Release Date: August 10, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Domestic property NOI and real estate FFO growth accelerated to 8.5% and 7.9% respectively in Q2 2026, driven by strong leasing demand and disciplined execution.
- Leasing momentum remains robust with over 1,200 leases signed in Q2, new deals up 20% year-over-year, and initial base minimum rent on new deals up 17% year-to-date.
- Retailer sales performance is strong, with mall and premium outlet sales reaching $838 per square foot, up 13.9%, and total sales volume growing 6.6% over the trailing 12 months.
- The development pipeline is robust, with $1.07 billion in projects underway at a 9% blended yield and over $4 billion in potential future projects, supporting long-term growth.
- The company raised its full-year 2026 real estate FFO guidance to $13.20-$13.30 per share, reflecting confidence in continued operational outperformance.
Negative Points
- Higher interest expense and lower interest income combined to create a $0.06 per share drag on FFO in Q2, with expectations of continued pressure through the year.
- The company absorbed approximately 1 million square feet of retailer bankruptcy-related space returns during the quarter, though it successfully re-leased the space.
- Occupancy cost remains elevated at 12.5%, which could limit future rent growth potential for some tenants.
- Sales growth is expected to moderate in the second half of the year due to tougher comparisons, and guidance assumes a slowdown in consumer spending.
- International travel-related outlet centers, particularly in Vegas and Orlando, are experiencing slower growth due to reduced international tourism, impacting overall portfolio performance.
Q & A Highlights
Q: Given the strong sales trends, how should we think about potential upside to 2026 NOI and FFO growth from overage rents if these trends continue? What is baked into guidance?
A: Eli Simon (CEO): We have seen no signs of a slowdown; traffic accelerated in July. However, sales are the one thing we cannot control due to macro factors. Guidance effectively assumes a slowdown, so if current conditions continue, we will likely be above the range. Brian McDade (CFO) added that if current conditions persist, there will be a further contribution beyond guidance.
Q: Can you provide an update on the 1 million square feet of bankruptcy-related space returned during the quarter? What were the rents, and what is the economic uplift from replacing this space?
A: Eli Simon (CEO): The space was primarily from Saks Office. We leased it back quickly, ending July at 96.3% occupancy. The boxes were paying $18 million in rent; deals signed today for about half the space are already well in excess of that, and we expect to turn the $18 million into $44 million. The rent impact will be a 2027 story since we got the space back later than expected.
Q: Given occupancy is at 96%, where do you see the greatest opportunity to drive NOI and earnings growth over the next 12 to 18 months?
A: Eli Simon (CEO): There is a little more occupancy growth to go, but the key levers are re-tenanting lower performers with better tenants that pay more rent and our development pipeline. We have $1 billion in the ground generating 9% returns, with $600 million more to start by year-end. These developments also benefit the rest of the center beyond the quoted returns.
Q: Can you discuss the outlook for tenant allowances (TIs) and whether reducing them is a goal, given the strong leasing environment?
A: Eli Simon (CEO): TIs are a function of tenant demand and supply of available space. The mix of deals impacts TIs; for new or less creditworthy tenants, we may pay less. Year-to-date, new deal rents are up 17% while tenant allowances are down 12%. Our focus is on growing cash flow, and we are reinvesting heavily in our centers, which is attracting new retailers and driving growth.
Q: As you look ahead to 2027 and beyond, with inline shop rents around $60-$65, are you signing leases in the mid-70s? What is the trajectory for rent growth?
A: Eli Simon (CEO): Year-to-date, new leases are signed at $78, but it's not as simple as moving from $65 to $78. Many leases renew at mid-single-digit increases. We focus on the right retailer for each space, not just market rent. The supply and demand story is positive, and we continue to upgrade the merchandise mix with a pipeline of 483 deals, 28% of which are new tenants.
Q: Can you provide details on which tenants or categories you are adding to centers versus those you are limiting exposure to?
A: Eli Simon (CEO): We are adding across a variety of categories, with the most exciting being new and emerging brands in technology, athleisure, home, and jewelry, particularly targeting Gen Z. These brands come from online, Europe, and Asia. We are also upgrading restaurants, adding $400-$500 million of incremental restaurant sales. The watch list is in very good shape with nothing material.
Q: Can you give an update on TRG (The Retail Group) and when the contribution from the additional 12% ownership normalizes?
A: Eli Simon (CEO): We are more excited about TRG. We've increased EBITDA margins on managed assets by 300 basis points this year, with another couple hundred basis points to go. The 120 basis points contribution from the additional 12% ownership will annualize in the next two quarters. We are investing significantly in assets like Green Hills, International Plaza, and Cherry Creek for long-term growth.
Q: With $4.5 billion of unsecured debt maturing in 2H26 and 2027, how are you thinking about those maturities and current cash?
A: Brian McDade (CFO): We are active across various markets, having done two deals in Europe. We haven't accessed yen funding yet but are considering it. Credit spreads are tight, but there is plenty of capital to refinance. We are being proactive about interest expense, which will be a $0.20 drag for the balance of the year.
Q: Can you discuss the breadth of the strong sales growth? Is it just the top 50 assets carrying the portfolio?
A: Eli Simon (CEO): It's definitely broader than the top 50. Luxury and jewelry remain very strong, and Juniors brands targeting Gen Z have had 16 straight months of positive comps. Restaurants are a bit softer. Florida remains very strong, while border outlets are growing a bit less due to lower international travel. It's a broad-based story across malls, outlets, and mills.
Q: Can you provide an update on the Simon Brand Ventures and the opportunity to monetize the visitor count?
A: Eli Simon (CEO): We will launch Simon Media Network in the coming weeks to take advantage of first-party customer insights. We have billions of visits and over $100 billion in domestic sales. The business is growing at double-digit mid-teens percent year-over-year. We are investing in screens and touchpoints with a one to two-year payback period, and we see a tremendous opportunity to grow this business significantly over time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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