Simon Property Group Earnings Call Highlights Growth, Risks

Simon Property Group ((SPG)) has held its Q4 earnings call. Read on for the main highlights of the call.

Simon Property Group Signals Confidence With Record Results Amid Emerging Retail Headwinds

Simon Property Group’s latest earnings call painted an overall upbeat picture, with management highlighting record funds from operations, strong leasing and rent growth, healthy property-level income, and a deep redevelopment pipeline. While executives were candid about mounting pressures from tariffs, higher interest costs, and some occupancy drag from recent acquisitions, the tone remained confident that the company’s scale, balance sheet strength, and active capital deployment position it well to navigate 2026 and beyond.

Record REFFO Underscores Core Earnings Strength

Simon reported record real estate funds from operations (REFFO) of $4.8 billion for fiscal 2025, equating to $12.73 per share. Fourth-quarter real estate FFO came in at $3.49 per share, a 4.2% increase from $3.35 a year earlier. Management framed this performance as evidence of durable demand across its portfolio and effective operational execution, even as macro and rate headwinds intensified over the course of the year.

Leasing Surge and Rising Rents Signal Solid Tenant Demand

Leasing momentum was a major highlight. Simon signed more than 1,300 leases covering over 4.4 million square feet in the quarter and over 4,600 leases totaling more than 17 million square feet for the year, with roughly 30% of that volume coming from new deals. New leases were signed at an average rent of $55 per square foot, and average base minimum rents climbed 4.7% year over year, helped by roughly 250 basis points of growth from the TRG properties. The leasing pipeline is approximately 15% larger than a year ago, underscoring robust retailer appetite for Simon’s properties.

Retail Sales and Traffic Continue to Build

Retail performance indicators remained positive. Sales per square foot for Simon’s malls and premium outlets reached $799 for the year, with the SPG-only portfolio posting about 2% year-over-year sales growth. Total sales volumes rose about 4% in the fourth quarter and roughly 3% for the full year, and management pointed to accelerating shopper traffic as a key driver. This traffic and sales momentum supports both current rent levels and future leasing economics.

Property NOI Growth Demonstrates Operating Leverage

On the property level, Simon delivered solid net operating income gains. Domestic property NOI increased 4.8% year over year in the fourth quarter and 4.4% for the full year. Including international operations on a constant-currency basis, portfolio NOI grew 5.1% in the quarter and 4.7% for the year. These figures highlight the company’s ability to translate leasing and rent growth into tangible earnings power across markets.

Active Acquisitions and Redevelopment Drive Future Growth

The company continued to lean into external growth through selective acquisitions and large-scale project work. In 2025, Simon acquired approximately $2.0 billion of high-quality retail assets, including European luxury outlet properties, an interest in Miami’s Brickell City Centre, the remaining stake in Calvin Realty Group, and the Phillips Place center. It also completed more than 20 major redevelopment projects and disclosed a development and redevelopment pipeline exceeding $4 billion. Management positioned this activity as critical to keeping the portfolio top-tier while creating future NOI upside.

Attractive Development Economics but Modest Near-Term Contribution

At year-end, Simon’s share of net development costs across its platforms totaled roughly $1.5 billion, with a blended expected yield of about 9%. Around 45% of this net cost is tied to mixed-use projects, reflecting the company’s push into more diversified, experiential formats. Despite these attractive economics, management expects only about $30 million of incremental NOI in 2026 from projects completing during the year, emphasizing that much of the financial benefit from the current pipeline will emerge in 2027 and later.

Capital Returns Remain a Priority

Capital allocation skewed heavily toward shareholder returns in 2025. Simon returned around $3.5 billion in cash to shareholders via dividends and buybacks. More than $3.2 billion was paid in common dividends, and the company repurchased over 1.2 million shares for approximately $227 million, with another 273,000 shares bought back for $50 million after year-end. The board declared a first-quarter dividend of $2.20 per share, up $0.10, or 4.8%, from the prior year, signaling continued confidence in cash flow durability.

Balance Sheet and Liquidity Provide Strategic Flexibility

Management highlighted the balance sheet as a competitive advantage. Simon completed about $9 billion in financing transactions during 2025, including a $1.5 billion dual-tranche U.S. senior notes offering with a combined average term of 7.8 years and a weighted average coupon of roughly 1.77%. The company ended the year with more than $9 billion of liquidity and net debt to EBITDA of 5.0x, which it described as consistent with an A-rated profile. This liquidity supports both ongoing development and continued shareholder returns.

Product and Market Momentum Supports Brand Relevance

Beyond the numbers, management highlighted evidence that its properties remain highly relevant with both shoppers and brands. The company opened a new premium outlet in Indonesia, expanding its international footprint. High-profile openings such as Chanel at Town Center were singled out as strong performers. Simon also pointed to early traction from its Simon Plus loyalty program, which helped drive activation and traffic during the holiday season, suggesting potential upside from digital and customer-engagement initiatives.

Tariff Pressures Raise Retail Credit Risk

Management was explicit that tariffs are becoming a meaningful headwind, particularly for small and mid-sized retailers that are more exposed to cost increases and have less pricing power. This could translate into higher bankruptcy risk and more tenant churn in 2026, introducing an element of credit uncertainty despite otherwise healthy consumer and leasing trends. While Simon believes its portfolio quality mitigates this risk, it flagged the issue as a key macro watch point.

Investment Write-Off Tied to Saks Transaction

During the fourth quarter, the company wrote off an investment associated with its transaction involving Saks Global. While the financial hit was recognized in 2025 results, management noted that Simon retains various contractual rights from the deal, including certain lease and operating rights. The message to investors was that the write-off is contained and does not alter the broader strategic positioning of the portfolio.

Interest Rate Environment Weighs on Earnings

Lower interest income and higher interest expense were both cited as earnings headwinds in 2025, reflecting the broader rate environment and financing needs tied to acquisitions and development. Looking ahead, the company’s guidance assumes net interest expense will rise by roughly $0.25 to $0.30 per share in 2026 compared with 2025. While this pressure is manageable given NOI growth, it does dampen the pace at which REFFO can expand.

Short-Term Occupancy Drag from Acquisitions

Recent acquisitions, particularly the TRD/TRG assets, have had a dilutive impact on reported occupancy. The addition of these assets reduced occupancy by approximately 20 basis points for malls and premium outlets and about 30 basis points for the mills portfolio. Management expects occupancy to improve as integration progresses and leasing ramps, but acknowledged that the near-term effect is a modest headwind to portfolio metrics.

Redevelopment Benefits Skewed to 2027 and Beyond

While Simon’s redevelopment and remerchandising pipeline is large and priced at compelling yields, the company cautioned that much of the associated financial upside will not be fully visible in 2026 results. Many of the larger projects are back-end loaded, with “material” NOI uplift expected to emerge in 2027 and later. For investors, that means balancing near-term earnings pressures against a potentially stronger multi-year growth trajectory as today’s capital projects come online and stabilize.

Leverage and Market Variability Remain Watch Points

With net debt to EBITDA at 5.0x, Simon operates with a moderate level of leverage that leaves it somewhat exposed to shifts in interest rates and capital markets, despite ample liquidity. Management also acknowledged uneven consumer demand across geographies, pointing in particular to weaker cross-border spending from Canadian shoppers and variability by market. While the overall portfolio is performing well, localized softness could create pockets of slower growth or higher leasing effort.

Guidance and Outlook: Steady Growth with Manageable Headwinds

Looking to 2026, Simon guided to real estate FFO of $13.00 to $13.25 per share, with a midpoint of $13.13, implying continued growth from 2025’s record levels despite higher financing costs. The outlook assumes at least 3% domestic property NOI growth and about $0.25–$0.30 per share of higher net interest expense. Management expects roughly $30 million of incremental NOI from projects completing in 2026 and continues to work through a development pipeline exceeding $4 billion, backed by a year-end share of net development cost of about $1.5 billion at a 9% blended yield (around 45% mixed-use). Operational metrics remain strong heading into the year, with end-2025 occupancy at 96.4% for malls and premium outlets and 99.2% for mills, average base minimum rents up 4.7%, retail sales per square foot at $799, and occupancy costs at 12.7%. Combined with more than $9 billion in liquidity, net debt/EBITDA of 5.0x, and an increased quarterly dividend of $2.20 per share, management’s guidance conveys cautious optimism that underlying property strength can offset known macro and rate headwinds.

The earnings call left investors with a picture of a company balancing cyclical challenges with structural strengths. Record REFFO, solid NOI growth, and strong leasing provide a firm foundation, while an active acquisition and redevelopment pipeline offers multi-year upside, albeit back-end loaded. At the same time, tariff-driven retailer pressure, higher interest expense, and localized demand variability underscore that the road ahead is not without risk. For shareholders, the key takeaway is that Simon appears committed to using its scale, balance sheet, and capital allocation discipline to sustain growth and maintain attractive returns, even as the retail and rate environment becomes more complex.