**Simon Property Group, Inc. (NYSE: SPG) Q3 2025 Earnings Call Transcript**
*November 3, 2025*
Simon Property Group, Inc. beats earnings expectations. Reported EPS is $3.22, compared to expectations of $3.09.
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**Operator:**
Greetings. Welcome to the Simon Property Group Third Quarter 2025 Earnings Conference Call. Please note, this conference is being recorded. I’ll now turn the conference over to Tom Ward, Senior Vice President, Investor Relations.
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**Thomas Ward (SVP, Investor Relations):**
Thank you, Sherry, and thank you all for joining us this evening. Presenting on today’s call are David Simon, Chairman, Chief Executive Officer and President; Eli Simon, Chief Operating Officer; and Brian McDade, Chief Financial Officer.
A quick reminder: 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. Actual results may differ materially due to a variety of risks, uncertainties, and other factors. Please refer to today’s press release and our SEC filings for a detailed discussion of risk factors relating to these statements. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included within the press release and supplemental information in today’s Form 8-K filing, available at [investors.simon.com](https://investors.simon.com).
Our conference call this evening will be limited to 1 hour. We ask that those participating in the question-and-answer session please limit yourself to one question. I’m pleased to introduce David Simon.
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**David Simon (Chairman, CEO & President):**
Good evening. I’m pleased with our financial and operational performance for the third quarter. Our results were driven by solid fundamentals: higher occupancy, accelerating shopper traffic, strong retail sales, and positive supply and demand dynamics—all contributing to strong cash flow growth.
We’re happy to have acquired the remaining interest in Taubman Realty Group (TRG) that we didn’t own and are excited about opportunities to enhance operational efficiency and increase NOI from these assets, delivering long-term returns to shareholders. I want to thank Bobby and Billy Taubman and the entire TRG team for our successful partnership over the last five years.
Now, I’ll turn it over to Eli for more on the TRG transaction and development activity, and then Brian will cover our third-quarter results.
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**Eli Simon (Chief Operating Officer):**
Thank you, David. As mentioned, we completed the acquisition of the remaining 12% interest in TRG that we did not previously own in exchange for 5.06 million limited partnership units. We acquired these high-quality assets at an overall cap rate of over 7.25%, not including any operational efficiencies or improvements. These iconic assets further enhance the quality of our portfolio, and we are now positioned to pursue new growth and value creation opportunities.
The TRG portfolio boasts strong operating metrics: 94.2% occupancy, average base minimum rent of $72.36 per square foot, and retailer sales of approximately $1,200 per square foot. This transaction will be accretive in 2026 as we assume management responsibilities and integrate the assets, with the full benefit realized in 2027. We expect at least a 50 basis-point increase to the going-in overall yield. TRG will be consolidated and accounted for as a business combination, requiring a remeasurement of our previously held equity interest to fair value, resulting in a significant noncash, non-FFO gain to be recognized in Q4 2025.
Regarding development, in Q3 we began construction on several new projects including a second phase of residential at Northgate Station, an expansion of the Westin Austin Hotel at The Domain, and retail/experiential additions at Brea Mall, King of Prussia, and The Shops at Mission Viejo. At quarter end, our share of the net cost of development projects was $1.25 billion with a blended yield of 9%. Approximately 45% of net costs are allocated to mixed-use projects. Our development and redevelopment pipeline continues to grow, including a major full-price retail and mixed-use project in Nashville, with more details forthcoming.
Now, over to Brian for a review of our third-quarter results.
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**Brian McDade (Chief Financial Officer):**
Thank you, Eli. Real estate FFO was $3.22 per share in Q3 compared to $3.05 in the prior year—a 5.6% increase. Both domestic and international operations had a strong quarter, contributing $0.26 of growth, driven by an 8% increase in lease income. Lower interest income and higher interest expense combined were a $0.09 year-over-year drag.
Domestic NOI increased 5.1% year-over-year for the quarter and 4.2% for the first nine months of the year. Portfolio NOI, including international properties at constant currency, grew 5.2% for the quarter and 4.5% year-to-date. Retailer demand remains robust; we signed over 1,000 leases totaling approximately 4 million square feet during the quarter, with 30% representing new deals.
Malls and Premium Outlets ended Q3 at 96.4% occupancy (up 40bps sequentially and 20bps YoY). The Mills achieved 99.4% occupancy (up 10bps sequentially and 80bps YoY). Average base minimum rents increased 2.5% YoY for Malls and Premium Outlets and 1.8% for the Mills. Retailer sales per square foot in Malls and Premium Outlets were $742 for the quarter. Total sales volumes increased more than 4%, with sequential acceleration in shopper traffic and retailer sales, especially during back-to-school season. Occupancy cost at the quarter’s end was stable at 13%.
Q3 funds from operations were $1.23 billion or $3.25 per share compared to $1.07 billion or $2.84 per share last year. Some of the increase was due to improvement in OPI. Please refer to the FFO reconciliation in our supplemental materials for details on year-over-year changes.
**Balance Sheet & Dividend:**
During the quarter, we completed a dual tranche U.S. senior note offering totaling $1.5 billion at a combined average term of 7.8 years and a weighted average coupon of 4.8%. For the first nine months, we completed 33 secured loan transactions totaling $5.4 billion at a weighted average interest rate of 5.38%. We ended the quarter with $9.5 billion in liquidity.
We announced a Q4 dividend of $2.20 per share, a $0.10 or 4.8% YoY increase, payable December 31.
**Guidance:**
We are increasing our full-year 2025 real estate FFO guidance range to $12.60–$12.70 per share, compared to $12.24 last year and our prior guidance of $12.45–$12.65. The updated range reflects a $0.15 increase at the low end and $0.10 at the midpoint.
We are now available for questions.
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### Q&A Session Highlights
**Operational Efficiencies for Taubman Assets:**
When asked about operational improvements post-TRG acquisition, David Simon explained that beyond the initial elimination of public company costs, integrating TRG into Simon’s platform enables further synergies in development, leasing, marketing, and property management—driving NOI and occupancy higher.
**Cap Rate Clarification on TRG Acquisition:**
David Simon detailed that across four transactions for the Taubman Group, the blended cap rate is over 7.25% on today’s numbers. Adding operational synergies pushes the yield north of 8%, with further upside from intrinsic portfolio growth, which tends to outpace the legacy Simon portfolio. The final 12% was acquired at a cap rate in the 6.25–6.5% range, excluding operational enhancements.
**Retail Sales Trends:**
Brian McDade shared that Q3 saw widespread sales increases across platforms, with luxury and athleisure leading the way, and a particularly strong back-to-school season. High-income-oriented centers outperformed while value-oriented centers saw more modest growth. Florida remains strong, though Las Vegas assets underperformed due to weaker tourist demand.
**Outlook for NOI Growth:**
David Simon and Brian McDade expressed confidence in maintaining positive NOI growth into 2026, pending final guidance to be issued with February earnings.
**Tariffs & Retailer Impact:**
David Simon believes the full impact of tariffs has not been felt yet, suggesting it’s still mid-game. While large retailers are better equipped to handle tariff pressures, small retailers may face more challenges. However, supply and demand for Simon’s leasing remains robust.
**Market Segments & Leasing:**
Despite cautious lower-income consumers, value-oriented centers continue to see increased traffic. net effective rents remain healthy due to low occupancy cost ratios and continued retail demand, though sales growth lags higher-end centers.
**Leasing Activity & Tenant Mix:**
Simon continues to add new-to-market concepts such as Meta, Google, Netflix, and Pop Mart. Approximately 30% of leases signed in the quarter were new deals, not just renewals, indicating strong demand for fresh concepts and ongoing improvements to the merchandising mix.
**Technology & AI Outlook:**
David Simon addressed questions about AI and retail, saying e-commerce will be affected more directly by AI than physical retail. Simon’s focus is on creating compelling in-person shopping destinations that leverage technology for loyalty, marketing, and operations. Simon is experimenting with AI internally and will continue to look for opportunities to integrate it.
**Klépierre Investment & European Strategy:**
Simon continues to view its Klépierre investment as strategic, evaluating it continually. Full-price European assets are more likely to be acquired via Klépierre, while outlet assets would be considered for direct Simon ownership.
**TRG Portfolio Secured Debt:**
Simon plans to gradually unencumber TRG assets, enhancing the already strong unencumbered asset base. The portfolio will be reviewed periodically for potential sales, though currently, they’re comfortable with the holdings.
**Capital Allocation Priorities:**
Now surpassing pre-COVID dividend levels, Simon’s priorities are to “quarterize” (offset) shares issued in the TRG transaction, grow the dividend, and pursue accretive redevelopment opportunities across both flagship and mixed-use assets. Share buybacks are likely, market conditions permitting.
**Leasing Pipeline & Luxury Tenants:**
The S&O (signed and not opened) pipeline remains strong at 310bps, with 50–60bps attributed to luxury tenants. Kering dropped out of the top 10 tenant list, not due to closures but because other retailers opened more stores.
**OPI (Operating Property Income) & Catalyst Integration:**
Simon is pleased with post-merger progress across multiple brands under Catalyst, with strong results in JCPenney, Aeropostale, Brooks Brothers, and Lucky, despite some challenges with Forever 21. The focus remains on delivering value across all income segments.
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**Closing Remarks (David Simon):**
We had a very active quarter and expect an even busier fourth quarter. Thank you for your interest and your questions.
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*End of transcript.*
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*For more information, visit the [Simon Property Group Investor Relations website](https://investors.simon.com).*
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