Simon Property Group, Inc.

Welcome to Simon Property Group third quarter 2025 earnings conference call. At this time, all participants are in a little mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Tom Ward, Senior Vice President, Investor Relations. Thank you, sir. You may begin.

Thank you, Sherry. And thank you all for joining us this evening. Presenting on today's call are David Simon, Chairman, Chief Executive Officer and President, Eli Simon, Chief Operating Officer, 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 related to those following 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 you to please respect the request and leave yourself to one question. I'm pleased to introduce David Simon.

Good evening. I'm obviously pleased with our financial and operational performance for the third quarter. Our results were driven by solid fundamentals. higher occupancy, accelerating shopper traffic, strong retail sales, and a positive supply and demand dynamics, all contributing to strong cash flow growth. We are pleased to have acquired the remaining interest in Calvin Realty Group that we didn't know and are excited about the opportunities to enhance the operational efficiency and increase the NOI from the assets and deliver long-term returns to our shareholders. I want to thank Bobby and Billy Tauben and the entire TRG team for our successful partnership over the last five years. I'm now going to turn it over to Eli who will discuss the terrific TRG transaction and update on our development activity And Brian will cover our third quarter results and other various goodies. There you go, Eli.

Thank you. As mentioned, we completed the acquisition of the remaining 12% interest in TRG that we did not previously own in exchange for 5.06 million limited partnership units. We are pleased with the outcome, having acquired these high-quality assets at an overall cap rate of over 7.25%. not taking into account any operational efficiencies and improvements. These iconic assets further enhance the quality of our overall portfolio, and we are now in a position to pursue new growth and value creation opportunities for this portfolio. The portfolio has strong operating metrics, including 94.2 percent occupancy, average base minimum rent of $72.36 per square foot, and retailer sales of approximately $1,200 per square foot. This transaction will be accretive in 2026 as we assume management responsibilities and integrate the assets with the full benefit realized in 2027, given all of the operational aspects of running on our platform, adding at least 50 basis points to the going in overall yield. TRG will be consolidated, and the acquisition will be accounted for as a business combination. This will require remeasurement of our previously held equity interest to fair value, resulting in a really big non-cash, non-FFO gain to be recognized in the fourth quarter of 2025. Now turning to development. In the third quarter, we began construction on several new projects, including a second phase of residential at Northgate Station, an expansion of the Westin Austin Hotel at the Domain, retail and experiential additions at Brea Mall, King of Prussia, and the shops at Mission Viejo. At quarter end, our share of the net cost of development projects across all platforms was $1.25 billion, with a blended yield of 9%. Approximately 45% of net costs are for mixed-use projects. In addition, our new development and redevelopment pipeline continues to grow with exciting new opportunities ahead, including a major full-price retail and mixed-use project in Nashville, where we will be unveiling our vision later this week. I will now turn it over to Brian, who will walk through our third quarter results.

Thank you, Eli. Real estate FFO was $3.22 per share in the third quarter compared to $3.05 in the prior year, 5.6% growth. Domestic and international operations had a very good quarter and contributed $0.26 of growth, driven by an 8% increase in lease income.

As anticipated, lower interest income and higher interest expense combined were a nine cent drag year over year.

Domestic NOI increased 5.1% year over year for the quarter and 4.2% for the first nine months of the year. Portfolio NOI, which includes our international properties at constant currency, grew 5.2% for the quarter and 4.5% for the first nine months.

Retailer demand remains strong as we signed over 1,000 leases totaling approximately 4 million square feet during the quarter. Approximately 30% of our leasing activity represents new deals, reflecting continued strong demand across the portfolio.

The malls and premium outlets ended the third quarter at 96.4% occupancy, an increase of 40 basis points sequentially

and 20 basis points year over year. The mills achieved a 99.4% occupancy, an increase of 10 basis points sequentially, and 80 basis points from the prior year.

Average base minimum rents increased 2.5% year over year for the malls and the premium outlets, while the mills saw a 1.8% increase. Retailer sales per square foot for the malls and the premium outlets were $742 for the quarter. Importantly, total sales volumes increased more than 4% in the third quarter.

Shopper traffic in retailer sales accelerated sequentially, reflecting the impact of a successful back-to-school season.

Occupancy cost at the end of the quarter was stable at 13%. Third quarter funds from operation were $1.23 billion or $3.25 per share compared to $1.07 billion or $2.84 per share last year. Some of the increase was due to improvement in OPI compared to last year.

Please see the FFO reconciliation included our supplemental today for details on the year-over-year changes in FFO per share.

Turning to the balance sheet and liquidity, during the quarter, we completed a dual tranche U.S. Senior Note offering that totaled $1.5 billion at a combined average term of 7.8 years and a weighted average coupon rate of 4.8%. During the first nine months of the year, we completed 33 secured loan transactions totaling approximately $5.4 billion. The weighted average interest rate on these loans was 5.38%. We ended the quarter with approximately 9.5 billion of liquidity. Turning to our dividend, today we announced $2.20 per share for the fourth quarter, a year-over-year increase of 10 cents, or 4.8%. The dividend is payable on December 31st. Now turning to guidance, we are increasing our full year 2025 real estate SSO guidance range to $12.60 to $12.70 per share.

This compares to $12.24 last year in our prior guidance range of $12.45 to $12.65 per share. The updated range reflects a $0.15 increase at the low end and a $0.10 increase at the midpoint. Thank you. We are now available for questions.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question is from Michael Goldsmith with UBS. Please proceed.

Good afternoon. Thanks a lot for taking my question. In the prepared remarks, you mentioned the opportunity for operational efficiencies and improvement for the Taubman assets twice and that they should help improve the yield by 50 basis points. So, can you share some of the specifics of the opportunity from bringing these assets fully onto your platform?

Can you get on your phone? We should always have a backup. Hello?

Hi, we're able to hear you. Okay, we got disconnected.

So can you repeat the question? We didn't get it all.

Yeah, absolutely. In the prepared remarks, you mentioned the opportunity for operational efficiencies and improvements for the Taubman assets. twice and that you should help improve the yield by 50 basis points. So can you share some of the specifics of the opportunity from bringing these assets onto your platform?

Yeah. I mean, you know, when we bought the original 80% of Taliban, the only real operational efficiencies we got was eliminating public company costs. Obviously they had a, full operational team running those assets. And we'll be able to add them to our platforms at very little cost. And then from an operational enhancement point of view, we bring our expertise in development, redevelopment, leasing, marketing, brand ventures, and we put all that together, and that's what we do for a living. So we've helped out, but not to the point of how we would if we actually ran the properties day-to-day. So now we put them on our, we bolt them onto our platform, that's easy, and then we run the properties day-to-day, and we bring all that we can bear to a portfolio like that. And that's where we see tremendous amount of upside. Look at the occupancy. It's lower than where we're at. And we think we can bring it up to our level. And then we've got all our asset management techniques, property management capabilities that are going to, just grind higher cash flow. That's what we do for a living. That's why we've been the acquirer. That's why we've been successful time and again. And, you know, if you look back at this portfolio and you look at the entire transaction, you know, we're going to be at a Essentially an eight cap rate when we add these little over a cap rate when we When we add The portfolio the assets to our platform and that and you look at the quality of the assets That makes for a terrific deal, which you guys need to understand So it's a much higher cap rate and strip centers of trading and Much better growth rate than strip centers or trading that I've seen. And, you know, these assets have been around 70 years. You know, that's the other thing to step back. So take data centers. Data centers trade at a four and a half cap rate. And we don't know. Nobody knows what they're going to look like in five years. What we do know is that good models have been around seven years. Seventy years. Not seven years, not 17 years, but seven zero years. So we made a hell of a trade, and that's certainly one of the reasons why I think the Talmans wanted to convert this last 12% into our units. which is convertible on a one-to-one basis to our stock because they've seen the, you know, our ability to execute and perform at levels that no one else has in our peer group.

Thank you very much. Good luck in the fourth quarter. Yeah, be excited. We are. All right, good.

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

Hey, good afternoon out there. And Eli, welcome to the public earnings call. Thank you. So you now get all the enjoyment that David has had over the years. So David, just going back to the cap rate, and if you'll indulge me a little bit, if we take the implied cap rate of the shares issued on Friday is sort of a little over a six, but you spoke about an eight, which sounds like the existing assets were producing a lot more, the overall versus the final buyout trade. But then you spoke about the initial 50-bit increase once it's on Simon's platform, but presumably there's a lot more growth over the next five or so years that presumably that eight goes higher. One, can you help us understand sort of the pricing of the final 12 and how that relates to the seven and a quarter that you initially spoke about? And then over the next few years, presumably this cap rate is going to be much higher than an eight.

Yeah. So let me just unpack it a little bit. I'll be a little more clear. So if you look at, we had four transactions within the Taubman Group. We had the Initial 80, we had the two 4% and then 12. If you look at that on today's numbers, today's numbers, that's basically a little over a seven and a quarter cap rate. If you add what we think will bring in operational synergies, efficiencies, slash enhancements, That's where we get to north of eight. And then obviously, Alex, you're right. Then you have all the intrinsic growth of the portfolio, which we're not, you know, that will just be year after year growth because I think these assets, by and large, have a, you know, a higher skew of quality than, you know, just assignment-only portfolios. So they skew a little higher growth than we do, you know, we did historically. So we would expect our top NOI growth to accelerate because of adding that in. So hopefully that impacts it. If you really are focused on the 12%, not including the operational enhancements, we're in the six and a quarter to six and a half cap rate if you just want to focus on that 12%, okay? Can I help you explain it?

Yeah, it's what we thought initially, but obviously all the pieces adding up to get us how you're thinking about it.

I told you a lot more, only because it's you, I told you a lot more information than I normally would, okay?

I'm sure Floris will ask a lot more details than I have. So I'll stand back. So thank you, David.

Okay. Our next question is from Caitlin Burrows with Goldman Sachs.

Hi, everyone. Congrats on the quarter and recent announcements. And yes, welcome, Eli, to the earnings call. Maybe on the sales results, they increased in the quarter, which was great to see. Could you give any detail on how widespread that was? Did a couple of tenants drive numbers one way or the other? I know you have initiatives to upgrade the tenant base, maybe shrink where it makes sense. So just whether we're starting to see some impact from those initiatives.

Hi, Caitlin. It's Brian. Quite honestly, throughout the quarter, you saw a widespread increase across all three platforms. And, you know, the tenant base certainly, you know, was productive in the quarter. You saw certain categories outperform. You saw luxury come back a bit. Certainly, athleisure outperformed even the apparel category. So, certainly, the back-to-school season was a robust part of our business and our portfolio. Even you saw some positive inflection in some of the tourist-oriented centers. So, we are starting to see it kind of widespread across the totality of the portfolio. sequential improvement, both in traffic and in sales. Yeah, Caitlin, I would only add that I think, you know, like I said last quarter, I believe, we're still not, from a sales point of view, hitting on all cylinders. What I did, what we did see is that the kind of the higher-end consumer, obviously, I don't have to You know, you have as good data as we do at Goldman. But clearly, you know, we're in this K-shaped kind of situation. So we did skew better results in the, you know, the higher income-oriented sense. The value-oriented centers were more flat to, you know, kind of, you know, eking along. So you didn't see the entire portfolio. Brian's right. The border was okay, at least stabilized. So it's not hitting on all cylinders, but it's okay. Florida remains to be very strong. You know, the one area that... You know, we're seeing, and I think everybody's seeing, is that you're, you know, Las Vegas from a tourist market is underperforming. You see it from the casinos. Obviously, we have a lot of properties, great properties, but they're not, you know, they're not copying the sales growth that we would expect. And then Brian is like, we did see stabilization in the luxury, which is good. But, and again, the higher income properties are doing better. The one caveat is, as you know, our Vegas properties skewed toward that, and they were not, their comp sales were in fact a little down. I don't have the number off the top of my head. So we're seeing underperformance. You know, look, we don't worry about that because Vegas assets are great, and Vegas does go up and down, and you've clearly had Canadians that don't go to Las Vegas and other people that are not going at the frequency that's happening. But no concern there, but right now it's kind of in a trough.

Thank you.

Sure.

Our next question is from Samir Canal with Bank of America. Please proceed.

Hi, good evening, everybody. Brian or David, you've generated very strong NOI growth here to date, you know, 5% for the quarter. I guess given the solid leasing environment you're seeing, you know, just trying to see if you can keep up this sort of same store momentum in 26 or even do better, assuming a sort of a similar retailer sales environment. Curious on your thoughts. Thanks.

Well, the team is doing our I think we invite Alex. We invite you and then disinvite you, but the team is going through the property by property root canal, okay? So I'm glad to report no cavities, no need for root canal. We feel really, you know, what I'm being told and what I'm seeing from the numbers is really positive. The team is juiced, energized. So we feel, I'm not going to give you a number, but, you know, we feel really good about 26 in terms of our ability to produce confidence. As you know, we'll do that in February with our earnings guidance. But, you know, the team is feeling good that, you know, we'll have another year Obviously, there's external factors that we don't, even we don't control. I'm kidding. But we're feeling really generally positive about what we're seeing, right, Brian? Yeah, no, that's the report back. We're in the middle of grinding out. We'll get back to you in February, but I think there's an optimism. Yeah, you've been going through all these.

And it's across the portfolio. not just the powerhouse centers, but really across the portfolio, a lot of exciting new things in store for next year.

Thank you.

Sure.

Our next question is from Greg McGinnis with Gosha Bank. Please proceed.

Hey, good evening. So from our perspective, and despite our expectations, tariffs have had seemingly little impact. on shopper or retailer behavior to date. And, David, I know you previously mentioned that maybe the holiday season is when we start to see some impact to retailer financials, but we were hoping, you know, for an update on what you're seeing in your retailer discussions and regarding your expectations on any impact to leasing and or tenant behavior. From the tariffs, right?

So, look, I think the news that – President Trump and President Xi had on the Chinese discussion is positive for our retailers, even though a number of them have moved some of their production out of China. That's a positive. I continue to believe that terrorists will have an impact. We have not yet seen all of it. And I think some of that will, as I said last time, it's a pretty consistent story. Some of that will be passed on to the supplier. Some of that will be eaten by the retailer. And some of that will be passed on to the consumer. So there's just, in many cases, the inability for retailers to eat that entire tariff. So they're going to have to pass it on or renegotiate better vendor deals. And I still believe we still haven't seen the full impact of it. So I think your question is appropriate. I think it's still, you know, now baseball goes to, what is it, 18 innings now? I mean, okay, 18 innings, you know. So I'm not, let's assume it goes to state nine. I think the tariff, if I had to put an ending on it, I'd say five or six. You know, it's just a gut feel, so it's not scientific. So we'll have to see. And I do worry that it will put more pressure you know, on the smaller, you know, the smaller retailers or the, you know, the not the mammoth retailers that we all think about, right? Because they have the ability to, you know, to handle it and try and use this as an opportunity to squeeze and increase market share. So, you know, we're still in the middle of the game. It ain't over. Hopefully, It is a nine-inning game. It doesn't go to 18. But I don't think the final chapter, you know, how about all these analogies? But I don't think the final chapter has been written. So we're still cautious on that. Let me just end by saying, you know, from a supply and demand point of view, you know, just from our leasing, we see absolutely unequivocally no change of heart you know, from the retailers that are looking to grow their footprint.

Great. Thank you. Thank you.

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

Hey, guys. David, maybe going back to your comments earlier about, you know, the value mall, kind of the foot traffic going on there versus your As you look at 26, I know you guys said you feel very good, but as you guys approach conversations with tenants who are looking at both high-end and kind of the value segment from some of that crossover, do you feel like you guys are losing a little bit of momentum in the ability to push net effectives at the value side of the portfolio, or Has the inflation over the last couple of years just pushed OCRs to a point where you still feel like you're able to get pretty good upside relative to maybe where you're pushing into luxury or the higher end malls?

Yeah, let me just say, traffic for the kind of the value oriented centers is up. So it's not the traffic, it's just really the conversion. I think that consumer is being a little more cautious about But I think you've pinpointed. I mean, we have low OCRs there. The demand, again, the retail demand on that portfolio is still very positive, so no change of – no different point of view, but we – we do have to be sensitive because the lower income consumer, which again, we don't skew to, even in our outlet centers, they're skewed toward the higher end retailers, higher-end consumers, I should say. So it's not, it's not, it's not where we skew, but again, demand is good, and it's not a, there's not really no change of mood or potential there, but it is, sales are not moving, you know, as, they're not increasing at the rate that the full price better, higher-end centers are. That's it. So I think that the outlet consumer is being a little more cautious. But let's see what happens this Christmas. I mean, you've still got things going for the lower consumer, lower gas price, hopefully lower electricity prices for the time being until all these data centers get built, and that's another thing. Interesting thing we need to talk about as a country. But I think it's, again, we're just, you know, the sails are not hitting like Vegas, like a couple of the northern borders. We're just not hitting on all cylinders. And the reason we say that is to show you that there's more juice there. in the orange, right? Is it orange or lemon? Orange. I'd rather say orange. Yeah, lemon sounds pretty bad, right? So there's more juice there.

It's just we're not getting all of it at this point.

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

Great, thanks. I wanted to ask on the new leasing in the quarter, Brian, I think you mentioned it was about 30% of the total leases executed. Is this y'all proactively looking to get ahead of leases that might expire in a year or two and upgrade the credit quality? And can you also give us a sense if you're seeing more of those new-to-mall concepts coming in the portfolio? And lastly, anything you can comment on leasing spread for that would be helpful. Thank you.

Well, I'll just let Brian answer most of it, but I'll say the new to, you know, concepts. I mean, Ned is opening a store. We're in discussions with him. Google's opening stores. We're in contact with him. Netflix, Eli's going to the opening tomorrow at King of Russia. Or is it next week? Next week. So Netflix is... You know, I encourage everyone to go check it out. They're opening their flagship destination store at King of Pressure next week. So there's more and more. You have a little boo-boo?

Yeah, Pop Mar, Dick Dick, Princess Holly, a bunch of pennants. And what they see is they can open a bunch of stores with us. And so we're having really great conversations in our new business leasing.

So the – and I'll let Brian get to the rest. So the new idea, new experiential stuff, we're doing new Apple stores as well. They opened Delamo as a good example. We've been working that deal for five years or so. So I think – It's very encouraging what we're seeing on the new storefront. We're still doing a lot of new restaurants with high-end operators. So that's going very well. We opened Formula One at Form Shops, one of their second or third operations, two-level flagship store. bunch of people there for the opening. It's terrific, small pictures. So just on the new concept, the new storefront, you know, between the restaurants and the metas of the world, the Netflix, the Googles, you know, they're all working on that. I think, you know, it's very, very positive, very positive. So lots happening on that front. And, Michael, the 30% statistic is new leases, so it is not picking up old stuff. What you've got is just the unabated demand for us to continue to add interesting and new uses. We're also seeing big demand from the existing kind of retail base, and we're slightly out ahead of 26 is expiration.

And so I think it's coming from a variety of places. Certainly on the last several calls, you've heard us talk about improving the merchandising mix.

And that 30% statistic is really encapsulating our desire and ability to do that. So, and I'll give you a simple example. We have a great mall. I probably shouldn't, yeah, I'm not going to name the tenant, but I'll give you some breadcrumbs. But it's a great mall in a great southeastern city, a great southeastern city, not Atlanta. That's a great southeastern city, but another great southeastern city. out of Atlanta that were, and this goes to your point, are you, even if you have a lease, are you satisfied? The answer is no. So we're taking one tenant that has a lease, we're actually downsizing them, moving them to another space, and putting a leading high-end retailer in there. I'll leave it at that. I was going to give you a little bit more breadcrumbs, but I don't want people yelling at me. So, which is a good example of, even though we had leases on both states, we're taking one, downsizing one tenant, moving, bringing in another one. And that's what our folks do. That's one of the great things that we see in the TRG portfolio. And we'll be a lot more aggressive in doing that You know, because you're never, we should never be satisfied that we've executed the mix, you know, at the rate that, you know, you've always got to change it. For instance, you know, talk form shops, and I think it just recently opened. We had an H&M store there. We replaced it with Zara. A beautiful store. big investment that they had. And that changes the whole kind of the center court they're familiar with the asset, which is truly exciting. So absolutely, and that's one of the, like I said, one of the interesting things that we see in the TRG portfolio and then in our assets across the, you know, spectrum, whether it's the outlet centers or the full-price models. Great.

Thanks so much. Thank you.

Our next question is from Juan Sanabria with BMO Capital Markets. Please proceed.

Hi. Good afternoon. I was hoping maybe to talk a little bit about technology. A lot of things in society seem like they're in flux, and Retail is not excluded there. Talk about chat GPT agents or agentic agents that can do some of the shopping, bypassing people. Just curious on how you guys are trying to position for this and your thoughts on how this may evolve and if you see it as a risk or an opportunity or both.

Well, you know, you have to assume everything's a risk. So I do think... bringing AI into the equation will have a pretty big impact on how e-commerce is done. But we offer something much broader than e-commerce. If e-commerce was going to put us out of business for the last 20 years, and here we are standing, Just to give you an example, I saw Palantir had EBITDA this quarter of, like, adjusted EBITDA, whatever that means, of $400 billion, and our EBITDA this quarter was $1.6 billion. So now Palantir's market cap is $500 billion, and ours is $65 billion, you know, if you include the units, right? So that's pretty good math, right? So... You know, again, I do think the people that shop, the e-commerce shoppers are definitely going to use AI tools, you know, to eventually to use AI to replace the way they shop online today. And the key for us is to create like we have for 70 years. Remember, we've been in this business 70 years. Okay? Not five, not 20. You know, but we have survived. This product has survived 70 years. And I will tell you our half-life is greater than the newfangled data centers that are being built today because I think they'll figure out how to do them smaller and more efficient three to five years from now. Okay, and I know nothing, but that's my cut field. I know nothing, but that's my cut field. So going back to your question, so it will have an impact on e-commerce. I think it's going to absolutely continue to make us great at what we do and that we're going to have to create real shopping, holistic shopping environments. And another way to look at it is, look, so there's a lot of talk about going to, and I was at this CEO summit the other day, which was kind of interesting, but put that aside. You know, there's a lot of talk that people are going to be working three days a week. So And the potential GDP impact of AI could be 15 trillion or trillions of dollars, right? So the way I look at it, I look at it as actually positive. So if you, let's say we all work, now I'm going to still work five days, eight days a week, right? Or I'm going to make work at least seven, eight days a week. Let's just hypothetically take the point that it's only three days a week work. Okay, three days a week that you work. You're going to have a lot more free time. We've created this great wealth. You know, our GDP goes from $18 trillion to, you know, 25 to 30 trillion. That means money in people's pocket. I think we're going to go to the mall to shop. What else are they going to do? Okay? So they can only yell at their kids that much when they're playing, you suck. So they're going to go to the mall to shop, eat, spend their new found wealth that's going to eat through this economy. Now what we have to do is just create these great environments and ultimately You know, we'll use AI like everybody else to enhance our loyalty, to enhance our shop sign-in, to enhance our search effort, to connect with the consumer. And, you know, we'll talk to Chad GPT and ask him what we've heard or is or whatever, what we can do to them all to make it better and do all this stuff. But I'm looking at it positively. We've lasted 70 years. We're only going to work three days a week. We're going to create $12 trillion of value. And people are going to go to the mall to shop. Because what else are we going to do? Okay? You see what I'm saying? Yes. Hopefully. Okay. So in any event, but we're experimenting how to do it. We've got a friend called Harvey that we may create the first AIC CEO. Now I'm not saying he's going to replace me, but he could replace one of our divisions or elsewhere. So stay tuned. You know, we'll use it effectively like we've used everything else. Thanks, David. Thank you.

Our next question is from Vince T-Bone with Green Street Capital. Please proceed.

Hi, good evening. I wanted to follow up more time on the Todman cap rate. Just specifically, the way I'm looking at it, the purchase price is just over $1.5 billion if we use Friday's close for the OP unit value plus incremental debt. And then trailing 12-month NOI is right around $77 million for 12% of Todman using your supplemental. So that's more like a low five cap rate on a trailing 12-month basis. So, I mean, is it really that much synergies to get to the quarter to half?

Yeah, we told you the numbers. Vince, at this point in our career, we're not going to mislead you or the public. Your cap rates are too low for certain assets, but not too high for ours. And we told you where the cap rates are. So, and we told you where the accretion is, and we told you everything there is to tell you about that deal. They've had a lot of growth this year. They've got growth next year. And we told you everything there is to tell you. I will tell you, I think your cap rates for our asset base is too high. I think your peers at Green Street have a product that is too low compared to ours. Our growth is better, and the longevity of our asset base, we don't factor in our assets the last 70 years. Okay?

No, that's fair. All right. Thank you. Thank you.

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

Hey, good evening. Thanks for taking my question, David. Good to hear from you. Eli, welcome to the call. My question is on corporate structure. Congrats on the internalization of the remaining part of TRG, but I'm curious if there are any changes or shifts in how you think about your investment in your European platform, Clipierre. Earlier this year, you bought an asset in Italy off balance sheet outside of Clip Year. So I guess I'm curious if you're happy to own more assets outside of Clip Year. But then I also wanted to add, it seemed like recently you opted to convert some of the Clip Year exchangeable note holders into stock, not cash, which might suggest you have a longer-term hold for that stock. So maybe help us reconcile those two dynamics and how you're thinking about the Clip Year platform. Thank you.

Well, we bought the ball, which has nothing to do with the, which is a luxury outlet center in Italy, too. It's actually on balance sheet. It's on balance sheet. Right, no, I saw that. Yeah, so that has nothing to do with Clay Pierre. You know, Clay Pierre, look, it's been a great investment for us. We evaluate it all the time. We did get some As you know, we issued the convert, did we do it three years ago? Three years ago. Three years ago. We got conversion notice. We did settle in shares. And, you know, we look and evaluate that investment, you know, continually. And we'll continue to do that. But it's been a very good investment. We've added a lot of value to that organization. I think, you know, again, the market should appreciate where Claypierre go back. Let's turn the clock back 10 years ago where Claypierre was and look at where it is today. And our strategic input vision guidance created the new Claypierre that exists today. That's a position to succeed in European full-price retailer with the best. And that's all, you know, I mean, again, the management team did a great job, but we hired the management team, okay? So, you know, but at the same time, We have a fiduciary duty to continue to add value to Clay Perry while we're on the board. At the same time, we have a fiduciary duty to our assignment shareholders to look at all of our investments and see if that's the best allocation of our capital, and we will continue to do so.

I appreciate that, David. I guess I just wanted to clarify, because I mentioned the asset in Italy you bought earlier. because you bought it on balance sheet and not in clip here. So I guess I was curious if you were happy owning more assets outside of clip here in Europe. Thank you.

Yeah, I, we would, we would probably, okay, I'm sorry if I misunderstood. So we would probably only look to, um, you know, we've kind of decided that the full price, you know, again, this could always change, right? But we, we, It's kind of decided that if there are full-price assets to acquire while we continue to hold our clay pier investment and stay on the board, that clay pier would do that. On the other hand, if it's in the outlet world, because we look at outlets worldwide, we have outlets in Asia, obviously North America, both in Mexico, Canada, U.S., obviously, several countries in Asia, that we would look at those for our own accounts, the signing accounts. Okay. I'm sorry I misunderstood your question.

That's helpful. Thank you.

Our next question is from Mike Muller with J.P. Morgan. Please proceed.

Thanks. So Calvin's used a secure debt strategy for the portfolio ever since the 98 restructuring. Do you think he'll be unencumbering a number of those assets over time? And as a follow-up, are there any parts of that portfolio that look like they're sale candidates today?

Mike was Brian. You're right. They did go to a secure strategy over time. I would expect that over time we will unlock that and use our unsecured capital to unencumber assets in due course to further improve our unencumbered asset base, which is already incredibly powerful. As far as the quality of our balance today, I think we're comfortable where it sits, but we naturally evaluate things frequently, and so that could change over time. But for now, I think we're in a good place.

Got it. Okay. Thank you.

Thank you. Our next question is from Ronald Camden with Morgan Stanley. Please proceed.

Hey, thanks. It's Adam on for on. I think we had always looked at the dividends or post-COVID as, you know, I think you guys sort of targeting getting back to that pre-COVID dividend level. You know, you're now past that. So I guess just sitting here today, how do you sort of stack rank the capital allocation priorities? I know you've talked about sort of development of obviously of the Class A assets, but also I think you've talked in recent quarters about some of the Class B or B-plus development opportunities or redevelopment opportunities as well. So just sitting here, the different options in terms of capital allocation, how do you sort of stack rank those dividend buybacks potentially, development, redevelopment, etc.? ?

Actually, thank you for, I forgot we passed our code. We did? We did. All right, good. Good work, guys. Well done. So, look, I think one of the things that you'll probably, you know, we do have a buyback. open, right? Obviously, you can't find that now. But one of the things you'll see from us most likely, which is not in the numbers, but we, you know, we issued 5 million unit shares. So we'll look to quarterize that, you know, over, you know, we're not issued, we don't, we have a balance sheet that does not need to issue equity. So, um, now as part of the deal, Calvin family, uh, um, really wanted units, equity. So I think over time, obviously subject to market conditions, we'll look to quarterize, i.e., at least want to get our share level back to kind of where it was pre-issuance for the TRG deal. Now that's subject to market conditions, We'll be very smart about it and do everything else. So that has moved up. I still think we're going to want to grow our dividend. And obviously, I think I said last time, the development stuff, does take time to put the capital to work. We don't move as fast as these data centers that just go up in nine months. But I think quarterizing that 5 million issuance has moved up to the top of the charts. But that does not mean that the capital redeployment in the portfolio slows down. We're very, and you're rightly pointing out that, you know, we all get in these classifications, A minus B plus. We're going to put it where the capital is accretive to that property value. You know, we don't use Green Street cap rates. We use David Simon's cap rates. And over my career, I've been more right than wrong. So now we can do a chat, GTT poll of who's got the better cap rates. I'm going to go with David for the time being, but I've been proven wrong. So we're blowing and going, and we've got some really exciting big things on the horizon to do with capital, and just to name a few. You know, we bought out Seritage and FOCA, which is a huge, massive thing to a great center, which should be a four and a half cap rate. But don't worry, our development yield is going to be greater than that, much greater than that. But we've got Fashion Valley, we've got Boca, we've got Barton Creek. These are just two or three that are popping. Later in the week, the team will be announcing a really landmark deal in Nashville, a great site in a great city that we have a very important presence in, now complemented by the TRG assets that we now have full operational control with. which is a very good asset, and Oppie Mills, as an example, which is a very good mills and a distinct trade area. So that'll be our new ground-up development that we're really excited about. So it's pretty much status quo other than we're going to be moving up the, you know, I don't want another 5 million shares outstanding.

Okay? Okay.

Great. Thanks so much for the time. Appreciate it.

Sure. Thank you. We're going to run a little bit over. We've got two more questions.

Our next question is from Flores Stakeman with Lattenberg Salmon. Please proceed.

Hey, guys. Thanks. I know we're running late. David, great to hear your voice. Eli, again, I'll not be the first one to welcome you, but good to have you on the call as well. And, David, I love your passion. Question for you, I'll try to keep it relatively short here, but your S&O pipeline, could you talk about that? And I note that Caring has dropped out of your top ten tenants list. Presumably they haven't closed any stores. Is that just you haven't signed new leases or they haven't opened new stores in the portfolio? And maybe talk a little bit about in that S&O how your luxury is trending or how you expect that to trend maybe.

Hi Florence, it's Brian. So the ethanol pipeline is 310 basis points as of 9-30. And you're right, carrying did drop out of the top 10. It's just simply because we opened up more stores with other retailers and forced them above the carrying ranking. So it's really a reflection of the robust activity that's on the ground from a leasing perspective. Caring is still a very important tenant, and over time we would expect to continue to see them move around to the top rankings. As you look at that 310 basis points, there is a substantial amount of luxury in there. It's probably to the tune of about 50 to 60 basis points of the total 310. So the luxury cohort of tenants continues to favor our portfolio and continue to see growth with us.

Thanks, Brian.

And again, we've got, you know, you know, we're, our occupancy is pretty high, but we're, a lot of this new stuff is retending, and obviously, you know, Forever 21 is having, you know, releasing all that space is having an impact on the asset. That's a no, right?

That's correct. Thanks. Thank you, Forrest.

Our final question is from Teo Aktushana with Deutsche Bank. Please proceed.

Hi, yes. Good evening. Thanks for taking my call. Eli, congratulations. Welcome aboard. In regards to OPI, just curious what you guys are – how you're thinking about that business. Again, it's a little bit more value-oriented. I'm just kind of curious if there's opportunities to kind of monetize that or is just the world too murky right now to really have an opportunity?

Well – You know, we'll see how that transpires, but I will compliment the team at Catalyst. They're doing really terrific work at a number of the brands. Not all, you know, some of the brands are, you know, again, it's not perfect sailing there, but they're doing a great job at JCPenney, great job at Aeropostale, a great job at Brooks Brothers, a really good job at Lucky. So we've been very pleased with, you know, how Catalyst has integrated the various brands. That merger is really this is the first nine months. If you go back, it really happened in early 25. So they're doing a terrific job. It's stable, good results. Obviously, out of Forever 21, which was as much as we tried to save it, we couldn't, primarily because of the de minimis. We would have had a fighting chance had we not suffered from the de minimis. We couldn't overcome that. Now, thankfully, it's changed, and at least it puts domestic retailers on an even footing with certain foreign retailers. So long story short, Catalyst is doing a terrific job. And like everything else, look, if it – I would say we'll always look at what the best options are. But for the time being, it's in good stead. And again, they skew toward direct. A few of the brands skew toward the lower income. And I will say this, the lower income and the higher income as well, they're looking for value. So value can be, you know, Value is in the eye of the beholder, but, you know, you've got to give the consumer today value. Whether they're a high-income consumer or a lower-income consumer, value is the name of the game. And I think Catalyst has recognized that in providing a high-end, like at the Brooks Brothers, and it's kind of the more moderate era when... you know, and the tenant. So it was all good.

Well said, David. Thank you. Thank you.

If there are no further questions, I would like to turn the conference over to David Simon for closing remarks.

Okay. We had a very active quarter. We're going to have a very active fourth quarter. So more good stuff to come. And thank you very much for your interest and your questions. Thank you.

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