Simon Property Group Inc. (SPG) March 3, 2026 Conference Transcript

and COO Eli Simon. This session is for city clients only and disclosures have been made available at the corporate access desk. To ask a question you can raise your hand or go to liveqa.com enter code GPC26 to submit questions. Eli I'll hand it over to you to introduce the company and team, provide any opening remarks, tell the audience the top reasons an investor should buy your stock today and then we'll get into Q&A.

Perfect. Good afternoon and thank you Nick and Craig for the introduction we appreciate the opportunity to speak with you today let me begin with the core principle that has guided Simon for decades assets matter when assets are built to last and located in the best market their longevity generates sustainable growing cash flow that has been the defining characteristic of our company for decades and it continues to drive our performance today our assets stay relevant because we continue continually reinvest in them, redeveloping, densifying, curating the best tenant mix and enhancing the consumer experience. This continuous improvement creates a virtuous cycle that extends asset life and compounds cash flow growth. Not many real estate assets last for 70 plus years. Ours can and do through discipline, accretive reinvestment and operational expertise including most recently at Southdale Center and at Dyna, Minnesota where we have reinvented the oldest and closed mall in the country and made it more relevant than ever. Our strategy remains clear and consistent. Own and operate the best retail real estate in the best markets. Reinvest in our assets with high return redevelopment, densification, and mixed-use additions to drive long-term value creation. Pursue disciplined, accretive acquisitions where we can add value. And innovate to enhance both the consumer and retailer experience. 2025 was an exceptional year and a validation of our model. We delivered record results across all key operating metrics including revenue, NOI, real estate FFO, and dividends supported by strong retailer demand and increasing shopper traffic. We completed $2 billion of strategic acquisition including the remaining interest in Taubman Realty Group, our partners interest in Berkel City Center and the mall luxury outlets in Italy. Each of these deals enhances the quality and long-term growth profile of growth profile of our portfolio. We completed significant redevelopment and expansion projects transforming former department stores into high productivity experiential environments and expanding our mixed-use components. Our active development pipeline is 1.5 billion dollars with a shadow pipeline of more than four billion dollars that will start over the next few years. Approximately 40 percent of that pipeline is in transformative mixed-use projects at iconic properties including the town center of Boca Raton and Fashion Valley in San Diego. Our financial foundation remains rock solid with our A-rated balance sheet continuing to be a defining advantage. With more than nine billion dollars of liquidity and over one and a half billion dollars of annual free cash flow after dividends, we have the flexibility to reinvest, acquire and return capital to shareholders while maintaining discipline leverage. As we look ahead, our conviction remains strong. Demand for high quality physical retail remains strong and consistent and retailers know that operating stores is essential to profitable growth and new supply remains limited. Our continually improved portfolio will support durable cash flow growth for many, many years to come. Our strategy is clear, consistent and proven and our platform is exceptionally well positioned for long-term value creation. Thank you and we look forward to your questions.

Great. So if I synthesize that or maybe you can synthesize that down, what are the let's just say two or three reasons investors should buy this stock today?

The first, as I said in my opening remarks, assets matter and our portfolio is unrivaled. demand remains strong and consistent across the portfolio across all categories apparel food and beverage experiential entertainment and the like we're coming off a record year as I mentioned 25 and that momentum has continued in the beginning of 26 and we look forward to it continuing we also have a strong proven track record of discipline investments both external growth opportunities as well as our development and redevelopment pipeline which remains strong and is growing with many very high accretive projects hoping to start over the next two to three years and finally as I said our balance sheet is a significant competitive advantage you know we generate over a billion and a half dollars in excess of our dividend each year which allows us to reinvest that free cash flow into high accretive opportunities and which will continue into the future so you know bottom line I think no one is more cycle-tested and has overcome various external threats more than we have, and we are very excited for that to continue into the future.

It certainly feels like a good moment for retail broadly right now. I feel like the market and the question that we get the most frequently is how could AI disrupt these different businesses. I want to get into Simon specifically, and I know you've been active and on the front foot about deploying AI and different technologies over the years. years, but maybe starting more broadly on retail and what you're hearing from your tenants and the retailers directly about the opportunities and risks that they're seeing from AI today.

Sure. I think from the retailer's perspective, it's a potential new avenue of growth, a new avenue to drive sales. But from a physical retail perspective, nobody's looking at it and saying, I'm going to replace my physical stores with an AI agent and with my e-commerce only. I think it's been pretty clear and proven at this point that the way to grow profitably is to open stores. It's a better customer acquisition cost. It creates better long-term value and what we see when we talk to retailers is they want to open stores. They want to be in the best markets and that's what our portfolio provides them and so we're not hearing any negativity from the retailers and hopefully it's a positive. More sales for them is better. If they can operate their businesses better. We obviously own stakes in retailers and so we understand that business. They are going to, our retail investments, are going to find efficiencies operationally from AI, which only benefits us as now we will have better financially healthy tenants. So we look at it as a positive and not really focused on any potential negative outcomes.

And then how about internally, within Simon, the opportunity to be more efficient?

Of course. We look at AI like we do any other investment, whether it's we're looking to partner with somebody, build it internally, buy something. It's incredibly disciplined. We look at every single nickel in the company, however we spend it, whether it's overhead, technology and our capital projects and our operating expenses, and so we'll continue to do the same with We've obviously used it and had success across various departments, across our legal department, our marketing department, and we have 30,000 tenants or so that all have different needs, different imaging. We have 200 plus properties in the U.S., and so if we can create materials for them, create pitch books, et cetera, faster. That only benefits us. And then lastly, obviously, on the data side, we have a tremendous amount of data. We're in the early innings there. But really being able to take that data, use it better, use it more efficiently, and then ultimately find ways to monetize it, which we've started to do. Very excited about that, early innings, but we'll grow significantly from here.

We had a question come in that dovetails on this.

What initiatives are you developing around retail media the use of customer information to you know synthesize the data better bring in foot traffic and maybe partner with tenants and retailers sure so it's sort of i look at it as um as two facets right one is our internal use we have better data better ability to use the data to allow us to lease better allow building programs internally allow us to have a better understanding of what tenants need to be where how they will perform which is only going to make us better operators from the use of data going forward you know we've launched a retail media network launched it last year continuing to grow it this year but basically if you think about it we have 25 or so million people in our consumer database that's built up over time we launched our loyalty program November of last year to get more granular data on those consumers but I think it's it's a pretty attractive data set for both our retailers but also a broader universe because you know that 25 million people is a part of a cohort that spends 100 billion dollars a year in our assets you know a couple billion visits a year a few hundred 200 300 million individual shoppers so clearly that is pretty powerful in the early days of harnessing it obviously AI will help us but it's something that you know we're really focused on top to bottom of the company right now.

And maybe beyond the efficiencies at a corporate level, from an operating expense or maintenance, kind of preventative maintenance, right, what are you guys doing at the property level or what good technology is there out there, if any, at this point to really help modulate you know, heating, cooling expenses and lighting and all the things that kind of go into it and can minimize CAM?

So it's something that, you know, it's not like we just, you know, woke up and saw the letters AI and said, oh, my God, how is this going to help us operate better, right? We've consistently, over a very long term, invested in different platforms and different ways to be more energy and efficient, run our properties better. So all we view that as just a continuation. So it might have been a software program before, now it might be AI-backed, and we're continuing to trial things. and the good thing for us is when we talk to potential providers, if we find something that works they see the ability to roll it out across 200 or so assets in the U.S., which means that we're going to get that first phone call when people have interesting ideas and we take those calls all the time and we're starting to see interesting results. It's obviously very early but energy cost is something we are very focused on and think that hopefully there are real savings to be had there.

And to circle back, you know, your prepared remarks, you highlighted the $4 billion of potential kind of development, redevelopment within the pipeline. Maybe talk a little bit about how much of that is Taubman related now that you guys have full control of it versus legacy portfolio and maybe a range of returns or how we should think about that incremental capital spend.

So I would say, honestly, the $4 billion, I think, has basically none of Taubman because that was sort of in plan before. We obviously announced right after earnings that we have a $250 million dollar three projects in Denver, Cherry Creek, Nashville, Green Hills, and Tampa International Plaza. We are incredibly excited about those projects to make really good assets even better that, frankly, should have been done a while ago. We didn't have the ability to do it. Now we are going to do it. But that $4 billion is, you know, the vast, vast, vast majority of it, if not all of it, frankly, is our core portfolio. You know, from the TOWAN portfolio, if you think about it, they had an independent balance sheet, not the nine-plus billion dollars of liquidity we have. And so some of the assets do need capital. We've highlighted those three as where we think we can have the biggest and best returns. but we're going through property by property and have been the last several months looking to see where we can merchandise better where we can make the properties look better and so we'll continue to do that you know we look at it not as a 2026 story but these are assets we want to own forever and that's why we did the deal initially it's why we bought the next 4% the next 4% the last 12% it's because these assets are great assets that we want to own you know for a very long time and then you know going to your return question you know I think the billion-and-a-half is that at 9% I'd say two things on that right obviously that's that's a lot of you know a lot of assets in there right a lot of different projects we'd expect the the pipeline the shadow pipeline I should say to be similar but you should note that you know we're I wish we were building multi-family to a nine right but we're not but we're building at you know 150 200 basis points spread and so if you think about that as a six and a half or so a lot of the other projects then are higher than that right 40% or so of the of the pipeline is is mixed use then the other thing you know which I do think is important to note is when we underwrite that pipeline or you know provide you know there was public returns that is truly the cash we are spending in the box of what we are doing right whether it's a department store redevelopment what we did at Southdale you know the exterior renovation we added luxury what it's not doing is picking up all the other benefits that we're getting throughout the property you know which to be intellectually consistent but that makes that number obviously much higher right and you look at Southdale that doesn't take into account the 40 45 new tenants we've added you know since we announced and started construction of the of the Luxury Redevelopment, which is now open, and those tenants are outperforming, those like-for-like tenants that have been at Southdale for a while are outperforming that same tenant in other malls by 1,000, 1,500 basis points because we revitalized a 70-year-old asset. And so, yes, it's 9%, which that in and of itself is obviously very good, but we do know that there is a lot more creative creative returns that are beyond that with what we're doing.

And what's the tail on this from a time frame on that $4 billion? Like when should we expect that to hit and what is behind it? I know you have Talman, but as you reevaluate the portfolio and continue to re-underwrite or bring in new assets, what could that kind of additional opportunity be over time?

Sure. So I guess on the first part, on the $4 billion you know I'm hopeful that that starts over the next several years you know maybe AI can disrupt how you know city planning and some of these towns work so they can be quicker because it's not an issue of our desire it's not an issue of our capital or the tenant demand it just takes time to get through some of these processes but I would expect most of that to you know start over 27 28 29 but then you got to remember that you know some of these projects of Fashion Valley, that's going to be a three-year development. An iconic asset in San Diego that we're going to add multi-family, flagship retail, world-class restaurants, et cetera. And so I think it's important to note that it's not just when we start, but this capital does get deployed over a multi-year process. And then behind the $4 billion, we are just scratching the surface, right? Again, it has nothing to do with capital constraints. It's, you know, where's the best use of our time? And that's what this $4 billion has determined. But we continue to look at our portfolio every day because if we're not making the asset better, inherently it's getting worse. And so we say, okay, where's the next asset that we can put significant dollars in to make it better the next Southdale, the next Brea, you know, in Orange County, which is near the end of that significant work. So we think there's a lot behind it. $4 billion, I think, is not too bad. But we'll continue to grow that over time.

And you guys have historically been opportunistic as well on the direct retailer side. I know that a couple years ago you pulled back a little bit because maybe you're getting some feedback from investors. But as SACS comes and some others potentially down the road how interested I know you guys already have an investment sack so that's maybe a redundant question but going forward like the if you have this level of potential redevelopment or use of capital within the existing portfolio that's a little more organic probably a little de-risk that versus the appetite to continue to be opportunistic just kind curious how much capital maybe you set aside for those relationship or you know strategic investments versus the just the straight up real estate side yeah i mean i think it's it's as you

said opportunistic we're not looking for it if somebody calls us we'll take the call and we'll look at an opportunity i mean from a capital perspective you gotta remember we have very very very little net cash in these deals we put in a little cash to begin with and then we've returned significant amount of it so earmarking anything it would be it would be silly because it's it's the minimus relative to liquidity we have uh and and the you know in the other uses of cash and so if there's something interesting can we do it of course we're not actively looking at it obviously you know with our investment catalyst we're happy right i think the the management team there has done a great job but we're not actively looking uh to do anything we

think we got a great opportunity in our existing portfolio and let's just keep making these assets even better and driving cash flow growth which is you know what i think we're uh we're the best at any questions from the audience open up for a minute nope all right um on the leasing side the the demand has been strong the execution has been strong um As you talk to retailers, the tariff issue SCOTUS slapped it down and the administration came right back with another avenue.

Kind of how is that uncertainty or extra cost essentially factoring into conversations you guys are having as tenants are looking to lease or they are looking to figure out their cost structure and margins and you know your OCRs factoring all that in sure so I think a couple things first is you know tariffs and sort of changing supply supply chains is not a new story this is you know went on pre-COVID in the first Trump administration and has been continuing to today so that I think you know from retailers their flexibility is a lot better than it might have been 20 years ago. And so that's first and foremost. Second is when we had our earnings call first week in May, so a month or so after Liberation Day, I think we said on the call that there were four or so leases that fell out. We signed 4,500 leases last year and four or five fell out because of tariffs. Well, we're sitting here almost a year later and the number is still four or five leases fell out because of tariffs. So we don't see that changing. The conversations we're having are good. Retailers are looking to secure renewals on their space going into the future more, because they realize that if they have good space, they want to keep that good space. And so we're working on not just 26 renewals, but 27 and 28 renewals with some retailers in certain circumstances so you know obviously it's fluid we're cognizant of it you know could there be some impact on margin of course I think the retailers though by and large have done a good job of figuring out how to minimize it and you know we'll see what happens but we'll be ready to react either way but you know as we sit here today the leasing pipeline is still very strong it's still you know north of 15 above where it was this time last year So even after 10 or so months of tariff noise.

We had a question come in through LiveQA specific to ClayPierre. How do you think about the success of that investment in keeping your capital in the deal longer term?

So I think the key word you said there is investment, and we view ClayPierre as an investment. And an investment, by his definition, we can hold an investment or we can sell an investment. And so that's how we look at it. obviously it's been very successful. We're proud of what we've done over the last 14 years. We're proud of how it's performed, but it's an investment. And so we will evaluate it every day and determine if it's an investment we should keep or it's an investment that we have better use of that capital. But otherwise, sort of business continues as usual.

In regards to the exchangeable, I know I think we had talked, you guys have the ability to pay back in cash, you have the ability to put shares. You mentioned you did put a little bit of the investment back, a very small piece. As you guys go forward, how should we expect that debt to be paid off? Could you liquidate more of the investment there through the payback of it or did you kind of right size what you guys wanted to right size and now you pay it back with Sure.

We will look at each and every exchange as they come in to the extent they do and then decide at that moment what we want to do. As of the earning call, we would exchange a million and a half shares out of our 63, 64 million shares. Obviously, that is not a huge percentage, but we will evaluate each exchangeable notice to the extent they come in and sort of determine what is best for SPG at that time.

Kind of pivoting a little bit and it goes back to maybe the investment piece. You guys bought Jamestown a few years ago. It's been quiet on that front, at least externally, what you guys are doing with them. Is there anything near-term or on the horizon or maybe even in the $4 billion that you referenced that leverages that platform over time, or how should we think about that relationship going forward?

Sure. It's a great relationship. I was talking to Matt and Michael, I think on Wednesday or Thursday last week, it's, you know, I would say the $4 billion is just SPG, right? And I would think of it less as what Jamestown is giving to us versus what we are giving to Jamestown. And so, you know, they're working on, you know, they closed on our transaction in Charlotte not too long ago in the last couple of weeks. They're working on a transaction in Berlin that's closing soon. They're looking at a couple of large mixed-use sports-related developments in Tampa and in Atlanta. And so we provide input, we provide expertise maybe down the road depending on how those deals get capitalized. We maybe provide capital. But it's a great relationship, you know, we're 50 percent owners, right, so we don't control it by any means. It's an awesome management team who's doing a good job. And so we talk to them weekly at least and to continue to find ways to grow that platform. It's an investment that we're happy we made and we'd like to continue to grow it.

The goal is to grow AUM and ultimately that is what we're kind of focused on and we expect to see that in the near future with that platform.

Is there ever an opportunity for you guys to do or them to do a fund with you guys contributing assets taking outside capital? model, could that be something down the road or is it basically you guys just want an asset management arm, maybe you introduce them to some people they might not know to get their AUM up and kind of enjoy the fees, the high profit margins on that?

Never say never, but I think it's more the latter, right, because if you think about, you know, by and large our portfolio, you know, the assets we own, we want to own outright, right, or, you know, our share of what we have with partners. And so to contribute it, to grow their AUM in a business that we own 50% of versus what we can own and what we can control our own destiny, that's much more interesting. But we do develop interesting capital relationships with Jamestown, right? They do talk to large institutional investors on the private side that we might not really have a need for, frankly. Maybe one day down the road we do. But that's an interesting angle for us is to develop those relationships. We look at it and say we have boots on the ground in literally hundreds of markets, north of a hundred markets across the country, and so basically any asset that Jamestown is looking at to underwrite is the market that we know, and so that is pretty valuable intel when they are looking at going to raise capital and they are talking to the large institutional Not too many people can say that, and so we think it is additive to their platform.

We had a question come in. I know you guys addressed this a little bit on the call, but maybe an update on the expectation for the SACS bankruptcies. How many stores have you gotten back? Do you expect any leases to be bought in auction?

Sure. So you have to separate the off-fifth and the full price department stores. On the off-fifth, as we said on the call, we have 38 stores that pay $18 million and effectively they have rejected the vast vast majority of those and we're going to take that 18 million and based on where we are today with about half those stores that's a 30 million dollar rent roll and so you know based on the rest of the stores that should more than double the 18 million bucks you know all those are in the outlets in the mills and so that is going well low paying low productive space in very good locations I was at Silver Sands Premium Outlets last week We're going to take their box, it's in a prime corner of the center, and we have a deal with a great retailer that will do literally maybe 10x the volume, if not more, of what Saks is doing, or what Saks Off 5th is doing. On the full price department stores, that's early, we'll see. Obviously, we announced at Copley the Neiman box that we're going to redevelop and add multiple restaurants that will do over $100 million in volume and additional new luxury retailers. and then we'll see where the rest of the rest of the full price stores shake out but either way you know if SACS remains as a go-in concern which you know I think would be good you know generally speaking for the industry and for the environment then that's fine and if something you know worse were to happen you know it's their stores are in great centers and you know we've obviously been thinking about alternative uses and so we'll just you know see how the bankruptcy plays out we're prepared either way and it's not the first time you know we've dealt with something like this.

Another question come in. How have tenant sales or traffic trended year-to-date relative to trends last year?

Yeah so you know through January both sales and traffic have accelerated you know where they were the last couple of months of the year in 25. So it's obviously early you know February too early to know, to have a read on, but I think anecdotally similar-ish, but kind of crazy weather in parts of the country that might not normally get it, so don't have a great read on February yet, we'll see, but through January have accelerated both the growth in sales and the growth in traffic over the last couple months of the fourth quarter last year.

You guys have done a fair bit of outlet development overseas just kind of curious with the geopolitical risk going on and what's going on over the weekend just does that delay or change your underwriting at all on the decision to kind of put capital outside the u.s on the margin i know where you guys own is not where this is going on but clearly there's obviously we don't we don't own in the area so that that's not and you know frankly not really looking in the area so that's not that's not a concern I mean when we look at international development you know which we write our most recent asset was in Indonesia last year to the extent we're taking country

risk we're going to make sure we're earning the right return so it's just a higher return threshold but we obviously evaluated you know very very closely you know I don't want to say we scrutinize it more than something we do here because we scrutinize you know every five ten thousand dollar decision very closely to make sure we're not wasting money um but on the international front you know we have a few new deals um you know our new uh expansion in japan or an expansion in japan a new development in korea that you know supposed to start later this year let's see where the geopolitical environment is the great thing is we can do it or we can not do it and you know that's funded basically by uh you know by those those portfolios with those partners so doesn't really you know sweat either way we're not really sweating either way but we'll just evaluate each one we have a very stringent criteria when we go overseas and obviously it's been you know incredibly successful so far we're proud of the assets we have then in terms of capital allocation priorities we had a question come in you know if between expansion of malls outlets densification of you know other uses how do you prioritize those then and how do you think about either larger cities or more secondary cities? Yeah, I mean, we prioritize all. We do all, we'll do all, and are excited about all. And so there's no issue resource-wise, both in terms of people or in terms of capital at all, right? We're generating a billion and a half dollars after dividend to fund the pipeline and while naturally deleveraging. So it's not a concern. it's each individual asset what's the best decision for that asset sometimes like a Boca just you know one of my favorite malls frankly and one of the best malls in the portfolio we have an opportunity to do something incredible to add a hotel multifamily great retail great dining we're gonna do it in other markets it might make more sense to do a you know sort of a box replacement or maybe a small restaurant outlay, what we did at Mission Viejo where we added a handful of restaurants outside and a couple of furniture uses. So we look at each and every asset, what's the best use of that asset, not where are we putting money, because if we do something here, we can't do it there. And then on development itself, obviously we've announced what we're doing at Sage Field, south of Nashville and Franklin, in which we could not be more excited about you know a little bit different than what we've done in terms of the style truly taking into account the beautiful layout where it is and but retail demand for that has kind of been unlike anything we've seen in terms of the quality of retailers that are excited about that so that's you know obviously going to really start picking up later this year and open in a couple years and you know we continue to look at new development opportunities less, so on the full price side, probably more on the mall side, sorry, on the outlet side, but those will have to be deals that we want to do that we think generate an attractive return.

Debt spreads have been coming in for the REITs, especially the larger, more highly rated REITs. What's your view and need for capital in the near term? Kind of how should we expect or should we expect you guys to tap that market to take advantage?

Yeah, I mean, Craig, we're regular funders in the security unsecured market. I mean, we're not raising incremental capital, we're funding our business with free cash So really, it's just replacement debt. Markets are wide open. We did an offering earlier in the year, you know, five-year offering at 65 over Treasuries. You know, in the history as a public company, we've only issued a five-year tighter one other time. So the markets are open, the secured markets are opening and pricing efficiently. So, you know, ultimately we will be very active again this year as we are every year, probably have about $10 billion of total financing to do between unsecured and secured. You know, we still do face, you know, higher interest rates in the coupons we're rolling off. You know, we benefited during the when interest rates were at zero. I was actually, you know, kidding with David that we will have rolled off our last 1% coupon next year.

And so we, you know, we are still getting tight pricing, but base rates certainly are elevated relative to recent past. we have our rapid fire question set in the session what will same store noi growth be for we'll just say retail overall next year in 2027 less than ours any specific numbers still less than ours will there be uh more fewer the same number of retail rates a year from now doesn't impact us broadly do you expect m a across retail rates we'll see doesn't it doesn't impact

doesn't impact us all right thank you thanks guys thank you