide range of national, regional and local retailers as well as entertainment and dining concepts aimed at driving foot traffic and shopper engagement.

Corporate strategy emphasizes active asset management, redevelopment of underperforming properties, and growth of outlet and mixed‑use formats that reflect evolving consumer preferences. The company is led by Chairman and Chief Executive Officer David Simon, and it works with institutional partners and capital markets to finance development and acquisitions. Simon Property Group’s operations center on maintaining high occupancy, enhancing the shopper experience and generating long‑term value through property-level improvements and portfolio optimization.

Simon Property Group Q1 2025 Earnings Call Transcript

Key Takeaways

• Real estate FFO: Q1 FFO of $2.95/share increased from $2.91, driven by a 5% rise in lease income and higher occupancy at both malls and outlets.
• Lower adjusted FFO: Q1 funds from operations were $2.67/share versus $3.56 last year, reflecting a $0.17/share mark-to-market loss and $0.05/share Catalyst restructuring charge.
• Development pipeline: $944 million of projects underway at a targeted 9% yield, with another $500 million of new starts planned, including mixed-use and retail redevelopments.
• Fortress balance sheet: A-rated credit profile with $10 billion liquidity, net debt/EBITDA of 5.2x, fixed-charge coverage of 4.6x; Q2 dividend up 5% and 2025 FFO guidance reaffirmed at $12.40–$12.65/share.
• Tariff uncertainty: Lingering 30% tariffs on China-sourced goods could constrain retailer inventory levels and weigh on sales, despite only minor leasing disruptions so far.

Presentation

[Operator]

Greetings and welcome to the Simon Property Group First Quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Tom Ward, Senior Vice President, Investor Relations.

[Tom Ward, SVP of Investor Relations 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. 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.

[Tom Ward, SVP of Investor Relations at Simon Property Group]

Both the press release and the supplemental information are available on our IR website at investors.simon.com. Our conference call this evening will be limited to one hour. For those who would like to participate in the question-and-answer session, we ask that you please respect our request to limit yourself to one question. I'm pleased to introduce David Simon.

[David Simon, Chairman, CEO and 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 Sanremo, Italy, and opened our first outlet in Jakarta, Indonesia. We continue to enhance our retail real estate platform through development, redevelopment, and acquisitions. Our A-rated fortress balance sheet with over $10 billion 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. 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, 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. 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 5.1 million sq ft 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. Malls and premium outlet occupancy at the end of the quarter was 95.9%, an increase of 40 basis points compared to the prior year. The mills occupancy was 98.4%, an increase of 70 basis points compared to the prior year.

[Brian McDade, CFO at Simon Property Group]

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 cost 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 $1.0 billion, or $2.67 per share, compared to $1.33 billion, or $3.56 per share last year. 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 non-cash unrealized mark-to-market and fair value adjustments on the KlaipÄ—da Exchangeable Bonds.

[Brian McDade, CFO at Simon Property Group]

This is offset by a $0.07 gain on the sale of securities. The non-cash loss on the derivative is due to the outperformance of KlaipÄ—da's stock price, which increased 11% in the first quarter. The first quarter also includes an after-tax loss of $0.05 per share related to Catalyst Brands' restructuring costs. Turning to our development activity, at the end of the quarter, development projects were underway across all platforms with our share of the net cost of $944 million and a blended yield of 9%. Approximately 40% of net costs are mixed-use projects.

[Brian McDade, CFO at Simon Property Group]

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 at Keystone in Indianapolis into dynamic mixed uses. Starts for this year will be approximately $500 million. Turning to the balance sheet, we were active in the first quarter, where we completed 12 secured loan transactions totaling approximately $2.6 billion. 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. As David mentioned earlier, we are well-positioned to allocate capital and be opportunistic through various economic cycles.

[Brian McDade, CFO at Simon Property Group]

Turning to the dividends, today we announced our dividend of $2.10 per share for the second quarter, a year-over-year increase of 10 cents or 5%. 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 $12.40-$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. With that, thank you to everyone. David and I are available for your questions.

[Operator]

Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad, and the confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. The first question comes from the line of Steve Sakwa with Evercore ISI. Please proceed.

[Steve Sakwa, Senior Managing Director and Senior Equity Research Analyst at Evercore ISI]

Yeah, thanks. Good evening, David and Brian. I guess I know the tariff situation has certainly been de-escalated, but I'm just curious what sort of conversations you were maybe having with retailers kind of leading up to today's announcement, and how do you think it impacts, if at all, the leasing? 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 and President at Simon Property Group]

Yeah. Hi, Steve. Let me take that, and Brian can add color. Just on the new leasing, 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. It was not big deals, but that's the only one. Other than that, at this point, it has not really affected any demand. We are hopeful that it will not because, as you know, retailers are looking long-term on these stores, and at some point, we are 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 kind of reduction in the kind of tit for tat, you are still talking about 30% tariff, which is material.

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

At this point, many retailers are either holding off bringing in goods from China, which could affect their inventory levels, trying to source it elsewhere, which they may or may not be successful with. It is a relatively big unknown to the extent that there is a reliance on China, even on today's recent news. Given margins, those tariffs in the 30% range, 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 is really retailer-dependent. I think they are going to probably operate business as usual. I think they will try to pass a little bit on to the consumer. They will try to get the manufacturer to take some of it, and they may eat some of it as well.

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

It should not affect how they operate and how they inventory their stores. China still is a big unknown. That is why, as Brian said in his comments, look, our sales were relatively flat. 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 is impossible for us to say what sales are right now just because we do not know inventories. I mean, I think we are going to obviously land within our original guidance, which is good given all the uncertainty. We are thinking that inventory levels could be affected because of the China tariffs, even with these reduced ones as I went through. I think it has the potential to affect sales.

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

That is why we are being a little more conservative, and we are thinking it is probably going to be more in the midpoint, one quarter-ish into a very uncertain, volatile thing. I would also say to you, the good news is, other than this one anecdote on some small deals from one European retailer, demand is still strong, and we have not seen across the board by any stretch of the imagination a reduction in leasing demand. That, in a nutshell, is the latest and greatest. I am sure if you ask us in a couple of weeks, we might have something new. You have retailers that are scrambling. Now, remember, the way this thing works is that for retailers, the U.S. retailers pay the tariff. They cannot get the goods on the boat unless they pay the tariff at the time it is delivered to the boat.

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

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. 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 relationships seem to be thawing and seem to be on a more constructive path. How it all shakes out, I mean, our guess is as good as yours or your economist or anybody else.

[Steve Sakwa, Senior Managing Director and Senior Equity Research Analyst at Evercore ISI]

Thank you. That's it for me.

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

Sure. Thank you, Steve.

[Operator]

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

[Craig Mailman, Director and Equity Research Analyst at Citi]

Hey, good afternoon. Just as a follow-up there, David, that 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 re-accelerate here following the thawing. Have you seen that kind of pull forward of 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 from 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 who do you feel like they get a market share boost from the loss of that kind of avenue for customers to some extent?

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

Yeah. All right. So let me take it in only because I can remember it this way. I hope Tom took notes. De minimis is great for American-based companies. De minimis really hurt a number of retailers that obviously paid tariffs and were not able to avoid that loophole. Obviously, a couple of Chinese companies took real advantage of it. That is a great outcome. I want to applaud the administration for dealing with this loophole. Hopefully, it continues. I think that is going to be a material benefit to our retailers to defend themselves against Chinese retailers that ship directly to the consumer. Okay? That was really, really, really important. Now, with respect to Forever 21, I wish they had done it a couple of years ago because it would have leveled the playing field, but it is what it is.

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

Your second question, or maybe it was your first, I would say that we do not see in what our retailers sell all that pull forward that has been talked about. I think what you have to look at in the first through basically April now, we will get April sales shortly, but because we are in arrears on that from our retailers. I will give you a general thing. First of all, two or three things happened, and I will touch on traffic. One is you had an Easter that was in April versus March. That was obviously very important. That is 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. The weather was historically bad compared to 2024.

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

Traffic through the quarter was, I would say, down slightly, but when you look at year-to-date through April, it is actually up year-to-date because now we have taken into account April. Traffic is holding up. The malls are actually performing above, and the outlets are relatively flat. I would say what we are seeing in the outlet on a traffic point of view is we have assets on the border, whether in Mexico or Canada. Obviously, there has been a slowdown in traffic and sales on some of our border great long-term assets. Currently, with all the rhetoric, we are seeing some traffic diminution on some of the border assets with Canada and our Mexican customers. Hopefully, as that rhetoric dies down, we will get back to normal.

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

I think your first question, what 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. I have seen a number of retailers have already reduced their exposure to China dramatically. 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. If they can't, they're, I think, holding off on making a China decision.

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

I think they probably—this is squishy—but they probably have a month-ish to when if they still are in a holding pattern, whether to pull the trigger or not, it could affect inventory levels in Q4. I think that's so retail idiosyncratic, it's hard for me to make that blanket statement. Obviously, I think the European retailers have much better control over their production, and I don't see any change coming from them. I think their approach will be more on how they're going to price their goods to the ultimate end consumer. I hope that's helpful. I think did I cover all three?

[Craig Mailman, Director and Equity Research Analyst at Citi]

Yeah. Yeah. You got it. Thank you.

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

Okay. Thanks.

[Operator]

The next question comes from the line of Samir Khanal with Bank of America. Please proceed.

[Samir Khanal, Senior Director of Investor Relations 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 decisions, has your approach changed in 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 and President at Simon Property Group]

Like I said, the only anecdotal thing is one retailer backing out of four outlet deals. 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. Supply is still very much constrained. Demand is still strong. The reliance, as I said earlier, from China is much reduced. 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 in dealing with them. Obviously, to the extent they have a specific issue, we'll try to address it. 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 and President at Simon Property Group]

Again, we have not 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 have not seen it. If I had to venture, if things do not stabilize, which today is a good step, if they do not ultimately stabilize, I think you will have potential pressure points on the local mom-and-pop retailers that are important to the country. Obviously, we do lease space to them. Again, hopefully, I am not anticipating, we are not seeing a problem, but I do worry about that a little bit more than, say, XYZ that has 100 stores.

[Samir Khanal, Senior Director of Investor Relations at Bank of America]

Thank you, David.

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

Sure.

[Operator]

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

[Michael Goldsmith, Analyst at UBS]

Good afternoon. Thanks a lot for taking my question. Can you talk about the back leasing of those Forever 21 boxes? What types of tenants are you seeing interest in taking the space? Those tend to be bigger boxes, so have you needed to break them up? How quickly can you get rent-paying tenants in?

[David Simon, Chairman, CEO and 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 those economics, we've already replaced the rent that Forever 21 was paying us. 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. We're very focused on it. We will more than double at the end of the day—it will take a couple of years—all in to lease basically 100 stores. We will more than double the rent at the end of the two-year process. Brian, you agree with that?

[Brian McDade, CFO at Simon Property Group]

Yeah. No, absolutely. We got about 50 of them addressed. We think those 50, about half of those, are commencement of rent this year, the other half next year, with the balance kind of finishing out as we complete our leasing efforts, Michael. To David's point, we do think rents are going to at least double.

[Michael Goldsmith, Analyst at UBS]

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

[David Simon, Chairman, CEO and 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 and Senior Research Analyst at Piper Sandler]

Hey. Good afternoon out there. And David, appreciated your comment about the mom-and-pop retailers. Pretty interesting, especially given your platform. A question, if I hear you correctly, it sounds like the consumer is fine despite what we read online in the newspapers, etc., recession, job loss, whatever. It sounds like the consumer is fine. The shopper is fine. It sounds like the real wild card are inventory levels. It sounds like restaurants and the other similar services that aren't impacted by tariffs are doing well. Is that correct that the real concern to earnings is really about inventory levels and whether they can sell out products and hit % rents? Or are there other things that are playing into your outlook?

[David Simon, Chairman, CEO and 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. Our sales are flat. Two retailers are basically flat. Again, we don't have April sales. That's basically flat through the end of March. Again, I explained the Easter being in Q1 versus Q2 this year. I expect sales, once I get April numbers, to be up the first four months over the year compared to last year. The consumer, I think, is fine. I do think they're being a little more cautious. I do think tourism is—I don't know if this may be the wrong word—flattening, waning. What are the different phases of the moon? Waxing, waning, whatever it is.

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

I think tourism to the U.S. 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. I do think there should be a little bit of caution to the wind on just some of the sales that are generated by non-U.S. consumers. You put it all together, the economy is clearly a little bit uncertain. You put it all together, and it makes it really hard to predict sales right now. Even if it's—like I said, we're just thinking it's going to be a little more cautious, and that's why we're indicating it's probably more likely.

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

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. 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 and Senior Research Analyst at Piper Sandler]

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 and President at Simon Property Group]

Actually, and it's basically our portfolio on investment in Klépierre. Japan is—it's all internationally, it's all very good, right? Their playing field there hasn't changed. We don't expect that whole business, whether it's Europe and/or Asia, for us, is basically stability. We're outperforming in Europe and in Asia. Obviously, there's fluctuations. Korea could be up. Japan could be down. Generally, it's basically according to plan. I don't expect any change there. The U.S. consumer that goes to these places really doesn't drive our business.

[Alexander Goldfarb, Managing Director and Senior Research Analyst at Piper Sandler]

Thank you.

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

It's more the Germans going to Italy and 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 one Q, kind of talk about what's going on there. 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. I guess separately, would be how the tariff situation could impact J.C. Penney and the other Catalyst Brands this year.

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

Again, OPI had improvement. Again, OPI is basically three businesses. Just so everybody knows, it is our e-commerce business, RGG ShopSimon, which we own roughly 45%. Our interest in Catalyst Brands, which is Penny and the other operating brands, Brooks Brothers, Lucky, etc., which we now own, remind me, 39%. And our 50% interest in Jamestown. That is all it is. That is all it plans to be. It is not—it is not—it is not what we live and breathe every day, though we are focused on creating value there as we have with ABG and our other OPI investments. Getting to your question, we had quarter-over-quarter improvement and the other two businesses are stable, fine, going according to plan. The Catalyst Brands had real improvement quarter-over-quarter. As you know, part of that was being not only the synergies that it was achieving in the merger, but also the F21 bankruptcy.

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

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. 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. Obviously, they're negotiating very hard with their suppliers. They have—I mean, the administration is right. They have more leverage in negotiating with suppliers because the U.S. is a big market. They're in a tricky spot. It's very hard to predict sales for those brands, just like it would be for some other retailers. Some of the brands in Catalyst, like Brooks Brothers, is doing great. They're achieving the synergies that they wanted. The business is on plan.

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

The bottom line is, even with today's uncertainty, we still expect to have—again, it does not show in our numbers because of depreciation that I have explained to everybody. We expect Catalyst to have positive EBITDA this year, even with all the tariff and economic uncertainty that it is causing going forward. I would suggest you do not worry about it all that much. That is what we are telling the market. We are happy to answer any and every question except what the price of a cotton shirt is at Brooks Brothers. That I do not know. Actually, I do, but I do not want to—I do not want to be a know-it-all.

[Caitlin Burrows, Vice President at Goldman Sachs]

Thanks, David. Real.

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

Tom Ward, actually, is wearing—Tom, you look very nice. Okay? That is a good-looking shirt, actually. It is better than those—you used to wear those weird shirts. Okay. I think he is a Brooks Brothers consumer.

[Caitlin Burrows, Vice President at Goldman Sachs]

Thank you.

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

You're welcome.

[Operator]

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

[Greg McGinniss, Analyst at Scotiabank]

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 and President at Simon Property Group]

That's a great question. I would say we're still making long-term decisions. 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, since I've been involved, we've never been over our skis. We haven't even put on our skis, if I can keep with the analogy, right? Is that the right word? We haven't even put on our skis recently, right? We've been cautious to begin with. We have all these opportunities. We're very studious in them. 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. We are expecting construction costs to increase.

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

The things that have not started, obviously, we do not start construction until we have the guaranteed max price anyway. The things that are on the docket to start or we are getting through, we are not pulling triggers until we have all the costs finalized and everything else. I think caution is the word of order, but that does not mean we will not buy something or that we will not continue to do our pipeline. It would be foolish for us not to be a little more cautious. Hey, Greg, I think the only thing I would add there is, as volatility increases, sometimes for us, opportunities increase. We have a strong pipeline, and we are clinical with our capital, as you know. Nothing really materially changed, but obviously, a bit more caution relative to the headlines these days. I will give you a simple example.

[David Simon, Chairman, CEO and 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 did not feel like the right time to do it just because it was not material. It just feels like we should be a little more cautious. Again, I do not want to—I do not want to say that we are not going to do a couple of deals here that could even be non-trivial. Caution is the word of order right now.

[Greg McGinniss, Analyst at Scotiabank]

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

[David Simon, Chairman, CEO and President 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 million of projects that are not included in that billion-dollar spend level. We are still advancing our projects that are ready to move forward, but we're just doing so thoughtfully.

[Greg McGinniss, Analyst at Scotiabank]

Okay. Thank you, Brian. Thanks, David.

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

Sure.

[Operator]

The next question comes from the line of Floris van Dijkum with Compass Point. Please proceed.

[Samir Khanal, Senior Director of Investor Relations at Bank of America]

Thank you. David, you sound very chipper. I'm glad to hear your voice. Can I ask you about the S&O pipeline, where it stands today? I think end of the fourth quarter was at 250 basis points. Has that grown? How do you see that? Can you quantify that for us? What's the timing of those rents coming online?

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

You may ask, but I'm going to have Brian answer that. Is this about 300 basis points today? From S&O pipeline, we're standing about 300 basis points. When you run the math on that, it's about $150 million worth of rent at our average rents. Again, that's not all incremental to the existing kind of space. It's not all going to be additive here. We probably believe that the back half of this year, you're probably going to see 30-40% of that.

[Floris van Dijkum, Analyst at Compass Point]

The bulk of that will hit in 2026, or is there also some spillover in 2027?

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

2026 is some '27. We are seeing some tenants looking out further or have been looking out further. Some of that is included in that as well.

[Floris van Dijkum, Analyst at Compass Point]

That includes the Forever 21 spaces as well?

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

It does, yes.

[Floris van Dijkum, Analyst at Compass Point]

Great. Thank you.

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

It's just the ones that are at least signed up. Yeah.

[Operator]

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

[Vince Tibone, Managing Director at Green Street]

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 or categories that are having an outsized impact on the decline in trailing 12-month portfolio sales results.

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

I mentioned one of the decreases—I mean, it's a marginal decrease, but you had two—we don't like to get into specific retailers. You had two that were basically flat if you put those two retailers aside. Again, Easter was not in this versus last 12 months of last time. Vince, when you cut through it, it is relatively flat. We had a little—the malls were a little bit above. Outlets were a little bit down. 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. Again, we had a little softness in some of our border activity.

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

I would say, by and large, our top 25 retailers were pretty much doing okay and up. So other than that color, nothing unusual on sales.

[Floris van Dijkum, Analyst at Compass Point]

No, that's great to hear. Appreciate the color. 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. 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 and President at Simon Property Group]

Yeah. It depends on the department store. For instance, if they do not have private label, they really do not have—they are not sourcing their own goods. They really do not have the China tariff exposure that you might think. It depends on which department store you are talking about and how big their private label business is. If they sell mostly branded goods, then it is really their relationship with the wholesaler and what 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 the wholesaler's manufacturer and what they want to pass that on to the department store. That is a whole complicated—and what the consumer pays. There is just no way to really know how that all shakes out.

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

As far as we can see on department store closures, we do not see—as you know, we had the Macy's announcement. We had one that was affected by that. It would not surprise me if, again, you see pruning just like you do from every retailer on their store level. I do not expect any real major changes right now. Again, the tariff situation is idiosyncratic to that department store and mostly impacts whether or not they have a big private label business.

[Floris van Dijkum, Analyst at Compass Point]

Great. Thank you.

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

Sure.

[Operator]

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

[Mike Muller, CFO at JPMorgan]

Yeah. 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 and President at Simon Property Group]

Yeah. I would say we used to always do that. I did not see it. We had it? We do not do it by weighting anymore. We should do that, by the way. That is me telling my guys. I would say when I look at it, there is no question that the better properties are getting better. The simple answer to that is sales would be up. We can give you the specific numbers, but sales would be up if you NOI-weighted unequivocally. One hundred assets are up about 1.5%. That does not include—that, again, has Easter in March of last year, not April of this year.

[Mike Muller, CFO at JPMorgan]

Got it. Okay. Okay. Great. Maybe one other one. On the $500 million of development starts, I think, Brian, you mentioned mixed-use components in there. How much of those dollars or even the overall redevelopment pipeline of those dollars are directly retail versus some other property type, whether it is office, hotel, resi?

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

I mean, effectively, the 60% that isn't mixed-use, quite honestly, Michael. The 60% is retail. The other 40% would be mixed-use. All the other componentry.

[Mike Muller, CFO at JPMorgan]

Okay. Perfect. Thank you.

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

By the way, that's at our share. We have, again, we're going to do a big residential development at Bray Mall, but we have a partner for that. That is 500 new starts as our share. It is a bigger pipe than just that. We just boil it down to our share.

[Mike Muller, CFO at JPMorgan]

Got it. Thank you.

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

Sure.

[Operator]

The next question comes from the line of Ronald Kamdem with Morgan Stanley. Please proceed.

[Ronald Kamdem, Managing Director at Morgan Stanley]

Great. Hey, just wanted to go back to the guidance. I think some of the assumptions and inputs that have come into last time—appreciate it's still early—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 have those sort of changed since the last three months? Thanks so much.

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

No change, really. Yeah. No, no change in any of those amounts. As you can see, the interest income starting to come down. It's about $0.06 in the quarter. We would expect that to carry forward for the balance of the year. You will also see some more interest expense come through as we refinance our debt later this year and slightly higher coupons on. No material change to the other elements of the guidance we just announced at the beginning of the year.

[Ronald Kamdem, Managing Director at Morgan Stanley]

Great. Thanks so much.

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

Sure. Thank you.

[Operator]

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

[Ravi Vaidya, CFA at Mizuho Securities]

Hi there. This is Ravi Vaidya, the end of the line for Handel. I hope you guys are doing well. I wanted to particularly ask about your luxury tenants. What are you hearing from them in terms of sales and foot traffic? Maybe has there been any sort of pause or pullback on leasing demand from luxury tenants in particular?

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

Not really. Again, and I think it's very brand-specific. You have some that are absolutely on fire, others that are bringing in new designers and updating the brand. All of that's been pretty consistent for our outlook and what's been going on. They think very long-term like we do. There really hasn't been a change of mood or commitment from those brands. 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. We haven't seen the big sales growth. 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.

[Ravi Vaidya, CFA at Mizuho Securities]

Got it. Thank you.

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

Sure.

[Operator]

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

[Linda Tsai, Senior Vice President 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 and President at Simon Property Group]

We have seen that a little bit historically. I would say it's possible. If that's the case, margins might be okay because price—I mean, for retailers, prices could go up. I do think it's possible. We have seen that in other cases. I wouldn't rule it out. I think it's to be determined, but I wouldn't rule it out.

[Linda Tsai, Senior Vice President at Jefferies]

Thank you.

[David Simon, Chairman, CEO and 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 $2.8 billion of debt refinancing. I wonder if you could just talk a little bit about what that market looks like today, any big changes in terms, LTV, or how lenders are generally kind of looking at the asset class at this point.

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

I’d say that lenders are very comfortable with the asset class. We’ve been upgraded to stay positive from a staggered perspective. From an S&P perspective, from an unsecured perspective, $1.6 billion of maturities here. We will refinance that back in the unsecured market throughout the balance of the year. On the mortgage side, you continue to see lenders, CMBS, life insurance companies, and others 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. That opens us up to an opportunity to refinance. What we did earlier in the year is representative of that. Home loans done in the first quarter. I think the market is open for us to continue to refinance. Importantly, we’re rolling over our debt.

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

We're not looking for incremental capital. We're not looking to extract excess proceeds to redeploy into our business. We're doing that with our free cash flow. Yeah. The good news is good retail real estate has—people are very comfortable financing it, and certainly our company.

[Omotayo Okusanya, Managing Director at Deutsche Bank]

Thanks, David.

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

Okay. Just thank you, everybody. I think we'll talk soon. I believe at least I do think the mood's getting more certain and more stable. 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

• Tom Ward, SVP of Investor Relations
• Brian McDade, CFO
• David Simon, Chairman, CEO and President

Analysts

• Michael Goldsmith, Analyst at UBS
• Greg McGinniss, Analyst at Scotiabank
• Floris van Dijkum, Analyst at Compass Point
• Caitlin Burrows, Vice President at Goldman Sachs
• Linda Tsai, Senior Vice President at Jefferies
• Ronald Kamdem, Managing Director at Morgan Stanley
• Vince Tibone, Managing Director at Green Street
• Omotayo Okusanya, Managing Director at Deutsche Bank
• Steve Sakwa, Senior Managing Director and Senior Equity Research Analyst at Evercore ISI
• Mike Muller, CFO at JPMorgan
• Samir Khanal, Senior Director of Investor Relations at Bank of America
• Craig Mailman, Director and Equity Research Analyst at Citi
• Ravi Vaidya, CFA at Mizuho Securities
• Alexander Goldfarb, Managing Director and Senior Research Analyst at Piper Sandler