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DATE
Monday, Nov. 3, 2025 at 5 p.m. ET
CALL PARTICIPANTS
Chairman, Chief Executive Officer, and President — David Simon
President, TRG and Development — Eli Simon
Chief Financial Officer — Brian J. McDade
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TAKEAWAYS
TRG Acquisition -- Simon Property Group (SPG +3.35%) completed the purchase of the remaining 12% interest in Taubman Realty Group (TRG) through the issuance of 5,060,000 limited partnership units.
TRG Operating Metrics -- The TRG assets held 94.2% occupancy, produced an average base minimum rent of $72.36 per square foot.
TRG Cap Rate and Accretion -- Simon Property Group acquired the TRG assets at a cap rate over 7.25%, with operational integration projected to lift the yield by at least 50 basis points, and the full benefit expected in 2027 and accretion fully realized in 2027.
NOI Growth -- Domestic net operating income (NOI) rose 5.1% and total portfolio NOI increased 5.2% year over year in Q3 2025.
FFO Performance -- Real estate funds from operations (FFO) totaled $1.23 billion, or $3.25 per share, in Q3 2025, up from $1.07 billion, or $2.84 per share, in the prior-year quarter (non-GAAP funds from operations).
Occupancy Rates -- Malls and premium outlets reported 96.4% occupancy, a sequential increase of 40 basis points and a year-over-year increase of 20 basis points for mall and premium outlet occupancy; The Mills segment reached 99.4% occupancy, up 10 basis points sequentially and 80 basis points year over year.
Leasing and Retailer Demand -- Over 1,000 leases totaling about 4 million square feet were signed, with 30% classified as new deals.
Retail Sales and Traffic -- Retailer sales per square foot for malls and premium outlets reached $742, with total sales volume up more than 4% and sequential improvement in shopper traffic.
Average Base Minimum Rent -- Malls and premium outlets saw a 2.5% year-over-year increase in average base minimum rent.
Dividend Increase -- The Q4 dividend was announced at $2.20 per share, a $0.10, or 4.8%, increase year over year.
Guidance Update -- Full-year 2025 real estate FFO (non-GAAP) guidance was raised to $12.60–$12.70 per share, up from a prior range of $12.45–$12.65, and above last year’s $12.24 per share.
Liquidity Position -- Available liquidity at quarter’s end totaled approximately $9.5 billion.
Debt Activity -- $1.5 billion in U.S. senior notes were issued at a weighted average coupon of 4.8% and a term of 7.8 years; 33 secured loan transactions totaling $5.4 billion were completed with a weighted average interest rate of 5.38% during the first nine months of 2025.
Development Pipeline -- Net cost of development projects was $1.25 billion (Simon Property Group’s share) as of quarter end, with blended yields at 9% and 45% of net costs attributed to mixed-use projects.
SUMMARY
The completed acquisition of the remaining interest in Taubman Realty Group and its integration into the Simon Property Group platform is expected by management to drive NOI growth, improved yields, and future accretion, with the transaction projected to be accretive in 2026 and the full benefit realized in 2027. Broad leasing activity, higher sales per square foot, and widespread occupancy gains underpin resilient retailer demand across asset classes. Management disclosed an elevated dividend, improved balance sheet liquidity, and committed capital for both core and mixed-use development initiatives without signaling a near-term shift in capital allocation strategy.
Eli Simon described the TRG acquisition as resulting in "a really big noncash, non-FFO gain to be recognized in 2025" due to fair value remeasurement.
Eli Simon stated, "These iconic assets further enhance the quality of our overall portfolio and we are now in a position to pursue new growth and value creation opportunities for this portfolio."
Brian J. McDade noted the leasing environment is enabling proactive rotation of tenants to elevate credit quality and drive merchandising mix upgrades.
Management confirmed occupancy costs were stable at 13%, and current leasing activity includes a significant share of new-to-portfolio and experiential concepts.
Simon Property Group intends to 'quarterize' the newly issued units from the TRG transaction over time, subject to market conditions, and strategic capital deployment will continue to prioritize both flagship and mixed-use development aligned with accretive opportunities.
The company continues to evaluate its European investments, with the CEO stating, "to see if that's the best allocation of our capital and we will continue to do so."
TRG assets are expected to contribute to 'accelerated' top-line NOI growth due to their quality and growth skew, with full operational benefits realized in 2027 as the transaction is integrated and operational efficiencies are achieved.
INDUSTRY GLOSSARY
TRG: Taubman Realty Group, a portfolio of high-quality retail and mixed-use assets acquired by Simon Property Group, now wholly owned following the third-quarter transaction.
The Mills: A Simon Property Group-owned portfolio of value-oriented, large-format retail centers distinct from malls and premium outlets.
OPI: Other Platform Investments — Simon Property Group’s business segment encompassing interests in retailers and brands outside of direct-owned retail real estate.
Klepierre: A European retail real estate company in which Simon Property Group maintains a significant equity investment.
Full Conference Call Transcript
David Simon: Hi. Good evening. Yeah. I'm obviously pleased with our financial and operational performance for the third quarter. Our results were driven by solid fundamentals, higher occupancy, accelerating shopper traffic, strong retail sales, net of positive supply and demand dynamics, all contributing to strong cash flow growth. We are pleased to have acquired the remaining interest in Taubman Realty Group that we didn't know and are excited about the opportunity to enhance the operational efficiency and increase the NOI from the assets and deliver long-term returns to our shareholders. I want to thank Bobby and Billy, Calvin, and the entire TRG team for our successful partnership over the last five years.
David Simon: I'm now gonna turn it over to Eli who will discuss the terrific TRG transaction. And update on our development activity and Brian will cover our third quarter results and other various goodies. There you go, Eli.
Eli Simon: Thank you. As mentioned, we completed the acquisition of the remaining 12% interest in TRG that we did not previously own in exchange for 5,060,000 limited partnership units. We are pleased with the outcome, having acquired these high-quality assets at an overall cap rate of over 7.25% not taking into account any operational efficiencies and improvements. These iconic assets further enhance the quality of our overall portfolio and we are now in a position to pursue new growth and value creation opportunities for this portfolio. The portfolio has strong operating metrics, including 94.2% occupancy, average base minimum rent of $72.36 per square foot, and retailer sales of approximately $1,200 per square foot.
This transaction will be accretive in 2026 as we assume management responsibilities and integrate the assets with the full benefit realized in 2027 given all of the operational aspects of running on our platform, adding at least 50 basis points to the going in overall yield. TRG will be consolidated, and the acquisition will be accounted for as a business combination. This will require remeasurement of our previously held equity interest to fair value, resulting in a really big noncash, non-FFO gain to be recognized in 2025. Now turning to development.
In the third quarter, we began construction on several new projects, including a second phase of residential at Northgate Station, an expansion of the Weston Austin Hotel at The Domain, retail and experiential additions at Brea Mall King Of Prussia, and the shops at Mission Viejo. At quarter end, our share of the net cost of development projects across all platforms was $1.25 billion with a blended yield of 9%. Approximately 45% of net costs are for mixed-use projects. In addition, our new development and redevelopment pipeline continues to grow with exciting new opportunities ahead, including a major full-price retail and mixed-use project in Nashville, where we will be unveiling our vision later this week.
I'll now turn it over to Brian, who will walk through our third quarter results.
Brian J. McDade: Thank you, Eli. Real estate FFO was $3.22 per share in the third quarter compared to $3.05 in the prior year.
Eli Simon: 5.6% growth Domestic and international operations had a very good quarter and contributed 26¢ of growth. Driven by an 8% increase in lease income.
Brian J. McDade: As anticipated,
Eli Simon: lower interest income and higher interest expense combined were a 9¢ drag year over year. Domestic NOI increased 5.1% year over year for the quarter and 4.2% for the first nine months of the year. Portfolio NOI, which includes our international properties at constant currency, grew 5.2% for the quarter and 4.5% for the first nine months. Retailer demand remains strong as we signed over 1,000 leases totaling approximately 4,000,000 square feet during the quarter.
Brian J. McDade: Approximately 30% of our leasing activity represents new deals,
Eli Simon: reflecting continued strong demand across the portfolio.
Brian J. McDade: The malls and premium outlets ended the third quarter at 96.4% occupancy.
Eli Simon: An increase of 40 basis points sequentially and 20 basis points year over year. The mills achieved a 99.4% occupancy,
Brian J. McDade: an increase of 10 basis points sequentially and 80 basis points from the prior year. Average base minimum rents increased 2.5% year over year
Eli Simon: for the malls and the premium outlets, while the mills saw a 1.8% increase. Retailer sales per square foot for the malls and the premium outlets were $742 for the quarter. Importantly, total sales volumes increased more than 4% in the third quarter. Shopper traffic in retailer sales accelerated sequentially, reflecting the impact of a successful back-to-school season. Occupancy cost at the end of the quarter was stable at 13%.
Brian J. McDade: Third quarter funds from operation were $1.23 billion or $3.25 per share compared to $1.07 billion or $2.84 per share last year.
Eli Simon: Some of the increase was due to improvement in OPI compared to last year. Please see the FFO reconciliation included in our supplemental today for details on the year-over-year changes in FFO per share. Turning to the balance sheet and liquidity. During the quarter, we completed a dual tranche U.S. Senior note offering that totaled $1.5 billion at a combined average term of 7.8 years and a weighted average coupon rate of 4.8%.
Brian J. McDade: During the first nine months of the year,
Eli Simon: we completed 33 secured loan transactions
Brian J. McDade: totaling approximately $5.4 billion.
Eli Simon: The weighted average interest rate on these loans was 5.38%. We ended the quarter with approximately $9.5 billion of liquidity.
Brian J. McDade: Turning to our dividend. Today, we announced
Eli Simon: $2.2 per share for the fourth quarter a year-over-year increase of $0.10 or 4.8%. The dividend is payable on December 31. Now turning to guidance. We are increasing our full-year 2025 real estate FFO guidance range to $12.6 to $12.7 per share.
Brian J. McDade: This compares
Eli Simon: to $12.24 last year in our prior guidance range $12.45 to $12.65 per share. The updated range reflects a 15¢ increase at the low end and a $0.10 increase at the midpoint. Thank you. We are now available for questions.
Operator: Thank you. You may press 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question is from Michael Goldsmith with UBS. Please proceed.
Michael Goldsmith: Good afternoon. Thanks a lot for taking my question. In the prepared remarks, you mentioned the opportunity for operational efficiencies and improvement for the Taubman assets twice. And that these should help improve the yield by 50 basis points. So
David Simon: can you share some of the specifics of the opportunity from bringing these assets up fully onto your platform? Here. Can you get on your phone? We should always have a backup for you.
Michael Goldsmith: Hello?
Operator: Hi. We're able to hear you.
David Simon: Okay. We got disconnected. So can you repeat the question? We didn't get it all. Yeah. Absolutely. In the prepared remarks, you mentioned the opportunity for operational efficiencies and improvement for the Taubman assets twice and that you should help improve the yield 50 basis points. So can you share
Michael Goldsmith: some of the specifics of the opportunity from bringing these assets onto your platform?
David Simon: Yeah. I mean, you know, when we bought the original 80% of Taubman, the only real operational efficiencies we got was eliminating public company cost. Obviously, they had a full operational team running those assets. And we'll be able to add them to our platform that you know, very little cost. And then from an operational enhancement point of view, we bring our expertise in development, redevelopment, leasing, marketing, brand ventures, we put all that together. And that's what we do for a living. So we've helped out, but not to the point of how we would if we actually ran the properties day to day. So now we put them on our we bolt them onto our platform.
That's easy. And then we run the properties day to day, and we bring all that we can bear to a portfolio like that. And that's where we see a tremendous amount of upside. Look at the occupancy it's lower than where we're at, and we think we can bring it up to our level. And then we've got all our asset management techniques property management capabilities that are gonna just grind higher cash flow. That's what we do for a living. That's why we've been the acquirer. That's why we've been successful. Time and again.
And, you know, if you look back at this portfolio, and you look at the entire transaction, you know, we're gonna be at a essentially an eight cap rate when we add these little over eight cap rate. When we add the portfolio the assets to our platform. And that and you look at the quality of the assets, that makes for a terrific deal, which you guys need to understand. So it's at a much higher cap rate than strip centers and trading. Much better growth rate. Than strip centers are trading. That I've seen. And, you know, these assets have been around seventy years. You know? That's the other thing to step back. So take data centers.
Data centers trade at a four and a half cap rate and we don't know nobody knows what they're gonna look like in five years. What we do know that good malls have been around seventy years. Seventy years. Not seven years. Not seventeen years. But seven zero years. So we made a hell of a trade, and that's certainly one of the reasons why I think the Taubman's wanted to convert this last 12% into our units, which is convertible on a one basis to our stock, because they've seen the know, our ability to execute and perform at levels that no one else has in our in our peer group.
Michael Goldsmith: Thank you very much. Good luck in the fourth quarter.
David Simon: Yeah. Be excited.
Eli Simon: We Alright. Good. Thank you.
Operator: Our next question is from Alexander David Goldfarb with Piper Sandler. Please proceed.
Eli Simon: Eli, welcome to the public earnings call. Thank you. So
Alexander David Goldfarb: you now get the all the all the enjoyment that David has had over the years. So David, just going back to the cap rate, and if you'll indulge me a little bit, if we take the implied cap rate of the shares issued on Friday, it's sort of a little over a six. But you spoke about an eight, which sounds like the existing assets were producing a lot more the overall versus the final buyout trade. But then you spoke about the initial 50 bp increase once a time Simon's platform, but presumably there's a lot more growth over the next five or so years that presumably that eight goes higher.
So one, can you help us understand sort of the pricing of the final 12 and how that relates to the 7.25% that you initially spoke about? And then over the next few years, presumably, this cap rate is going to be much higher than an eight Yes. So let me just unpack it a little bit. I'll be a little more clear.
David Simon: So if you look at we had four transactions within the Taubman Group. We had the initial 80, We had the two four percents and then the 12. If you look at that on today's numbers, today's numbers, that's basically a little over a seven and a quarter cap rate. If you add what we think will bring in operational synergies, efficiencies, slash enhancements. That's where we get to north of eight. And then, obviously, Alex, you're right.
Then you have all the intrinsic growth of the portfolio, which we're not that will just be year after year growth because I think these assets by and large, have a you know, a higher skew of quality than, you know, just the Simon only portfolio. So they skew a little higher growth than we do you know, we did historically. So we would expect our top NOI growth to accelerate because of adding that in. So that so that hopefully, impacts if you really are focused on the 12%, not including the operational enhancements, We're in the six and a quarter to six and a half cap rate if you just wanna focus on that 12%.
Alexander David Goldfarb: Okay? Right.
David Simon: Explain it.
Alexander David Goldfarb: Yeah. That's that it's what we thought initially, but, obviously, all the pieces adding up to get us out how you think about them. You I told you a lot more. Only you and you, I told you a lot more.
Brian J. McDade: Information.
David Simon: I normally would. Okay?
Alexander David Goldfarb: I'm sure Floris will ask a lot more details than I have. So I'll stand back. So thank you for your thank you, David.
Eli Simon: Okay.
Operator: Our next question is from Caitlin Burrows with Goldman Sachs. Please
Caitlin Burrows: Hi, everyone. Congrats on the quarter and recent announcements, and yes, welcome, Eli.
Eli Simon: To the earnings call. Maybe on the sales results, they increased in the quarter, which was great to see. Could you give any detail on how widespread that was? Did a couple of 10 drive numbers one way or the other? I know you have initiatives to upgrade the tenant base, maybe shrink the network where it makes sense. So just whether we're starting to see some impact from those initiatives?
Brian J. McDade: Hi, Caitlin. It's Brian. Quite honestly,
Eli Simon: throughout the quarter, you saw a widespread increase across all three platforms. And, you know, the tenant base certainly was productive in the quarter.
Brian J. McDade: You saw certain categories outperform. You saw luxury come back a bit.
Eli Simon: Certainly, athleisure outperform, even the apparel category. So certainly, the back-to-school season was a robust one for our business and our portfolio. Even you saw some positive inflection in some of the tourist-oriented centers. So we are starting to see it kinda widespread across totality of the portfolio. Sequential improvement? Both in traffic and in sales. Caitlin, I would only add that I think, know, like I said last quarter, I believe, we're still not, from a sales point of view, hitting on all cylinders.
What I did what I did what we did see is that the kind of the higher end consumer, obviously, I don't have to you know, you have as good a date data as we do at Goldman and but, clearly, you know, we're we're in this case shape kinda situation. So we did skew better results in the know, the higher income, oriented sense. The value-oriented centers were more flat to you know, kind of, you know, eking along. So he didn't see you didn't see the entire portfolio. Brian's right. The order was okay. At least stabilized. So it's not it's not hitting on all cylinders, but it's okay. Florida remains to be very strong.
David Simon: You know, the one area that you know, we're seeing, and I think everybody's seeing, is that your you know, Las Vegas from a tourist market is underperforming. You see it from the casinos, Obviously, we have a lot of properties, great properties, but they're not you know, they're not copying the sales growth that we would expect. And then Brian is right. We did see stabilization in the luxury, which is good. But again, the higher income properties are doing better. The one caveat is as you know, our Vegas properties skewed toward that, and they were not, their comp sales were intact. I think a little down. I don't have the number off the top of my head.
So we're we're seeing underperformance. You know, look, we don't worry about that because Vegas assets are great and Vegas does go up and down. And you've you've clearly had Canadians that don't go to Las Vegas and other people that are, you know, that are not going at the frequency that's happening. But no concern there. But right now, it's kind of in a trough.
Caitlin Burrows: Thank you.
David Simon: Sure. Our next question
Operator: is from Samir Khanal with Bank of America. Please proceed.
Samir Khanal: Hi. Good evening, everybody. Brian or David, you've generated very strong NOI growth year to date.
David Simon: 5% for the quarter. I guess given the solid leasing environment you're seeing, just trying to see if you can keep up this sort of same store momentum in 2026 or even do better assuming a, sort of a similar retailer sales environment? Curious on your thoughts. Thanks.
David Simon: Well, the team, is doing our I think we invite Alex. So we invite you and then disinvite you, but the team is going through the you know, the property by property root canal.
Samir Khanal: Okay? So
David Simon: I'm glad to report no cavities No need for root canal. We feel really, you know, what I'm being told and what I'm seeing from the numbers, are really positive. The team is juiced energized. So we feel I'm not gonna give you a number, but you know, we feel really good about 26 in terms of our ability to produce content on our road. As you know, we'll do that in February, with our earnings guidance, but you know, the team is feeling good that, you know, we'll we'll have another you know, obviously, you know, the there's external factors that, that we don't even we don't control. I'm kidding.
Eli Simon: But
David Simon: we're feeling really generally positive about what we're seeing. Right, Brian? Yeah. No. That's the report back that we're in the middle of grinding out. We'll get back to you in February, but I think there's an optimism. Yep. You know, you've been going through all these Yep. And it's and it's across the portfolio. Not just the, you know, the powerhouse centers, but really across the portfolio. A lot of exciting, new things just in store for next year.
Samir Khanal: Thank you. Sure.
Operator: Our next question is from Greg McGinniss with Scotiabank. Please proceed.
Greg McGinniss: Hey. Good evening. So
Samir Khanal: from our perspective and despite our expectations, tariffs has seemingly little impact on shopper or retailer behavior to date.
Greg McGinniss: And, David, I know you previously mentioned that maybe the holiday season is when we start to see some impact to retailer financials, but we were hoping you know, for an update on what you're seeing in your retailer discussions and regarding your expectations on any impact to leasing, and or tenant behavior.
David Simon: From the tariffs. Right? So okay. I think the news that, president Trump and president Xi had on the Chinese discussion is positive for our retailers. Even though a number of them have moved some of their production out of China Although that's a positive. I do I continue to you know, believe that tariffs will have an impact We have not yet seen all of it. And I think some of that you know, will as I said last time, I mean, it's pretty consistent story. Some of that would be passed on to the, supplier Some of that will be eaten by the retailer. And some of that will be passed on to the consumer.
So, you know, there's just there's just in many cases, the inability for retailers to eat that entire tariff. So they're gonna have to you know, pass it on or renegotiate better, better vendor deals. And I still believe we still haven't seen the full impact. So I think your question is appropriate. I think it's still you know, if now baseball goes to what it, 18 inning sound? Is it?
Eli Simon: I mean okay. 18 innings now. You know? So
David Simon: so I'm not let's assume it goes to state nine.
Eli Simon: I think the tariff implied that they're, like,
David Simon: put an ending on it, I'd say five to six You know? I mean, it's just know, gut feel, so it's not scientific. So we'll have to see. And I do and I do worry that it I do worry. That it will put more pressure you know, on the smaller you know, the smaller retailers, or the know, the not the mammoth retailers that we all think about. Right? Because they have the they have the ability to you know, to handle it. And try and use this as an opportunity to squeeze and increase market share. So you know, we're still in the middle of the game. It ain't over. Hopefully,
Eli Simon: it is a nine inning game. It doesn't go to 18.
David Simon: But I don't think the final chapter you know, how about all these analogies? But I don't think the final chapter's been there. So we're still cautious on that. But let me just end by saying you know, from a supply and demand point of view, you know, just from our leasing, we see absolutely unequivocally no change of heart you know, from the retailers that are looking to grow their footprint.
Greg McGinniss: Great. Thank you.
Brian J. McDade: Thank you.
Eli Simon: Our next question is from Craig Mailman with Citi. Please proceed. Hey, guys. David, maybe going back to your comments earlier about
Greg McGinniss: you know, the Value Mall Kind Of The Foot Traffic Going On There Versus Your End Mall. As You Look At 26, I know you guys said feel very good, but
Brian J. McDade: in the tenant demand
Greg McGinniss: as you guys approach conversations,
Brian J. McDade: tenants who are looking at both high end and
Greg McGinniss: kind of the value segment from some of that crossover.
Brian J. McDade: Do you feel like
Greg McGinniss: you guys are losing a little bit of momentum in the ability to push net effectives at the value side of the portfolio or the inflation over the last couple of years just pushed OCRs to a point?
David Simon: Where you still feel like you're able to
Brian J. McDade: to get pretty good upside relative to
Greg McGinniss: maybe where you're pushing the luxury. Or the higher end malls.
David Simon: Yeah. I let me just say. I traffic for the kind of the value oriented centers is up. So it's not the traffic It's just really the conversion I think that consumer is being a little more cautious. But I think you pinpointed. I mean, we have low OCR's there. The demand again, the re retail demand on that on that portfolio is still very positive. So no you know, no change of no different point of view.
But, you know, we so do have to be sensitive because, you know, the lower income consumer which, again, we don't skew to even in our outlet centers they're skewed toward the higher end retailers around the higher end consumers, I should say. So it's not it's not it's not where we skew. But, again, demand is good, and it's not a no really no change of mood or potential there, but it is sales are not moving you know, as, they're not increasing at the rate that the full price better, higher end centers are.
Eli Simon: That's it.
David Simon: So I think that, you know, the outlet consumer is being a little more cautious But let's see what happens is you know, this Christmas. I mean, you still got you still got things going for the lower end consumer, lower gas price. Hopefully lower you know, electricity prices for the time being until all these data centers get built, and that's another interesting thing we need to talk about as a country. But I think it's again, it's we're just know, the sales are not hitting like Vegas, like a couple of order northern borders. Think we're just not hitting on all cylinders.
And the reason we say that is to show you that there's more juice in the orange. Right? Is it orange? Or lemon? Orange. I'd rather be orange. Okay. Yeah. Lemon sounds good. Right? So there's more juice there. It's just we're not we're not getting all of it at this point.
Operator: Our next question is from Michael Anderson Griffin with Evercore ISI. Please proceed.
Michael Anderson Griffin: Great. Thanks. I wanted to ask on the, the new leasing in quarter, Brian. I think you mentioned it was about 30% of the total leases executed. Is this you all proactively looking to get ahead of leases that might
Samir Khanal: expire in a year or two and upgrade the credit quality? And can you also give us a sense if you're seeing more of those new to mall concepts coming in the portfolio? And lastly, anything you can comment on leasing
Michael Anderson Griffin: spread for that would be helpful. Thank you.
David Simon: Well, I'll just let Brian answer most of it. But I'll say the new to you know, concept. I mean, Ned is opening the store. We're in discussions with them. Google's opening. Stores. We're in contact with them. Netflix, Eli's going to the opening tomorrow. At King of Prussia, or is it next week? Next week. So Netflix is you know, I encourage everyone to go check it out. They're opening their flagship destination store, at King Of Prussia next week. So there's more and more you heard the VooVoo the VooVoo? Yeah. Poplar, Addicted, Princess Holly, a bunch tenants. And what they see is they can open a bunch of stores with us.
And so we're having really great conversations in our in our new business, leasing. So the so and I'll let Brian get to the rest. But the new I new idea, new experiential, stuff We're doing new we're doing new Apple Stores. As well. They opened Delamo a good example. We've been working that deal for, you know, five years or so. So I think, very encouraging what we're seeing on the new storefront. We're doing still doing a lot of new restaurants with, you know, high end operators. So, you know, that's that's going very well.
We opened Formula One at form shops One of their second or third operations two level flagship store, and a bunch of people there for the opening It's terrific. Saw pictures. So just on the new concept, the new storefront, you know, between the restaurants and the metas of the world, the Netflix, the Googles, know, that they're all working on that. I think, you know, it's it's very, very positive. Very positive. So lots happening on that front. And, Michael, it's it the 30% statistic is new leases, so it is not picking up old stuff. What you've got is just the unabated demand for us continue to add interesting and new uses.
We're also seeing big demand from the existing kind of retail base, and we're slightly out ahead of twenty six's expirations. And so I think it's coming from a variety of places Certainly, on the last several calls, you've heard us talk about improving the merchandising mix. And that 30% statistic is really encapsulating our desire and ability do that. So and I'll give you a simple example. We have a great mall I probably shouldn't yeah. I'm not gonna name the tenant, but I'll give you some bread crumbs. But it's a great mall in a great Southeastern city. A great Southeastern city, not Atlanta. That's a great Southeastern city, but another great Southeastern city.
Not Atlanta, that were and this goes to your point. Are you are you even if you have a lease, are you satisfied? The answer is no. So we're taking one tenant that has a lease, We're actually downsizing and moving them to another space and putting a leading high end retailer in there. I'll leave it at that. I was gonna give you a little bit more breadcrumbs, but I don't want people yelling at me. So which is a good example of though we had leases on both spaces where taking one, downsizing one tenant, moving bringing in another one.
And that's what our folks do That's one of the great things that we see in the TRG portfolio. And we'll be a lot more aggressive in doing that you know, because you're never you're you're we should never be satisfied that we've executed the mix
Samir Khanal: you know, at the, at the at the rate that
David Simon: you know, you've always gotta change it. For instance, you know, talk to corn shops, and I think it just recently opened. We had an h and m store there. We replaced it with Zara. Beautiful store. Big investment that they had and that changes the whole kind of the center court. They're familiar with the asset. Which is you know, which is truly exciting. So absolutely, and that's one of the like I said, one of the interesting things we see
Eli Simon: in
David Simon: in the TRG portfolio and then and then in our assets across the, you know,
Brian J. McDade: spectrum, whether it's the outlet centers,
David Simon: or the full price malls.
Michael Anderson Griffin: Great.
Samir Khanal: So much.
Eli Simon: Thank you.
Operator: Our next question is from Juan Sanabria with BMO Capital Markets. Please proceed.
Brian J. McDade: Hi. Good afternoon. Just hoping maybe to talk a little bit about
Greg McGinniss: a little bit about technology. You know, a lot of things in society seem like they're in flux. And
David Simon: retail is, you know, not excluded there. Talk about
Greg McGinniss: chat, GPT agents, agents that can do some of the shopping. Bypassing people. Just curious on how you guys are trying to position for this and your thoughts on
David Simon: how this may evolve and if you see it as a risk or an opportunity or both. Well, you know, you have to assume everything's a risk.
Eli Simon: So
David Simon: I do think, bringing AI into the you know, the equation, we'll have a
Eli Simon: a pretty big impact
David Simon: on how ecommerce is done. But we offer something much broader than ecommerce. And I offer would you if ecommerce you know, was gonna put us out of business for the last twenty years and so here we are standing Just to give you an example, I saw Palantir had EBITDA this quarter of, like, adjusted EBITDA, whatever that means.
Eli Simon: Of
David Simon: 400,000,000,000, and our EBITDA this quarter was a billion 6. So now Tom and Tiers market cap is 500,000,000,000. And ours is know, 65,000,000,000, you know, if you include the units. Right? Yes. So that's pretty good math. Right?
Eli Simon: So, you know,
David Simon: again, I do think that people that
Eli Simon: shop
David Simon: the ecommerce shoppers are definitely gonna use AI tools. You know, to you know, to, eventually to use AI to replace the way they shop online today. And the key for us is to create like, we have for seven years. Remember, we've been in this business
Eli Simon: seventy years. Okay? Not five. Not twenty. You know? But in this we have survived
David Simon: this product has survived. Seventy years. And I will tell you our half life is greater than the newfangled data centers that are being built today because I think they'll figure out how to do them smaller, and more efficient. Three to five years in that. Okay? And I knew nothing. But that's my gut feel. I know nothing but that's my gut feeling. So going back to your question. So it will have an impact on ecommerce. I think it's gonna absolutely
Eli Simon: continue to make
David Simon: us great at what we do and that we're gonna have to create real shopping holistic shopping environments. Look at and another way to look at it is, look. So there's a lot of talk about, you know, going to and I, you know, I was at this CEO summit the other day, which was kinda interesting. But put that aside. You know, there's a lot of talk that people are gonna be working three days a week. So and the pretend potential
Eli Simon: g d GDP impact of AI could be
David Simon: 15,000,000,000,000 or trillions of dollars. Right? So the way I look at it, I look at actual positive So if you let's say we all work now. I'm gonna still work five days eight days week. Right? Lord, I'm gonna make work at least seven, eight days a week. But let's just hypothetically take the point that it's only three days a week work. Okay. Three days a week.
Eli Simon: That you work.
David Simon: You're gonna have a lot more free time. We've created this great wealth You know, our GDP goes from 18,000,000,000,000 to
Greg McGinniss: you know,
David Simon: 25 to 30,000,000,000,000. That means money in people's pocket.
Eli Simon: I think they're gonna go to the mall of shack.
David Simon: What else do they need to do?
Eli Simon: Okay? So they can only yell at their kids that much when they play you suck. So they're gonna go to the wall, shot eight, spender new, your new
David Simon: sound wealth that's gonna eat through this economy. Now what we have to do is just create these great environments. And ultimately you know, we'll use AI like everybody else to enhance our loyalty, to enhance our shop sign in, to enhance our search effort, to connect with the consumer and, you know,
Eli Simon: we'll talk to Chad GPT and ask him what we've heard
David Simon: or did or whatever, what we could do to them all to make it better and do all this stuff.
Eli Simon: But I'm looking at it
David Simon: positively. We lasted seventy years. We're only gonna work three days a week. We're gonna create $12,000,000,000,000 of value.
Eli Simon: And people are gonna go to mall to shop.
David Simon: Because what else do you think they're do?
Greg McGinniss: Okay?
Eli Simon: You see what I'm saying? Yes. Hopefully. Okay. So in any event, but we're
David Simon: you know, we're experimenting how to do it.
Eli Simon: We
David Simon: are we've got a friend called Harvey that we may create the first AI c CEO Now I'm not saying he's gonna replace me, but he could replace one of our you know, divisions or elsewhere. So stay tuned. You know, we'll use it effectively we've used everything else. Thanks, Debbie.
Eli Simon: Thank you.
Operator: Our next question is from Vince James Tibone with Green Street Capital. Please proceed.
Eli Simon: Hi. Good evening.
Vince James Tibone: Wanted to follow-up more time on the Toddman cap rate. Just specifically,
David Simon: if you like, in the way I'm looking at it, it's the purchase price is just over 1,500,000,000.0. If we use Friday's close for the, you know, unit value plus incremental debt, And then trailing twelve month NOI is right around 77,000,000 for you know, 12% of Toddman using your supplemental.
Vince James Tibone: So that's more like a low five cap rate on a trailing twelve month basis. So
David Simon: I mean, is it really that much synergies to get to the
Eli Simon: kind of quarters we have?
David Simon: Yeah. We told them we told you the numbers.
Eli Simon: Vince, at this point in our career, we're not gonna we're not gonna mislead you or the public. Your cap rates are too low.
David Simon: For certain assets, but not too high for ours. And we told them where the cap rates are. So Okay. And we told you where the accretion is. And, you know, we told you everything there is to tell you about that.
Eli Simon: That deal. You know? They've had a lot of growth. This year.
David Simon: They've got growth, next year. And
Eli Simon: and
David Simon: you know, we've told you everything in there to tell you. I will tell you, I think your cap rates for our asset base is too high. I think your peers at Green Street have a product that is too low compared to ours. Our growth is better. And, the longevity of our asset base You don't factor in, you know, our assets last seventy years.
Brian J. McDade: Okay? No. That's fair. Alright. Thank you.
Eli Simon: Thank you.
Operator: Our next question is from Haendel St. Juste with Mizuho Securities. Please proceed.
Vince James Tibone: Hey. Good evening. Thanks for taking my
Greg McGinniss: David, good to hear from you. Eli, welcome to the call. My question is on corporate structure.
Vince James Tibone: Congrats on the internalization of
Haendel St. Juste: the remaining part of TRG, but I'm curious if there are any changes or shifts in how you're thinking about your investment in your European platform, Clipierre?
Greg McGinniss: Earlier this year, you bought
Haendel St. Juste: an asset in Italy off balance sheet outside of Click Here. So I guess I'm curious if you're happy to own more assets outside of CLIP here. But then I also wanted to add it seemed like recently you opted to convert some of the Clip here exchangeable note holders into stock, not cash, which might suggest you have a longer term, hold for that stock. So maybe help us reconcile those two dynamics and how you're thinking about the Clipyard platform.
David Simon: Thank you.
Eli Simon: Well, we bought them all, which has nothing to do with the
David Simon: which is a luxury outlet center in
Eli Simon: too. It's actually on balance sheet. It's on balance sheet. Oh, yeah.
David Simon: Yeah. It's Right. No. I saw that. Yeah. So that has nothing to do with Clay Pier. You know, Klepierre look, it's been a great investment for us.
Eli Simon: We evaluate it, all the time. We did get some you know, we issued the convert. We did it three years ago, twenty years ago. Three years ago. We got conversion notice. We did we did, settle in shares. And, you know, we looked and evaluate that
David Simon: that investment
Eli Simon: you know, continually, and we'll continue to do that. But it's been a very good investment. We've added a lot of value to that organization. I think, you know, again, the market should appreciate. We're played here. Go back. Let's turn the clock back. Ten years ago where play here was. And looked at where it is today, and, our strategic input vision
David Simon: guidance created the new
Eli Simon: that exists today
David Simon: So that's a you know, that's a that's a position to
Eli Simon: succeed in European full price retailer with the best
David Simon: And that's all you know? I mean, again, the management team did a great job, but we hired them in. K? So,
Eli Simon: so you know? But at the same time,
David Simon: we have a fiduciary duty to
Eli Simon: to, continue to add value to claim care while we're on the board. While we're on the board. At the same time, we have a fiduciary duty to our assigned shareholders to look at all of our investments to see if that's the best allocation of our capital and we will continue to do so.
Haendel St. Juste: I appreciate that, David. I guess I just wanted to clarify because I mentioned asset in Italy you bought you bought it on balance sheet and not in CLIP here. So I guess I was curious if you were happy owning more assets outside of Clip here in Europe. Thank you.
David Simon: Yeah. I we would we would probably okay. I'm sorry if I misunderstood. So we would probably only look
Eli Simon: to you know, we've kind of decided that the full price
David Simon: you know, again, this could always change. Right? But we
Eli Simon: kinda decided that if there are full price assets, to acquire or to acquire
David Simon: while we continue to hold our Claypierre investment and stay on the board.
Eli Simon: That
David Simon: that Clay Pier would do that.
Eli Simon: On the other hand, if it's if it's in the outlet world,
David Simon: you know, because we look at outlets worldwide know, we have outlets in Asia, obviously, America. Also Mexico, Canada, US, obviously. Several company countries in Asia. That we would look
Eli Simon: at those for our own accounts.
David Simon: The signing accounts.
Brian J. McDade: Okay.
David Simon: And I'm sorry. I misunderstood your question.
Haendel St. Juste: That's helpful. Thank you.
Operator: Our next question is from Mike Mueller with JPMorgan. Please proceed.
Eli Simon: Thanks. So
Greg McGinniss: Calvin's used the secured debt strategy for the portfolio ever since the '98 restructuring. Do you think you'll be unencumbered a number of those assets over time? And as a follow-up, are there any parts of that portfolio that look like they're sale candidates today?
David Simon: Mike, it's Brian. You're right. They did go to a secured strategy over time. I would expect that over time, we will unlock that and use our unsecured capital to unencumbered assets in due course. To further improve our unencumbered asset base, which is already incredibly powerful.
Eli Simon: As far as the portfolio on balance
David Simon: today, I think we're comfortable where it sits, but we naturally evaluate things, frequently. And so that could change over time. But for now, I think we're in a good place.
Eli Simon: Got it. Okay. Thank you. Thank you, Michael. Our next
Operator: question is from Ronald Kamdem with Morgan Stanley. Please proceed.
Vince James Tibone: Hey, thanks. It's Adam on for Ron. I think we had always looked at the dividends or post COVID as I think you guys are of targeting getting back to that pre COVID dividend level. You're now past that.
Haendel St. Juste: I guess just sitting here today, how do you sort of stack rank the capital allocation priorities? I know you've talked about sort of development of obviously, if the cloud A assets, but also I think you've talked in recent quarters about some of the Class B or B plus development opportunities or redevelopment opportunities as well. So just sitting here the different options in terms of capital allocation, how do you sort of stack rank those dividend buybacks potentially development, redevelopment, etcetera?
David Simon: Good. Actually, thank you for I didn't I forgot we passed our COVID. We did? Yeah. You did. Alright. Good. Good work, guys. Well done. So look, I think one of the things that you'll probably you know, we do have a buyback
Eli Simon: open. Right? Obviously, we can't find that now. But one of the things you'll
David Simon: see from us most likely
Eli Simon: which is not in the numbers, But we, you know, we issued 5,000,000 unit share, so we'll look to quarterize that.
Samir Khanal: So
Eli Simon: over you know, we're not issued we don't we have a balance sheet that does not need to issue back.
David Simon: So now as part of the deal Calvin and family you know, really wanted units, equity. I think over time, obviously, subject to market conditions, we'll look to quarterize I e, you know, at least at least wanna get our sheer level
Brian J. McDade: back
David Simon: to kinda where it was pre issuance. For the TRG deal. Now that's subject to market conditions We'll be very smart about it. We'll do everything else.
Eli Simon: But that so that has moved up the, you know, I still think we're gonna wanna grow our dividend. And, obviously, I think I said last time, you know,
David Simon: the development stuff does take you know, time to you know, to put the capital to work. You know? We don't move as fast as these data centers that just go up, you know, nine months.
Eli Simon: But
David Simon: I think quarterizing that 5,000,000 issuance you know, has moved up to the top of the charts.
Eli Simon: But that does not mean that
David Simon: the capital redeployment in the portfolio slows down. We're very we're and you're rightly pointing out that
Eli Simon: that, you know, we all get into these classifications, a minus b, b plus. We're gonna put it where the capital
David Simon: is accretive to that property. Value. Now we don't use Green Street cap rates. We use David Simon's cap rates. And over my career, I've been more right than wrong. So we could do a we could do a chat GPT poll of who's got the better cap rates. I'm gonna go with David for the time being. But I've been proven wrong. So we well, we're blowing and going, and we've got some really
Eli Simon: exciting big things on the horizon to do with
David Simon: capital. And just to name a few. You know, we bought out Seritage at Boca. Which is a huge massive thing to a great center which should be a four and a half cap rate But that don't worry. We're not gonna our development yield is gonna be greater than that, much greater than that.
Eli Simon: We've got Fashion Valley. We've got Boca. We've got, Bargain Creek. Yeah. These are just two or three that are popping.
David Simon: Later in the week,
Eli Simon: the team will be announcing
David Simon: a really landmark deal in Nashville and a great site in a great city and we have a very important presence in
Eli Simon: now
David Simon: complemented by this PRG asset that we now have full operational control with. Is a very good asset in Auckland Mills. As an example, which is a very good
Eli Simon: very good mills and
David Simon: and a distinct trade area. So
Vince James Tibone: that'll be our
David Simon: new ground up development that we're, really excited about. So
Eli Simon: it's pretty much status quo other than gonna be moving up the
David Simon: the, you know, I don't want another 5,000,000 shares outstanding.
Brian J. McDade: Okay?
Eli Simon: Great. Thanks so much for the time. Appreciate it.
Caitlin Burrows: Sure.
Eli Simon: Thank you.
David Simon: Gonna run a little bit over. We got two more questions.
Operator: Next question is from Floris van Dijkum with Ladenburg Thalmann. Please proceed.
Floris van Dijkum: Hey, guys. Thanks. I know we're running late. David,
David Simon: great to hear your voice. Eli, again, I'm I'm not be the first one to welcome you, but good to have you on the call as well. And, David, I love your passion Question for you. I'll try to keep it relatively short here. But your s and o pipeline, could you talk about that? And I note that Caring has dropped out of your top 10 tenants list. Presumably, they haven't closed any stores. Is that just you haven't signed new leases or they haven't opened new stores in the portfolio? Maybe talk a little bit about in that s and o, how you're your luxury is training or how you expect that to trend maybe.
Brian J. McDade: Hey, Floris. It's Brian. So the S and O pipeline is three ten basis points as of non
David Simon: And you're right. Carrie did drop out of the top 10. It's just simply because we opened up more stores with other retailers and forced them above the Carrie ranking. So it's really a reflection of the robust activity that's on the ground from a leasing perspective. Kieran is still a very important tenant. And over time, we would expect continue to see them, move around to the top rankings. As you look at that 310 basis points, there is a substantial amount luxury in there. It's probably to the tune of about 50 to 60 basis
Brian J. McDade: points of the total three ten. So the luxury,
David Simon: cohort of tenants continues to favor our portfolio and continue to see growth with us.
Brian J. McDade: Thanks, Brian. And again, we've got
David Simon: you know, we're we're our occupancy is pretty high, but we're a lot of this new stuff is re tenanted. Obviously, you know, Forever twenty one, is having you know, releasing all that space is having an impact on the asset. That's a no.
Brian J. McDade: Right? That's correct. Thanks. Thank you, Floris.
Operator: Our final question is from Omotayo Tejumade Okusanya with Deutsche Bank. Please proceed.
Omotayo Tejumade Okusanya: Yes. Good evening. Thanks for taking my call. Eli, congratulations. Welcome aboard. In regards to OPI, just curious what you guys are how you're thinking about that business against a little is a little bit more value oriented? I'm just kind of curious if there know, opportunities to kind of monetize that, or it's just the world too murky right now to really have an opportunity.
David Simon: Well, you know, we'll we'll see how that transpires, but I won't I won't I won't compliment the team at Catalyst. They're doing really terrific work at a number of the brands. Not all you know, some of the brands are
Brian J. McDade: know, again, it's not
David Simon: perfect sailing. They're they're doing a great job at JC Penney.
Brian J. McDade: Great job at AeroPressel. A great job at Brooks Brothers. A really good job at Lucky, So we've been very pleased with you know, how Catalyst has integrated the various brands that network is really this is the first nine months. Just if you go back, it really happened in early twenty five.
David Simon: So
Brian J. McDade: they're doing a terrific job
David Simon: it's stable.
Brian J. McDade: Good results. Obviously, out of forever twenty one, which was you know, as much as we tried to save it.
David Simon: You know, we couldn't primarily because of the de minimis
Brian J. McDade: You know? And now that the you know, we would have had a fighting chance
David Simon: had we not suffered from the de minimis. But you know, we couldn't overcome that. Now, thankfully, it's it's changed, and, at least it puts domestic retailers on you know, and even footing with you know, with certain foreign retailers. So long story short, Catalyst is doing a terrific job And like everything else, look. If it,
Brian J. McDade: you know, it I would say we'll always look at
David Simon: you know, what the best options are.
Brian J. McDade: But for the for the time being, it's in good
David Simon: it's in good stead.
Brian J. McDade: And, again, they skew toward direct and a few of the brands do skew towards the lower income. And I will say this. Lower income and the higher income as well is
David Simon: know, they're looking for value.
Brian J. McDade: So value can be, you know,
David Simon: value is in the eye of the beholder, but, know, you gotta give you gotta give the consumer today value. Whether they're they're a high income consumer or a lower income consumer, values the game name of the game. And, and, I think Catalyst has recognized that in providing a high end, like, it works betters, and it's a kind of a more moderate arrow and you know, and PIN. So it's all good.
Brian J. McDade: Well said, David. Thank you. Thank you.
Operator: There are no further questions. I would like to turn the conference over to David Simon for closing remarks.
David Simon: Okay. We had a very active quarter.
Eli Simon: We're gonna have a very active
David Simon: fourth quarter.
Eli Simon: So more good stuff to come.
David Simon: And
Eli Simon: thank you very much for your interest and your questions. Thank you.
Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.