Simon Property Group - Earnings Call - Q2 2025

Executive Summary

• Q2 delivered steady growth: Real Estate FFO rose to $1.154B ($3.05/sh), up 4.1% YoY; consolidated revenue was $1.50B (+2.8% YoY). Domestic NOI +4.2% and portfolio NOI +4.7% underscored operating strength.
• Guidance: Midpoint of FY25 Real Estate FFO guidance was raised to $12.45–$12.65 (from $12.40–$12.65 in Q1); GAAP net income guidance nudged lower to $6.63–$6.83 (from $6.67–$6.92).
• Estimate context: Revenue beat S&P Global consensus ($1.50B vs $1.39B, ~+8%); Real Estate FFO/share printed roughly in line/slight beat vs $3.05*; S&P’s Primary EPS basis shows a miss ($1.36* actual vs $1.49* est), while company-reported diluted EPS was $1.70.
• Capital and dividend catalysts: Liquidity stood at ~$9.2B; Board raised the quarterly dividend to $2.15 (+4.9% YoY), payable Sept 30. Company sold $1.5B of new senior notes post-quarter, terming out September 2025 maturities.
• Strategic: Simon acquired full ownership of Brickell City Centre retail/parking; management sees accretive upside, citing purchase at a cap rate above strip-center trades and below replacement cost.

What Went Well and What Went Wrong

• What Went Well

  • NOI growth and occupancy: Domestic NOI +4.2% and portfolio NOI +4.7% YoY; portfolio occupancy rose to 96.0%, with The Mills at a record 99.3%.
  • Leasing velocity: ~1,000 leases for >3.6M sq ft signed in the quarter; ~30% were new deals; ~90% of 2025 expirations addressed ahead of this time last year.
  • Strategic M&A and capital: Full ownership of Brickell City Centre secured; management emphasized attractive cap rate and below replacement value, positioning for NOI uplift. Liquidity of ~$9.2B supports flexibility; dividend raised to $2.15.
  • Quote: “Retail demand is really unabated… the physical shopping environment continues to be the place to be.” – David Simon.

• What Went Wrong

  • GAAP EPS optics on S&P basis: S&P “Primary EPS” actual $1.36* vs $1.49* est, a shortfall; company-reported diluted EPS was $1.70 (different methodology).
  • Macro headwinds linger: Management remains “cautious” on tariffs and geopolitical uncertainty; border/tourist centers not “outperforming” as in prior cycles; traffic up only ~1.5%.
  • Interest income/expense drag: CFO cited lower interest income and higher interest expense as a ~$0.07 YoY headwind to Real Estate FFO/share growth dynamics, partially offset by operational gains.

Transcript

Speaker 5

Greetings. Welcome to Simon Property Group's second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. 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.

Speaker 2

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 relating to moving forward with these 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 one 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 am pleased to introduce David Simon.

Speaker 6

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 operations, 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.

Speaker 1

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, 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 were 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 mall 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, 8.6% growth.

Second quarter results include a $0.21 per share non-cash after-tax gain, primarily due to Catalyst Brands' deconsolidation of Forever 21. In addition, better operational performance at Catalyst Brands compared to last year. Lastly, a $0.13 per share non-cash loss from the unrealized mark-to-market adjustment on our exchangeable bonds due to the outperformance of Clay Pierce 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 and a blended yield of 9%. Approximately 40% of net costs are for mixed-use projects. As David mentioned, we acquired our partners' interest in Brickell City Centre. Our $512 million investment includes the retail and parking components as accredited.

We now fully 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%, and 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.

Speaker 5

Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Jeff Spector with Bank of America. Please proceed.

Great, thank you. Given that, first, I'll keep it high level. You know, just given all the uncertainty, you know, I see as to today, I guess could you describe for us the leasing velocity you're seeing, some of the demand, maybe a peek into, you know, your last leasing meeting in terms of quantity, deal flow, and quality of the deals, please? Thank you.

Speaker 6

Unabated. You're right, Jeff, in the sense that the whole world is uncertain. A lot of geopolitical stuff going on, obviously. A lot of domestic political stuff going on. New York City, thankfully, we're not an investor in New York City, but obviously a lot of political uncertainty in New York City. Tariff swings back and forth. Interest rate uncertainty. You can name it. However, you have unbelievable stores that are us, in particular, that are able to manage that. In addition, retail demand is really unabated. The physical shopping environment continues to be the place to be. We're quite bullish about what we've done, what we are doing, where we are going, despite all of the headlines that are out there. Unabated. If you look at our 33-year almost track record, I kind of laugh, not to, I guess, not to segue, but to segue.

I kind of chuckle to myself in that some of our, you read all these companies that are restructuring. Now they're going to lease their properties better. Now they're going to manage their balance sheet better. Now they're going to bring in new management and be better. If you look at our particular little niche, we've had bankruptcies. We've had people that have bought companies that have been overpaid, that had to restructure their operations. Wholesale management changes. Restructuring of operations, this, that, and the other. There's one group, one group that's never done that. That's us. All we've done is run our business appropriately. We'll continue to do so. It's something that I think investors and analysts in particular, Jeff, should point that out. You've never read about a Simon Property Group restructuring.

Yes, we had to do some certain drastic things to deal with COVID and to deal with the great financial crisis. There's been no restructuring of this company. Only things that have benefited Shell. The headline risks that are out there, they're real. Tenant demand is unabated. Traffic's up. Sales are holding their own. Our properties are continuing to get better.

Great, thank you.

Sure.

Speaker 5

Our next question is from Michael Griffin with Evercore ISI. Please proceed.

Great, thanks. Maybe just diving into that tenant demand piece a bit more. It probably seems like the national retailers and concepts have a greater footing or clarity around their real estate footprint needs. For maybe some of those smaller tenants, maybe those mom-and-pop local concepts, are you still seeing strong demand from those as well, David? You touched about kind of across-the-board demand, just curious if you can kind of bifurcate those two pieces. Thank you.

Speaker 6

Yeah, you're right. Last quarter, I did express my concern about that segment, given, you know, how tariffs might affect them and their cost of goods. It's, they're doing, they're beating their plans so far this year. It's all systems go there. I'm sure there's trepidation, but they're, I think they're managing it as best they can. I still think the full story, obviously, given the volatility, has not been written, but we're not seeing it in demand. That particular business that is sensitive to moms and pops continues to perform well. We're more optimistic about that segment than I was last quarter. Like I said, it is something that we're watching closely.

Great, thank you.

Sure.

Speaker 5

Our next question is from Caitlin Burrows with Goldman Sachs. Please proceed.

Hi, thanks. Maybe just on the acquisition side, you guys were active in the first half with acquisitions, which was exciting to see. I was wondering if you could talk a little bit more about the upside you see at Brickell and then more broadly to what extent other acquisition opportunities seem to exist for Simon today, either from JV partners or otherwise?

Speaker 6

Sure. Brickell is a really good asset that long-term will be great. Miami, you know, Caitlin, I'm sure you're familiar with it. We're in the central business district. There's no real retail that can be built in that. Because of the traffic of Miami, it's kind of its own submarket. Even though, you know, there's a lot of retail generally in Miami, just because of the traffic and the population density and the tourism, it is really, you know, you can have a number of properties that flourish. In the central business district, you see what Citadel's doing there. I still think you'll see a continuation of New York and Chicago companies moving there. The job prospects are great. Brickell in itself deals and attracts a lot of international customers and tourism. It's got the hotels. It's got the nightlife.

We just think the asset's going to get better and better. There'll be more development around it that, you know, will continue to fuel its growth. We bought it on a very creative basis. We bought it at a higher F rate than the strip centers that are being sold today. Strip centers that are subject to, you know, probably easier competition, easier to build. Brickell, we bought it at below its replacement cost by far. It hasn't even had its first rollovers of rent. I think we'll do, you know, this is our core business. I think we'll do better leasing and managing the assets. We're very excited about Brickell, as we, you know, as we are with the mall. We're working on a few other things that, you know, we're able to do. I mentioned this before.

We're working on some other interesting things that we're able to do because we've never gone through a restructuring. All great, great to buy a mall because you haven't bought anything in a decade. That's never been us. We'll keep, you know, we'll keep finding opportunities where we can grow our platform. We're going to be, you know, we're going to be picky on what we buy and what we want to do. We're able to do it because, you know, this company doesn't need to sell a bunch of assets. It doesn't need to bring in a new management team. It doesn't need to downsize its platform. It doesn't need to do it because it's outperformed over a 30-plus year period, you know, that no one else has done. We're hopeful that a couple of more things will get announced this year, and they'll be accretive.

They'll add to our platform, and that we'll be able to manage them better, so we'll be able to grow our cash flow.

Thanks for all that.

Sure.

Speaker 5

Our next question is from Alexander Goldfarb with Piper Sandler. Please proceed.

Hey, good afternoon out there, David. Just, you know, continuing on.

Speaker 6

We're actually in New York City. That's why I brought up the New York City comment.

Okay. You're just down the train line from us here in Greenwich, so hopefully you're enjoying the city. A question. Just following up on Caitlin's question on externals. For quite a long time, you've been reiterating to us that you see more investment potential in your existing portfolio versus externally. If Tom will forgive me for a two-parter: One, what is the return threshold, the gap that you need when you go externally versus the ability to reinvest internally in your existing? Two, it does seem like we're on the cusp of a mall transaction wave where capital is starting to flow back to malls across the spectrum. I'm just sort of curious if, in your view, this is going to set up like a repeat that we had in the late 1990s, early 2000s when there was suddenly, within a few years, this massive mall trade.

Wondering if you're foreseeing that. That's my two-parter. Forgive me, Tom.

You don't have to ask for forgiveness from Tom. He's a very nice man. We'll give you a sweet pat, Alex. I think a lot goes into acquisitions. It's not an either/or thing. We have, as you know, Alex, the balance sheet and the firepower to do both. The development process, i.e., or the redevelopment process, takes years to do, right? Tate's Brain is under construction. We had to buy the steer store. We had to get approvals. We're about to start on a multifamily. That's over a three-year process. It's not like suddenly the money just goes out day one. We've never had this dilemma that you're suggesting where it's an either/or. From a math point of view, we look at it on a similar basis. Are we buying it, or when we're redeveloping or developing, are we creating net asset value?

If it's a mall, is the redevelopment yield higher than where that asset might trade? What does it do to the overall asset's growth rate of cash flow? A lot goes into that, but that's the basics. On an acquisition, it's a little bit of the same thing with our expertise. What does it do for the platform? Does it deepen our relationships with the retailers? Are we buying it under replacement cost? When we look back, will it be accretive to that NAV? You have to take a little bit longer-term view on that. It has not created this situation where we can't do both. Our goal is to continue to do both and to push to do both. The reason we haven't done as many acquisitions is we really have been product and price sensitive.

We'll continue to be product and price sensitive because we can't create NAV without focusing on the product and the price sensitivity. As my, you know, I'm on the board of Apollo, and not to quote Mark Rowan, but I'll go ahead and quote him. Purchase price matters, okay? It does. We're very focused on that. Rest assured, when we buy something, we vetted the price. Really vetted the price. Going to your next thing, I'm not sure about whether there's going to be huge mall transactions. I think you'll have other players come in, you know, buying, maybe not necessarily, you know, quote, A properties, but a lot of Bs. The reality is you can make, you know, you can, there's say-holing, you can create, you know, nice arbitrage. You can manage them and lease them and improve them.

They're a lot stickier than people believe because, you know, most malls, Alex, I hate to break it to you, but most enclosed malls are 30 to 50 years old. Yet, you know, despite the media and the naysayers, they've, and that's not to say there hasn't been a significant amount of obsolescence. Most of them, you know, are here today still, still fighting a pretty good battle, despite, you know, a lot of things not going their way. I think there'll be more trades, but I'm not sure it'll just be this huge, huge wave of transactions. That is, Brian, you can weigh in if you want, but that's kind of, you know, just some random rambling thoughts, Alex. You can comment. I will let Tom give you another pass. You can comment on my comments while Brian is contemplating whether he will want to add anything to it.

Your turn first, Alex.

No, I'm going to defer to others who want to ask. That was very thorough, so thank you, David.

Brian, nothing to add, covered it.

Speaker 5

Our next question is from Craig Mailman with Citi. Please proceed.

Hey, guys. Good evening. I wanted to maybe circle back on some of the themes of the earlier questions, David. Just, you know, a lot's happened in the last 90 days and last quarter. Your message was, you know, a little bit more realistic, I think, in the face of uncertainty. You know, Brian kind of focused us to the midpoint of guidance. Fast forward 90 days, maybe there's been a little bit less fallout than would have expected. You guys raised the low end. Would you still kind of point us to that midpoint of guidance? Maybe update us on, you know, your views today of, you know, how you're feeling about the macro. Are you concerned about any lingering effect of policy or geopolitical happenings kind of weighing on 2026 growth?

Speaker 6

Let me, I'll let Brian kind of, I'll be less robust than I was with Alex. I will say, unquestionably, even though we raised the bottom end, we're still very cautious about the economic environment. We have to be, right? I mean, you know, tariffs are a real cost to doing business, and they're changing consistently, right? The only consistent thing about tariffs is that they've been consistently changing, right? It's a cost to do business. Now, ultimately, who pays that cost? Is it the consumer? No, first of all, it's the domestic company that imports, right? They start with the cost, pain, and you can see it by Ford and a number of other companies that said it's going to cost me $800 million or $1 billion. The next question is, can the suppliers chip in? Then ultimately, the consumer.

I think most companies are kind of working that next step or two through. In that scenario, it is hard for us not to be cautious. Obviously, from just pure retail, are they going to be more cautious on buying than they might not otherwise be for tariffs? At the same time, the U.S. economic landscape looks, I mean, I don't have to tell you how much money and capital is planning to be spent in the U.S. That's a huge driver of GDP. I don't think it'll be all that's out there, all that's announced, but there's going to be a huge driver of GDP growth. The ultimate ramifications of those investments are uncertain, but that's several years down the road, I believe. We're optimistic about the growth profile of the U.S., but there's a lot of variabilities that all companies are dealing with.

I said I wasn't going to be long-winded. It turns out that I was. I think the bottom line is we're being a little more cautious. I think 2025 actually, to me, might feel better only because by then you'll know the tariffs. The tariffs could be a one-time cost. That time, between the suppliers and the vendors or the importers, you've kind of figured out who's going to pay for it. It'll surface, and then you'll be able to go forward and operate the business. I don't think 2026 will have this kind of volatility from the tariff scenario, and it actually could look better.

Brian.

Craig, I guess all I would add to that is, as you look at kind of what we did for guidance, certainly looking back at your history, it is not, we traditionally will bring up the bottom end of our range at this point in the year after seeing the first six months. Occupancy is up, FFO is up. I think we're cautiously optimistic to David's point for the balance.

Great, thank you.

Speaker 5

Our next question is from Michael Goldsmith with UBS. Please proceed.

Good afternoon. Thanks a lot for taking my question. David, I think you've mentioned increased shopper traffic on the call twice now. Are you able to quantify what you're seeing? Is there any difference in the traffic growth between mall and outlet or any other way that you can segregate it with the goal of trying to understand if the consumer is, if there's any trends for the consumer at different price points?

Speaker 6

Yeah, our traffic is up 1.5%. That's the number. I would still, you know, we're not operating on all cylinders. Where we see a little bit of sales and traffic weakness are border, you know, these assets are still great, so don't get me wrong. Generally, they provide pretty healthy sales growth. Right now, they're relatively flat. I would say the softness, at least based upon historical results, has been assets on, and it doesn't really matter whether it's an outlet or a full-price mall. It's assets that are on the border north or south, okay? It's almost irrelevant whether it's a Canadian border or the Mexican border. From a sales and traffic point of view, we're not hitting on all cylinders because that freedom of going back and forth to shop or whatever is restricted.

I would also say we're not seeing the benefit that normally you might see from a weaker US dollar, vis-à-vis the euro or certain other currencies, as the international tourist is not growing or flatlining in terms of people the way you might see historically. Those kind of tourist-oriented centers are not, again, they're great centers, so they have a high bar to achieve. They're not outperforming like they always do for us. We're kind of in-law. Therefore, we're not, in my opinion, not performing at the highest level because those great properties border north-south tourism are kind of operating within the normal portfolio performance. Make sense? You understand what I'm saying?

Absolutely. Thank you very much.

Thank you.

Thanks.

Speaker 5

Our next question is from Floris van Dijkum with Compass Point. Please proceed.

Hey, David. Thanks for taking the question. David, maybe if you could comment on, you know, last, I think last quarter I asked about your S&O pipeline of being around 300 basis points. As I look at your portfolio, your Mills assets are 99.3% leased or something like that. Is this getting to be the new normal in the supply-constrained market? I did notice your TRG assets saw a drop, but the rents were up markedly. Maybe if you can talk a little bit about where the greatest growth potential is in your view, in, you know, between the various segments of your portfolio. If you could maybe expound on that and then maybe update on the S&O pipeline as well, please.

Speaker 6

Floris, I'll start with the S&O. It's at 340 basis points at the end of the quarter. As we think about, and you've heard us talk about occupancy, it's the optimization of that occupancy is where we're kind of at in the point in the cycle now. It's really finding merchandise mix and finding tenants that make the property better. There will be more of that replacement of existing tenants with new tenants going forward. It's really going to drive the performance of the portfolio, and it's across all of our asset classes. The Mills still, even at a high occupancy, the tenant demand is still strong, and we're able to replace underperforming tenants. You can say the same across the outlet and the mall businesses as well.

Tom, no, there's no TRG, no real, you know, it's a smaller portfolio, so a swing here and there has a bigger impact. A couple Forever 21. As Brian mentioned in the text, we lost 1.8 million square feet in bankruptcy. 1.7 million of that was Forever 21. That has a bigger impact on a smaller portfolio, and that's really what transpired at the TRG level.

In terms of occupancy, is 99 your goal now internally? Do you think you can get that in the global platforms as well?

You know, I want every six weeks about, you know, with the highest productive tenant. I think it's an interesting tidbit. 99.3%, I don't get excited about it one way or another. Next quarter, it could be 99.95%, or it could be 99.1%. I think it's neither here nor there. They're going to, the team's doing a good job, though. I'll give them a pat on the back.

Thanks, David.

Thank you.

Speaker 5

Our next question is from Vince Tibone with Green Street. Please proceed.

Hi, good afternoon. I was a bit surprised Simon was not more active acquiring J.C. Penney boxes from Copper Property Trust. Just big picture, could you discuss how you're currently thinking about the importance of owning and controlling additional anchor boxes at your centers and how your appetite to acquire these may vary based on center quality, near-term redevelopment prospects? I'd just love to pick your brain on that topic.

Speaker 6

Yeah, this is a complicated matter, so I'm not going to talk about it specifically, but it's really up to the catalyst. We don't have any particular right to buy it. It's really up to the catalyst to, you know, mayor, you know, has a right to buy it. I'm not going to really get into that scenario, what happens. We've been very active on buying boxes and redeveloping our centers. I think everybody knows that. As I said earlier, purchase price matters, and we are very focused on paying the right price on any given particular scenario. Again, you got to be careful this going from what Prosco is selling to Simon Property Group. There's a company called Catalyst that operates those stores. We're a shareholder in it. It's a complex matter.

Beyond that, other than to say, we've been very active in buying boxes since all the various restrictions that have been going on, but we're going to pay the right price.

Now, just to maybe summarize and confirm, is it kind of fair to summarize that it seems like there's probably more complexities in this structure versus, you know, this is not an indication that Simon Property Group is less interested in buying anchor boxes or, you know, the appetite has changed? I mean, that's kind of what I read through, but I just wanted to kind of confirm that's a fair categorization.

Yeah, you can confirm, first of all, it's a related, it's optimized a relationship with Prosco, which is Catalyst. We have no relationship. We, Simon Property Group, has no relationship with Prosco. None. We have a relationship with Catalyst because they're, you know, in some cases, they're a tenant to us. In some cases, they're not a tenant to us, but they operate a J.C. Penney store, you know, or malls. You can't go from, you know, whatever the name of that, Copper Retail to Simon Property. You can't make that link and say, "Oh, Simon's not interested in the boxes." Would I be interested in all the Opco boxes? No, not necessarily. Would I be interested in the Simon boxes? Potentially, sure. I would fall back on what the right price is. You follow what I'm saying, Vince? You can't go from there to Simon Property Group.

You have to, there's a step function in there. The simple answer to your question is, do not read, you're right, do not read any intent from Simon Property Group due to that transaction. We'll see if it even closes. Deals get announced and they don't close. Tariffs get announced, but they don't close. Let's see what closes when and how, and we'll take it from there.

Great. Thank you. Appreciate all that, Carter.

Speaker 5

Our next question is from Handel C. Just with Mizuho Securities. Please proceed.

Hey, good evening out there. David, I guess I was intrigued by your commentary earlier that the cap rate for the purple asset was higher than recent open-air strip asset cap rates. I'm curious if that's more of a unique dynamic to this transaction because you were the only logical bidder here, or perhaps you have some additional color or thoughts you'd like to share on the asset pricing for top quality malls versus quality open-air. Any thoughts on what you see as the long-term opportunity, either from a mark-to-market or a densification opportunity at Brickell. Thank you.

Speaker 6

Yeah, I just think we're great at finding opportunities. We don't participate, rarely do we participate in auctions. Auctions get, you know, when our friends at Easthill or, or what are some of the others, Vanilla, Oakley Hill, when they run a process, man, they're going to find, usually, it's pretty, you know, it's pretty tough. We like to find opportunities. I have all the respect in the world for those guys who are doing their job. We like to figure out how to do it without that. I think the market does not recognize the value of something like Brickell. Brickell should have been sold at an auction at a higher price than what we paid. The market is mispriced when it comes to high quality. Brickell's not on a closing by any stretch of the imagination. The market misprices big retail.

They're mistaken as a roof, but it's a moving roof. So I got all sorts of stuff to it. The market mispriced, which is good for us because we could take advantage of it. I'm letting the cat out of the bag, which is probably pretty stupid. The market absolutely, unequivocally, misprices big enclosed shopping centers. If you look at the cash flow growth and the longevity, forget about it. That's fine with us, and it's good for us.

Speaker 5

Our next question is from Ronald Kamdem with Morgan Stanley. Please proceed.

Hey, just coming back to domestic property NOI. I see 3.8% year-to-date. I think you talked about at least 3% for the year. You made some interesting comments about how whether it's tariff or the strong dollar may be holding back some of the centers. Just wondering if you could comment on how you guys see that shaping for the rest of the year and if there's any way to quantify what sort of this headwind is doing to that number so we get a sense of what a true run rate can be. Thanks.

Speaker 6

Yeah, look, we're outperforming our year-to-date, even with the volatility of the tariffs that were announced in April. The consumer is holding on. We don't update our guidance for up NOI. There's a lot that goes into it, but we're very confident we're going to beat that number and have a very strong year. Like I said, I think leasing demand continues unabated. Sales is always a little bit out of our control. We'll have to see how that evolves. We're seeing pretty good sales results even up to today and a pretty good back-to-school season. We'll see how the rest of these shakes out.

Thanks so much.

Sure.

Speaker 5

Our next question is from Linda Tsai with Jefferies. Please proceed.

Hi. I'm just thinking, was in response to Alex's question earlier, you were discussing acquisitions in the context of deepening relationships with retailers. What are some of the examples of this? I would think that you have a lot of negotiating power with the majority of retailers.

Speaker 6

Retailers have all the power because they can go across the street or close the store or go online, leave the market. The more product you have available to them, the better the relationship. It's just a commercial relationship. If Microsoft sells out to a big company, they're going to be able to sell other products to that company. It's no different. If we could talk about 20 things as opposed to three things, it just means we'll have a longer meeting. If they have confidence in our ability to deliver a good product, maybe we'll have 21 things. Don't kid yourself. These retailers have all the leverage because they can close doors and go across the street or leave the market or do their business online. We're the one begging for the new business.

The more product you have, the better you are, and the more likely you are to have more senior focus from that retailer. Just like if you're selling widgets, if you have a bigger portfolio, you're able to spend more time with the customer. That's just commercial common sense. They have faith in our ability to deliver a good product and have confidence that we'll operate the center appropriately. That's why we're able to do a lot of repeat business. There's nothing more to that than that. Believe me, they got the leverage too. You don't have to operate the store.

Thank you.

Speaker 5

Our next question is from Hong Zhang with JPMorgan. Please proceed.

Yeah. Hey, David. I mean, you've talked about how you expect Brickell to be great because people are moving from New York and Chicago over to the area. I guess, have you seen the opposite impact in your New York centers, like say Westchester or Roosevelt Field?

Speaker 6

First of all, Brickell is really, really good. This is not a troubled asset, right? I just want to make sure you understand that. Your second part, your second part?

I guess, are you seeing a negative impact in your New York assets like Roosevelt Field, Westchester if people are migrating out of New York?

I don't think it's going to affect Long Island. I think New York City, I'd be nervous about it.

I'm going to butter him.

Yeah, I mean, I do. There's a lot of great stuff in New York City, but I think the suburbs, by the way, we've seen the suburbs have a renaissance, primarily due to COVID, right? I think the suburbs of New York City and suburban New Jersey, Jersey City, Long Island, Westchester County, all could benefit, depending on what happens with the city. I don't think it's, I don't know if it's a New York issue. I'd say it's more of a New York City issue.

Got it. Thank you.

Speaker 5

Our next question is from Omotayo Okusanya with Deutsche Bank. Please proceed.

Yes. Good evening. I am curious about the secured loan transactions this quarter. You guys have an A-minus credit. A lot of your peers are kind of doing unsecured around, you know, 5%. Curious why you guys decided the best thing to do was the secured loans at 5.84%. I don't know whether that's a duration thing, but I'm just curious.

Speaker 6

Mortgage financing. Yeah, that's mortgage financing.

Yeah, the mortgage financing.

Yeah, it's with the JV partner, so we wouldn't want to use our balance sheet.

Got it.

For a JV partner, I mean, 10-year unsecured debt for up today is right around 5%. On the unsecured market, we're right on top of the market where others are issuing. It should be, I agree with, I agree it should be 4%. Anyway, I agree with President Trump. Interest rates should be lower.

I hear you, David. Thank you.

Thank you.

Speaker 5

We have reached the end of our question and answer session. I would like to turn the floor back over to Chairman David Simon for closing remarks.

Speaker 6

All right. Thank you. Hope you enjoyed our call. I know Tom and Brian are available for all of us. Thank you.

Thank you.

Speaker 5

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