Q3 2026 SIMON PROPERTY GROUP, INC. EARNINGS CONFERENCE CALL - SIMON PROPERTY GROUP INC

Financial Performance:

• Real Estate FFO for Q3 2026 was $3.37 per share, a 4.7% year-over-year increase; reported FFO was $3.09 per share due to non-cash mark-to-market losses on exchangeable bonds and equity securities.
• Domestic property NOI grew 6.6% year-over-year; portfolio NOI (including international) grew 6.7% at constant currency.
• Operating metrics show record sales productivity: same-store sales rose 6.8% in the quarter and 7.1% over the trailing 12 months; operable sales grew 4.9% in Q3.
• Leasing fundamentals improved significantly: initial base minimum rent on new deals is up 17% YoY, while tenant allowances are down 10% YoY, indicating higher rents with reduced capital investment per deal.
• Average base minimum rent for malls/premium outlets increased 6.1% YoY; occupancy costs are at 12.4%.
• Free cash flow generation increased over 7.5% year-to-date; net debt to EBITDA stands at 5.0x with a fixed charge coverage ratio of 4.6x.
• Dividend raised by 4.5% to $2.30 per share for Q4 2026; year-to-date share repurchases totaled 3.4 million shares ($667 million) at an average price of $198.97.

Guidance and Future Outlook:

• Full-year 2026 Real Estate FFO guidance raised to $13.30–$14.40 per share, reflecting a midpoint growth of approximately 5% vs. 2025.
• Management expects 2027 to be driven by strong leasing velocity, operational momentum, and development pipelines, offset partially by ~$0.30 per share in higher net interest expense headwinds.
• Development pipeline is active with $1.2 billion in net costs currently underway at a 9% blended yield, plus a $4 billion "shadow" pipeline; the Sagefield ground-up development in Nashville (100 acres, 80+ shops) breaks ground next month with a 2028 completion target.
• Growth is expected to continue via re-merchandising, tenant expansions, and adding high-quality new tenants rather than relying solely on contractual renewals.

Business Segments and Product Lines:

• Portfolio occupancy for malls and premium outlets reached 96.5% (highest combined level since 2016); Mills occupancy was 98.9%.
• Acquired University Village in Seattle (premier open-air destination), expected to close in Q4 2026, which is accretive to NAV day one and modestly accretive to FFO next year.
• Leasing volume surged: ~1,200 leases signed in Q3 totaling 4.3 million square feet, with 25% being new leases.
• Simon Brand Ventures launched the "It's a Simon Thing" brand campaign to unify centers and drive traffic; ancillary revenue opportunities are being expanded through digital presence and media networks.
• Restaurant sales performance was the strongest in three years in Q3; luxury, watches, jewelry, and athleisure categories continued to outperform.

Market and Competitive Landscape:

• Tenant demand is broad-based across national, international, and emerging brands, with a 30% YoY increase in the leasing pipeline; national retailers are actively expanding footprints within the portfolio (up 40% YoY).
• E-commerce resilience is driving physical store growth as retailers prioritize direct consumer distribution and brand presence in high-quality locations.
• Tourist destinations (Florida, Las Vegas) are performing strongly; border assets (Canada/Mexico) are growing, though some individual assets like Woodbury are growing at a slower pace due to specific international travel dynamics.
• Competition remains fierce, but Simon's focus on high-quality, well-located assets and capital reinvestment maintains a competitive advantage in attracting tenants.

Risks and Challenges:

• Interest rate environment poses a headwind with estimated ~$0.30 per share in higher net interest expense for 2027, though management views the impact as manageable due to strong cash flow.
• Macroeconomic fluctuations and volatility in the rate environment could impact refinancing costs, though the company maintains a naturally deleveraging balance sheet.
• No specific slowdowns observed in tenant categories, but management monitors idiosyncratic regional tourism and international travel trends.
• Capital allocation requires balancing growth investments, acquisitions, and share repurchases; management remains disciplined to avoid over-leveraging for buybacks.

Management Commentary and Tone:

• Tone is highly confident and optimistic, characterized by terms like "excellent quarter," "strong demand," and "excitement."
• Management emphasized that the business is a "powerful machine" generating significant free cash flow, allowing for continued investment, acquisitions, and buybacks.
• Leaders consistently downplayed the open-air vs. enclosed mall distinction, stating the focus is on asset quality and tenant fit regardless of format.
• CFO Brian McDade and CEO Eli Simon highlighted a "balance sheet advantage" and the ability to fund developments with free cash flow, insulating the company from market volatility.

Analyst Questions and Answers:

• University Village Yield: Management declined to disclose specific pricing or yield, noting the transaction is accretive to NAV immediately and will grow above portfolio averages due to its quality.
• Acquisition Strategy: Reiterated a "no portfolio buying" strategy; they only pursue individual assets where they can add value, rejecting deals that require acquiring mediocre assets to get good ones.
• Capital Allocation: Buybacks are viewed as a permanent tool to utilize excess free cash flow, continuing after the Taubman deal offset shares are completed, provided it is accretive.
• Cost of Capital: Despite rising rates, the 9% development yields remain attractive; the primary filter for projects is tenant demand, not just financing costs.
• Sales Mix: Sales growth is broad-based across categories; malls slightly outperformed outlets due to specific high-growth categories (luxury, watches) not present in outlet centers.

Other Key Points:

• Simon Property Group is executing a "re-merchandising" strategy, continuously replacing tenants to drive NOI growth even when occupancy is near record highs.
• The company is actively refinancing debt, with $800 million in senior notes and $970 million in secured loans completed in Q3, maintaining ~$9 billion in liquidity.
• International expansion is opportunistic rather than aggressive, with interest in existing asset expansions in Japan and Malaysia and new developments in Korea, but no immediate plan to significantly scale international footprint.
• The "It's a Simon Thing" campaign is the most engaged in company history, aiming to unify the brand experience across all platforms.