Greetings. Welcome to Simon Property Group Second Quarter 2025 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce Tom Ward, Senior Vice President, Investor Relations. Thank you, sir. You may begin.

Thank you, Sherry. 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 related 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. 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 1 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.

Good evening, everyone. We delivered robust financial and operational results yet again for the second quarter. Occupancy gains, increased shopper traffic, and higher retail sales volumes contributed to strong cash flow growth. We continue to enhance our retail real estate platforms through development, redevelopment, and acquisitions, including the purchase of our partners' interest in Brickell City Centre, a premier mixed-use property in Miami and its rapidly growing Central Business District. Our focus remains on creating long-term value through disciplined investments and operational excellence that drive growth in cash flow, funds from operation, and dividends per share, which, yet again, we raised. I'm now going to turn it over to Brian, who will cover our second quarter results in more detail.

Good evening, and thank you, David. Real estate FFO was $3.05 per share in the second quarter compared to $2.93 in the prior year, representing 4.1% growth. Domestic and international operations had a very good quarter and contributed $0.21 of growth, driven by a 5% increase in lease income. As anticipated, lower interest income and higher interest expense combined for a $0.07 drag year-over-year. Domestic property NOI increased 4.2% year-over-year for the quarter and 3.8% for the first half of the year. Portfolio NOI, which includes our international properties at constant currency, grew 4.7% for the quarter and 4.2% for the first half. We signed approximately 1,000 leases for more than 3.6 million square feet in the quarter, with approximately 30% of our leasing activity for the quarter on new deals. Nearly 90% of our leases expiring through 2025 are complete, ahead of this time last year. The Malls and Premium Outlets ended the second quarter at 96.0% occupancy, up 10 basis points sequentially and 40 basis points year-over-year. The Mills achieved a record 99.3% occupancy, an increase of 90 basis points sequentially and 110 basis points from the prior year. Occupancy remained strong across the portfolio, overcoming retailer bankruptcies of approximately 1.8 million square feet this quarter. Average base minimum rent for the Malls and Outlets increased 1.3% year-over-year, and the Mills increased 0.6%. Sales for Malls and Premium Outlets per square foot were $736 for the quarter, and occupancy costs at the end of the quarter were 13.1%, flat sequentially from Q1 of 2025. Second quarter funds from operation were $1.19 billion or $3.15 per share compared to $1.09 billion or $2.90 per share last year, representing 8.6% growth. Second quarter results include a $0.21 per share noncash after-tax gain, primarily due to Catalyst Brands' deconsolidation of Forever 21, in addition to better operational performance at Catalyst Brands compared to last year. Lastly, a $0.13 per share noncash loss from the unrealized mark-to-market adjustment on our exchangeable bonds due to the outperformance of Klepierre's share price, which increased 8% during the second quarter. Now turning to development. At the end of the quarter, development projects were underway across all platforms with our share of net cost of $1 billion at a blended yield of 9%. Approximately 40% of net costs are for mixed-use projects. As David mentioned, we acquired our partner's interest in Brickell City Centre. Our $512 million investment includes the retail and parking components and is accretive. We now wholly own and manage this highly productive center and look forward to enhancing operations with efficiencies in our leasing and management expertise to drive NOI growth. Turning to the balance sheet and liquidity. During the first half of the year, we completed 21 secured loan transactions totaling approximately $3.8 billion. The weighted average interest rate on these loans was 5.84%. We ended the quarter with over $9 billion of liquidity. Turning to the dividend. Today, we announced our dividend of $2.15 per share for the third quarter, a year-over-year increase of $0.10 or 4.9%. The dividend is payable September 30. Now moving on to guidance. We are increasing our full-year 2025 real estate FFO guidance range to $12.45 to $12.65 per share compared to $12.24 last year. This is an increase of $0.05 at the bottom end of the range and $0.03 at the midpoint. With that, thank you, and David and I are now available for your questions.

Our first question is from Jeff Spector with Bank of America.

Given all the uncertainty, could you describe for us the leasing velocity you're seeing, with some of the demand? What may be a peak in your last leasing meeting in terms of quantity, deal flow, and quality of the deals, please?

Unabated. So you're right, Jeff, in the sense that the whole world is uncertain, with a lot of geopolitical and domestic political issues going on. Thankfully, we're not an investor in New York City, but there is obviously a lot of political uncertainty there. Tariff swings back and forth, interest rate uncertainty, you can name it. However, retail demand is really unabated. The physical shopping environment continues to be the place to be. So we're quite bullish about what we've done, what we are doing, and where we are going despite all of the headlines that are out there. If you look at our 33-year track record, we've had bankruptcies and people buying companies that overpaid and had to restructure their operations. There's one group that's never done that, and that's us. All we've done is run our business appropriately, and we'll continue to do so. We've never undergone a restructuring like others, which has benefited our shareholders. The headline risks out there are real, but tenant demand remains unabated. Traffic is up, sales are holding their own, and our properties are continuing to improve.

Our next question is from Michael Griffin with Evercore ISI.

Maybe just diving into that tenant demand piece a bit more. Are you still seeing strong demand from smaller tenants, local concepts? Just curious if you can bifurcate those two pieces.

Yes. Last quarter, I expressed my concern about that segment given how tariffs might affect them and their cost of goods. However, they are doing better than expected and beating their plans so far this year. It's all systems go there. I'm sure there's some trepidation out there, but they're managing it as best they can. The full story is not completely written yet, but we're not seeing a decline in demand for that particular business, which has shown resilience. So we're more optimistic about that segment than I was last quarter. However, it is something that we're watching closely.

Our next question is from Caitlin Burrows with Goldman Sachs.

On the acquisition side, you guys were active in the first half with acquisitions. Could you talk about the upside you see at Brickell? More broadly, to what extent do you see other acquisition opportunities existing for Simon today?

Brickell is a really good asset that long term will perform exceptionally well. Miami, especially in the Central Business District, has limited retail growth due to its traffic pattern. Despite Miami having a lot of retail, Brickell attracts international customers and tourists, ensuring growth with its hotels and vibrant nightlife. We believe the asset will keep improving, and we acquired it at a favorable price. Our $512 million investment is accretive and allows us to manage this highly productive center effectively. We will continue to seek other opportunities but will be selective in what we purchase. Our track record shows that we don't need to sell assets or restructure, which places us in a good position to identify and develop strategic investments.

Our next question is from Alexander Goldfarb with Piper Sandler.

Following up on Caitlin's question regarding externals. For quite a long time, you've indicated that there’s more investment potential in your existing portfolio versus externally. What return thresholds do you need when considering external acquisitions compared to reinvesting internally?

It's not an either/or situation. We have the financial capability to do both. The development and redevelopment processes take years to execute. We've never had to face a dilemma where we can't pursue both avenues. Thus, our goal is to expand via both internal and external investments while continuing to prioritize pricing and quality. While the market may be seeing interest in mall transactions, we will be judicious in our acquisitions and will continue to create NAV by focusing on product and price sensitivity. Ultimately, purchase price matters. As for the potential for a wave of mall transactions, I think we may see other players acquiring non-premium properties. Many malls, despite media narratives, are still performing reasonably well. So while I expect more trades, I don’t anticipate a massive wave of transactions.

Our next question is from Craig Mailman with Citi.

Can you provide an update on your midpoint guidance following the recent 90 days? How do you feel about the macroeconomic landscape, and do you have concerns about any lingering effects impacting 2026 growth?

We're cautious about the economic environment despite our raised guidance. Tariffs are continuously changing and presenting real costs to businesses. This can lead to retail caution in purchasing. However, I remain optimistic about the U.S. economic landscape due to planned capital investments fueling GDP growth. The actual effects of these investments are uncertain but will unfold over the upcoming years. Overall, we are maintaining cautious optimism and expect improvements in 2026 as the tariff situation stabilizes.

As you look at our guidance adjustments, we generally raise the bottom end of our range after assessing the first six months. Our occupancy and FFO are both showing strong growth, which gives us cautious optimism for the remainder of the year.

Our next question is from Michael Goldsmith with UBS.

Could you quantify the increase in shopper traffic? Is there a difference between traffic growth rates for mall and outlet properties?

Our traffic is up 1.5%. While we're not fully operating at peak performance levels, some assets near border areas are experiencing relative flatness in sales and traffic. We are not seeing the benefits of a weaker U.S. dollar to international tourists as we typically would, thus our properties near border areas are not outperforming expectations.

Our next question is from Floris Van Dijkum with Ladenburg Thalmann.

Could you comment on your S&O pipeline and the growth potential across the segments of your portfolio?

The S&O pipeline is at 340 basis points at the end of the quarter. As we think about and you've heard us talk about occupancy, optimizing occupancy is now our focus, which includes finding the right merchandise mix and tenants for our properties. This strategy will enhance performance across all asset classes.

While the TRG assets have seen a smaller portfolio impact, tenant demand remains strong. We're successfully replacing underperforming tenants across the Mills, Outlet, and Mall sectors.

Is 99% occupancy your goal internally across your platforms?

I don't focus solely on reaching 99% occupancy. The goal is to have high-performing tenants in all spaces. While 99.3% is impressive, our focus is on team performance rather than specific occupancy rates.

Our next question is from Vince Tibone with Green Street Capital Markets.

Can you discuss the importance of acquiring and controlling anchor boxes at your centers?

While the importance of anchor boxes is substantial, it’s ultimately up to Catalyst, our joint venture partner. We remain very active in purchasing boxes and redeveloping our centers. It’s critical to pay the right price for any acquisition. However, we have no direct relationship with any PropCos regarding anchor boxes since our relationship exists only with Catalyst.

To summarize, is it fair to say that the complexities in this structure do not indicate Simon's reduced interest in acquiring anchor boxes?

That is correct; don't misinterpret the acquisition complexities to conclude that Simon’s interest in anchor boxes has waned. The path between PropCo and Simon Property Group is not a direct one. Purchase price remains a key consideration.

Our next question is from Haendel St. Juste with Mizuho Securities.

Could you elaborate on your comment about the cap rate for the Brickell asset being higher than that of recent open-air strip asset cap rates?

We excel at identifying opportunities. We avoid competitive auctions and prefer situations where we can negotiate on our own terms. The market undervalues high-quality retail, as was the case with Brickell, which we acquired at a cap rate lower than current market opportunities for comparable assets. This pricing misalignment presents us with growth potential.

Our next question is from Ronald Kamdem with Morgan Stanley.

Regarding domestic property NOI, could you comment on how you see growth shaping up for the rest of the year, and if there's any quantifiable headwinds to this number?

We are currently outperforming our year-to-date expectations despite the volatility associated with tariffs. The consumer is resilient, and while sales are outside of our control, we are optimistic moving into the back-to-school season. We anticipate a strong finish to the year.

Our next question is from Linda Tsai with Jefferies.

Regarding deepening relationships with retailers, could you provide some examples of this?

Retailers hold significant sway since they can choose where to do business. The more products we offer, the better the relationship we can foster with retailers. Having a broader portfolio allows us to engage more effectively with our clients. It’s about confidence in our ability to deliver excellence and operate our centers effectively, ensuring repeat business.

Our next question is from Hong Zhang with JPMorgan.

Have you seen any negative impacts on your New York centers due to migration out of New York?

I don't expect substantial effects on Long Island. However, the urban environments in New York City may face challenges due to migration trends. The suburban locations are seeing a revival, particularly after COVID, and I believe they can thrive, depending on developments in the city.

Our next question is from Omotayo Okusanya with Deutsche Bank.

Why did your company choose secured loan transactions at 5.84% compared to unsecured options available at 5%?

Secured loans were part of our financing strategy with a joint venture partner; we want to optimize our balance sheet where needed. Our unsecured debt cost is currently competitive, so we are well-positioned in the market.

Interest rates should be lower. I agree with President Trump on that. Thank you, everyone. We hope you enjoyed our call. Tom and Brian are available for follow-ups.

Thank you.

Thank you.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.