Simon Property Group (NYSE:SPG) reported accelerating second-quarter growth in domestic property net operating income and real estate funds from operations, citing continued tenant demand, higher lease income, acquisitions and solid retailer sales.
Chief Executive Officer, President and Chief Operating Officer Eli Simon said domestic property NOI increased 8.5% year over year in the quarter, while real estate FFO rose 7.9%. He said shopper traffic accelerated and retailer sales continued to grow, supporting management’s view that its malls, Premium Outlets and other properties remain attractive destinations for consumers and tenants.
Leasing activity and retailer sales
The company signed more than 1,200 leases covering over 4.8 million square feet during the second quarter. New deals increased more than 20% from the prior-year period and represented about 28% of total leased square feet.
Through the second quarter, initial base minimum rent per square foot on new leases rose 17% year over year, while tenant allowances per square foot for new leases declined 12%, according to Simon. The company had completed more than 87% of its 2026 lease expirations and was negotiating expirations scheduled for 2027 and 2028.
Simon said the prospective-deal pipeline remained ahead of last year’s pace, with more than 100 additional deals and a 26% increase from the year-earlier period. He added that new leases signed year to date carried rents of roughly $78 per square foot, though he cautioned that lease renewals and tenant mix decisions mean expiring inline-shop rents cannot simply be compared with new-deal rates.
Malls and Premium Outlets reported sales of $838 per square foot, up 13.9%. Total sales volume increased 6.6% over the trailing 12 months and 7.6% in the second quarter, while comparable sales grew 5.7% in the quarter.
Simon said sales momentum was broad-based rather than concentrated in the company’s largest properties. Luxury, jewelry and watches remained strong, while brands targeting Gen Z consumers recorded 16 consecutive months of positive comparable sales. Restaurants trailed the broader portfolio, he said, while international travel patterns moderated growth at some outlet properties in markets including Las Vegas and Orlando.
Occupancy and Saks OFF 5TH replacement leases
Chief Financial Officer Brian McDade said Malls and Premium Outlets occupancy ended the quarter at 96%, unchanged from both the prior quarter and the prior year. The Mills portfolio was 98.8% occupied. Average base minimum rent at Malls and Premium Outlets increased 6.3% from a year earlier, while average daily rent at The Mills increased 12.3%.
The company absorbed approximately 1 million square feet of bankruptcy-related space returned during the quarter and relet it, McDade said. Simon identified nearly all of that space as former Saks OFF 5TH locations.
According to Simon, the affected outlet boxes had generated about $18 million of rent. Leases signed for approximately half the space were already “well in excess” of that amount, and the remaining space was under discussion or near-final agreements. He said the company expects to convert the $18 million in former rent into roughly $44 million, although the contribution will be more meaningful in 2027 because Simon did not regain the boxes until mid-May.
Signed-but-not-open occupancy remained near 310 basis points, Simon said. He added that the tenant watch list was at a low point and that any normal-course store closures could create opportunities to improve tenant mix.
Financial results, capital returns and outlook
Real estate FFO totaled $1.25 billion, or $3.29 per share, compared with $1.15 billion, or $3.05 per share, a year earlier. McDade said domestic and international operations contributed $0.29 per share of growth, supported by lease income, cost management and acquisitions. Higher interest expense and lower interest income represented a combined $0.06 per-share year-over-year headwind.
Reported FFO was $3.12 per share, compared with $3.15 per share in the prior-year quarter, which included a $0.21-per-share non-cash after-tax gain primarily related to Catalyst Brands’ deconsolidation of Forever 21.
Domestic property NOI rose 7.6% in the first half. McDade said about 120 basis points of NOI growth in both the quarter and first half came from Simon’s acquisition of the remaining 12% interest in Taubman Realty Group. Portfolio NOI, including international properties at constant currency, increased 8.3% in the quarter and 7.5% for the first half.
The board declared a third-quarter dividend of $2.25 per share, payable Sept. 30 to shareholders of record, representing a 4.7% increase from a year earlier. During the quarter, the company repurchased approximately 793,000 common shares and 238,000 limited partnership units for $211 million, at an average price of $205.10 per share.
Simon Property Group increased its full-year 2026 real estate FFO outlook to $13.20 to $13.30 per share, up $0.08 at the midpoint from its previous range. Management said the outlook assumes moderation in retailer sales growth, though Simon said results could exceed the range if current sales trends continue.
Development, balance sheet and growth initiatives
The company had development projects underway with its share of net costs totaling $1.07 billion and a blended expected yield of 9%. About half of the cost was tied to mixed-use projects. Simon said projects representing more than $600 million of additional net cost could begin construction in the second half, while the broader development pipeline exceeds $4 billion.
McDade said Simon Property Group completed $1.4 billion of secured loan transactions during the quarter at a weighted average rate of 5.36%, issued €500 million of five-year senior notes at 3.65%, and closed a $460 million five-year term loan. The company ended the quarter with approximately €9.3 billion of liquidity, net debt to EBITDA below 5 times and fixed-charge coverage of 4.7 times.
Simon also said the company expects to announce the launch of the Simon Media Network in coming weeks, an initiative intended to use first-party customer data, digital platforms and more than 4,000 in-property screens to expand advertising and media opportunities. He described the business as growing at a mid-teens annual percentage rate, while emphasizing that its longer-term potential remains uncertain.
About Simon Property Group (NYSE:SPG)
Simon Property Group, Inc (NYSE: SPG) is a publicly traded real estate investment trust (REIT) that owns, develops and manages retail real estate properties. Its core business activities include acquisition, development, leasing and property management of regional malls, outlet centers and mixed‑use retail destinations. The company operates retail brands that include high‑profile regional shopping centers and the Premium Outlets platform, and it provides services such as tenant leasing, marketing, property operations and capital projects to optimize asset performance.
Simon’s portfolio spans a broad mix of enclosed malls, open‑air centers, outlet properties and mixed‑use developments, and the company pursues redevelopment and repositioning to adapt properties to changing consumer and retail trends.
