Simon Property Group, Inc. (SPG) Q2 2026 Earnings Report, Transcript and Summary

Greetings. Welcome to Simon Property Group Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to Tom Ward, Senior Vice President, Investor Relations. Thank you. You may begin.

Thank you, Sherry, and thank you for joining us this evening. Presenting on today's call are Eli Simon, Chief Executive Officer, President and 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 relating to those forward-looking 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 1 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 Eli Simon.

Good evening. We delivered excellent financial and operational results in the second quarter. Domestic property NOI and real estate FFO growth accelerated in the quarter to 8.5% and 7.9%, respectively. This was driven by continued leasing demand, disciplined execution across all platforms and contributions from recent acquisitions. Shopper traffic accelerated in the quarter and retailer sales volume again grew solidly year-over-year, further evidence that our portfolio is well positioned and our properties are the places where shoppers and tenants want to be. And with our recently declared dividend, we will have paid out over $50 billion to shareholders since becoming a public company. Tenant demand continues to be widespread with no slowdown, drawing from a broad mix of established and emerging retailers across categories, platforms and geographies. During the second quarter, we signed more than 1,200 leases totaling over 4.8 million square feet. The number of new deals signed in the quarter increased more than 20% compared to last year, and new deals represented approximately 28% of total lease square feet. Year-to-date through the second quarter, initial base minimum rent per square foot on new deals is up 17% year-over-year, while tenant allowance per square foot on new deals is down 12% year-over-year. We have completed more than 87% of our 2026 expirations and are ahead of where we were at this time last year as we continue to negotiate 2027 and 2028 expirations with many tenants. The pipeline of prospective deals continues to build, remaining well ahead of last year's pace, reflecting continued broad-based tenant demand. Moving on to retailer sales. Malls and Premium Outlets were $838 per square foot, up 13.9%. Importantly, total sales volume increased 6.6% over the trailing 12 months and 7.6% in the quarter, with comparable sales growth of 5.7% for the second quarter. We continue to host unique activations that highlight the incredible value our portfolio offers. Our fifth annual National Outlet Shopping Day produced another year of shopper traffic and retailer sales growth, along with a more than 25% increase in retailer participation compared to last year with Simon+ members enjoying exclusive rewards tied to the event. We also built on the momentum around the World Cup, running a coordinated activation strategy across our portfolio that featured fan experiences, watch parties, retailer collaborations and community programming. The shopper and retailer response to these types of events underscores Simon's offering, the ability to turn major moments into large-scale real-world experiences that bring our consumers, brands and communities together. Turning now to development and redevelopment activity. At the end of the quarter, we had development projects underway across all platforms with our share of the net cost totaling $1.07 billion at a blended yield of 9%. Approximately 50% of the net cost is for mixed-use projects. Looking ahead, we expect projects representing more than $600 million of additional net cost to start construction in the second half of this year. Our development pipeline remains robust with over $4 billion of projects, which we believe will generate attractive returns, enhance our properties and support long-term growth in cash flow, FFO and dividends per share. This is consistent with the results we have achieved on similar recently completed projects such as Southdale Center in Edina, Minnesota, Brea Mall in Orange County and Briarwood Mall in Ann Arbor, Michigan. Over the last 4 years, we have also committed more than $400 million to center enhancements that are either completed, underway or recently approved, including common area upgrades, landscaping, lighting and other amenities, creating a more elevated shopping experience. These enhancements are noticed and appreciated by our customers and particularly by our retailers who value a landlord committed to the long-term success of their stores and the communities we serve. We remain focused on these enhancements alongside our broader development activity, and our balance sheet allows us to continue reinvesting in our portfolio for years to come. With that, I will turn it over to Brian, who will review our financial results from the second quarter in more detail and provide an update on our outlook for the remainder of the year.

Thank you, Eli. Real estate FFO was $1.25 billion or $3.29 per share in the second quarter compared to $1.15 billion or $3.05 per share in the prior year period, an increase of 7.9%. Domestic and international operations both performed well and contributed $0.29 of growth, driven by increased lease income, disciplined cost management and contribution from acquisitions. As anticipated, higher interest expense and lower interest income combined were a $0.06 drag year-over-year. Reported FFO was $3.12 per share in the second quarter compared to $3.15 per share in the prior year period, which included a $0.21 per share noncash after-tax gain primarily due to Catalyst Brands' deconsolidation of Forever 21. Domestic property NOI increased 8.5% year-over-year for the quarter and 7.6% for the first half of the year. Approximately 120 basis points of growth for both the second quarter and first half of the year were attributable to our acquisition of the remaining 12% interest in TRG. Portfolio NOI, which includes our international properties at constant currency, grew at 8.3% for the quarter and 7.5% for the first half of the year. Malls and Premium Outlets occupancy at the end of the second quarter was 96%, flat compared to the first quarter and year-over-year, a result that reflects the depth of retail demand as we absorbed approximately 1 million square feet of retailer bankruptcy-related space returned during the quarter and successfully relet. The Mills occupancy was 98.8%. Average base minimum rent for the Malls and Premium Outlets increased 6.3% year-over-year, while ADR for the mills increased 12.3%. Occupancy cost at the end of the quarter was 12.5%. Shifting to return of capital. Today, we announced a dividend of $2.25 per share for the third quarter, an increase of $0.10 or 4.7% year-over-year. The dividend is payable on September 30 to shareholders as of the record date. During the second quarter, we repurchased approximately 793,000 shares of common stock and approximately 238,000 limited partnership units for a $211 million investment at an average purchase price of $205.10 per share. On to the balance sheet. During the quarter, we completed 8 secured loan transactions totaling $1.4 billion at a weighted average interest rate of 5.36%. We issued EUR 500 million of senior notes at a 3.65% rate for 5 years, and we closed on a $460 million 5-year term loan priced at SOFR plus 70 basis points, the proceeds of which were used to repay $460 million drawn under our revolving credit facility. We ended the quarter with approximately $9.3 billion in liquidity, and our balance sheet remains incredibly robust with net debt-to-EBITDA below 5.0x and fixed charge coverage of 4.7x. This supports our strategy and our continued execution. Finally, on to 2026 guidance. Given our results for the first half of the year and our current view for the remainder of the year, we are increasing our full year 2026 real estate FFO guidance to a range of $13.20 to $13.30 per share. That compares to $12.73 last year and is an $0.08 increase at the midpoint compared to the range previously provided. Thank you, and we are now available for your questions.

[Operator Instructions] Our first question is from Caitlin Burrows with Goldman Sachs.

I guess I'm wondering if you can talk about TIs and cash flow growth. You did reference some of the pieces in the prepared remarks. So if you look over a long time period, like the last 10 years, NOI and FFO growth have outpaced FAD growth. Year-to-date, it looks like actually FAD growth has outpaced NOI and FFO growth. So maybe that is a change in the trend or maybe the numbers move around. But wondering, can you discuss the outlook for TIs and what they're a function of? If the demand and leasing environment is so strong, do you expect to pull back on TIs? And is reducing TIs a goal of yours?

Sure. So thanks for the question, Caitlin. So I think -- when I think about the -- let's just talk about TIs first. That's a function of demand for the tenants and -- demand from the tenants and demand for the space and the supply of available space. The reality is we're having a ton of conversations with retailers. Our pipeline today is up 26%, I think it is, from this time last year, which is over 100 more deals. And when we have those conversations, rent is a component of it and TI is a component of it. And there are certain times where it might be a tenant that we want to start a new relationship with, but we're concerned potentially about the credit or about their long-term viability. And so maybe we'll say, yes, maybe it doesn't make sense to pay as much of a TI as what we might pay for someone else. We're more certain about what the performance could be. So I think it's really a function of mix over the long run. But the reality is supply and demand shows itself in 2 ways. It shows itself in rent growth and it shows itself in TIs. Stepping back, if you look at funds available for distribution more broadly, I think for the year, we're up 9% or over 9% year-to-date. It's a focus of ours, right? Our focus is to grow cash flow growth and part of the cash flow growth is from the FFO and part of it is from the capital we spend. But what I do want to highlight or reiterate, which I said on the call -- in the prepared remarks, is we are reinvesting back into our centers in a big way, and that is noticeable from the consumers and really from the retailers. And I've been to, I don't know, I think I've been to 12 states in the last 3 weeks and seen a bunch of our properties where we have done these transformations. And what I've seen is new leases being signed there and new retailers coming to these centers because they see a landlord that has reinvested into that space. And when you ask the general manager, what's the customer perception been, they say, well, we've had people come up and say I didn't realize this center was still here, this center was still thriving. So our job is to continue to reinvest back into our centers and to make them better from the customer's perspective and from our retailers' perspective. But our job overall is to grow cash flow growth, grow dividends per share and make our centers better and sort of we throw it all into the calculus. And I think the results have been obviously very impressive so far, and we're looking forward to the future.

Our next question is from Michael Griffin with Evercore ISI.

Eli, I appreciate your commentary around the leasing outlook. Just wondering, as you kind of look ahead to really '27 and beyond, you've got rents on in-line shops to, call it, $60 to $65. I realize you don't quote a mark-to-market on the portfolio, but can you give us a sense as those leases are coming due, are you signing leases in the 70s, mid-70s? Just curious about the trajectory and opportunity there in rent growth given all the demand that you've really highlighted.

Sure. So if you look at year-to-date, I think we've signed new leases at $78 more or less. And -- but what you have to focus on those leases coming due is a large number of them will renew. They're great tenants. We have great relationships with them. They're important for the center. And our renewals historically speaking, and that's holding true now is sort of in the mid-single digits. And so we'll renew some and we'll replace some if we think that there are better retailers that can perform better and add more to the center. So it's not as simple as saying the $60, $65 goes to $78. But clearly, if you look at the trajectory of where new leases have been signed, obviously, it's a positive story. The supply and demand story is positive, but it's not as simple as just saying, take the $60, $65 to $78. But I think really the focus is what's the right retailer for each space. And there's no market rent really in our industry or how we think about it is what's the market rent for that tenant based on how they're going to perform and what they're going to do with the rest of the center. So we think it's a positive story. I don't think it's quite the $65 to $78 in a year, but we look forward to continuing to upgrade -- continue to upgrade the merchandise mix in the pipeline, I think it's 483 deals and a similar number of them are new deals or new tenants as we've done year-to-date, which is 28%. So we feel very good about the pipeline, and it's our job to continue to execute and continue to grow it over time.

Our next question is from Samir Khanal with Bank of America.

Eli, given that occupancy is at 96% today, I guess, where do you see the greatest opportunity to drive NOI and earnings growth, right? Clearly, there's a lot of momentum here. So help us think through the -- about the key drivers of growth, let's call it, over the next 12 to 18 months.

Sure. So first off, on occupancy, I think it's important to realize that we are at 96% occupied on the malls and mills -- I'm sorry, in malls and outlet portfolio. We got 1 million square feet space back in mid-May and are at the same occupancy level as we were at the end of the first quarter. I think that's pretty impressive. I think it speaks to the strength of the team and the strength of our portfolio. But when I think about the levers of growth, so to speak, occupancy does have a little bit more to go from here. I don't think we'd ever be at 100%. We wouldn't want to be. We want the ability to move around tenants, but there obviously is a little bit more from here. I think, honestly, above where we finished last year is the team's goal, and I think we'll achieve that. The other piece, obviously, is retenanting, taking out lower performers who obviously pay lower rent and replacing them with new, better tenants that pay more rent, given their increased productivity is obviously a focus. And the last piece is our development pipeline. We have $1 billion in the ground today. We have hopefully $600 million plus that will be approved and start by the end of the year. We're generating 9% return on those investments, which is obviously a very healthy number. And again, when I -- when we quote those numbers, that is only on the capital we're spending on those developments. But if you look at what we've done at Southdale, look at what we've done at Brea, look at Briarwood, there's significant benefit to the rest of the center when we do those developments that are not reflected in those returns. And so that's another avenue of growth for us. But it's really continuing to do what we've been doing, which I think we've obviously done a good job so far, but we have more to go. We're going to continue to reinvest into our centers and continue to upgrade the merchandise mix. But there's a lot of factors that go into our growth, but we feel pretty good about where we sit today.

Our next question is from Michael Goldsmith with UBS.

I think Brian in his prepared remarks talked about 1 million square feet of bankruptcy-related space coming back during the quarter. Can you outline who has been giving you back space? And then also, can you just talk about -- we've talked a little bit about the occupancy and you've been able to keep that flat despite giving all that space back. You also talked about how leasing economics are being strong, but can you talk a little bit about the space that you got back, at what rents were they in? Are you seeing kind of similar to the overall new leasing on those boxes? Just trying to understand the economic uplift from replacing the space.

Sure. So the 1 million square feet, basically all of that were the Saks Off Fifth's, right? Obviously, a pretty public bankruptcy process. But again, we've leased, right? So we had effectively no skipping, no excuses for lower occupancy, right? We got back where we are. And again, as of the end of July, we're at 96.3%. So we are above where we were. But if you look at Saks, not dissimilar to what we talked about earlier this year. If you look at the boxes in the outlets, they were paying $18 million in rent. The deals we have signed today are already -- which about half the space are already well in excess of that, and the rest are under discussions and near final deals. But we'll basically take the $18 million and turn it into $44 million. The only thing that I'd say is not reflected in '26 or I guess will be reflected in '26 is that we got those boxes back, frankly, later than we thought we would. We didn't get them back until, I want to say, it was May 15 or May 16. And so by the time -- again, we hustled, we got leases signed, getting leases signed now, but that's really going to be a '27 story when those rents start hitting. But again, it's a good news story for us, but that's really the vast, vast majority of that 1 million square feet of the Saks Off Fifth, which again, not surprising that we got them back, and I think it's overall a good outcome. And the replacements have been, I don't want to use names because I don't know what's been publicly said or not, but great, great retailers, blue-chip retailers. A number of expansions, frankly, that might have been elsewhere in the center, wanted more space, some carve-ups. But overall, very, very good demand and a lot of them actually had options over who to replace them with, but turned out to be a good news story for us.

Our next question is from Greg McGinniss with Scotiabank.

Similarly, along those lines of tenants that you're putting into the centers, you mentioned the substantial retenanting. Could you please provide some details on which tenants or categories you're adding to centers that seem to be resonating with consumers today versus those where you're looking to potentially limit exposure and where you see the tenant watch list where that sits today?

Sure. So we are adding, frankly, across a variety of categories across all geographies, across all platforms. I would say what is most exciting to me is our new and emerging brands, which are across a variety of sectors, includes technology companies, athleisure, home, jewelry, very big in the Gen Z, the teen consumer. We are adding a ton of new brands there that are, in many cases, unique to the market, unique to our center and really differentiates one of our properties where we add these types of connectivity to other properties. And so these brands are coming from online. They're coming from Europe. They're coming from Asia in the beauty space. A number of deals in the beauty space from Asian retailers come in the collectible space. Athleisure space obviously continues to grow with new entrants. And so that's very exciting. And when you walk one of our centers, you see something new, you see something that's differentiated. And I think it's resonating with customers. And when we add these types of retailers, we see increased traffic and not just for the retailers we add, but for the retailers for the rest of the center. And what that's led to, frankly, is if you go and look at some of the legacy players in the spaces where we're adding the new emerging brands, they're reinvesting into their stores. Their stores look so much better. Their merchandise looks better, and it's really a great symbiotic relationship, which we're very proud of. The other area of focus, I would say, would be in the restaurant space. We continue to upgrade the restaurants and continue to add restaurants. If you look, we have a number of high-profile developments and redevelopments that have started and will start over the next, call it, year or so, we're going to add probably $400 million to $500 million of incremental restaurant sales from some of the biggest names out there on a regional, on a national basis. And so again, that's something that we can continue to do to create a fresh environment, an exciting environment and an environment that customers want to go to. So that's really the focus, but the demand is from a variety of categories, variety of retailers. On the watch list, it's in very good shape. Nothing close to material, sort of normal course and the extent stuff happens, we handle an ordinary course of business.

It's actually an opportunity for us, Greg. It's Brian. The watch list is at its low point. But as we've said now, the recapture space does provide us opportunity to bring in better merchants.

Our next question is from Alexander Goldfarb with Piper Sandler.

Eli, I just wanted to go back on your Simon Brand Ventures. I think before you had said that I think it delivered like $200 million and maybe there's a goal of like $800 million, but also you have 2 billion people who go through your global portfolio. Just want to get a better sense of as you look to monetize this -- the visitor count, is this something that you think is like near term, like in the next, call it, 2 years that we'll see a material shift in this revenue increase? Or this is something more of a longer-term initiative? I'm just trying to get a handle on. I mean, 2 billion is certainly a lot of people.

Thanks, Alex. So I don't know if you have access to my e-mails, I guess. I have a draft press release that I guess I can say now that will be launched in the next couple of weeks to launch Simon Media Network to really, in a more broad way, take advantage of the first-party customer insights that we are getting. As you said, we have billions of visits a year, probably carrying over $100 billion in our domestic portfolio. And so there will be an announcement in next -- in the coming weeks. But yes, we think there's a real opportunity here to take sort of our whole ecosystem of -- we have obviously our digital footprint with Simon+, with ShopSimon, with Simon Search, our in-house screen network. We have over 4,000 screens, the largest footprint of screens, I think, in the world that we continue to invest in. And then now to take the data we're going to get into Simon Media Network and create something that's really, really interesting, both for our endemic brands, the retailers in our centers, but also for non-endemic brands who want access to our consumer who is -- has a high intent to shop and to shop and shop a lot. And so it's something we are focused on. I don't know about the 200 to 800. I hope it's that. I hope it's more than that, frankly, but it's a business that's growing at double-digit, mid-teens percent year-over-year. We're investing into it. We're adding screens. We're adding touch points at our centers. One is because we can make a really good return and have a 1- to 2-year payback period. But two is I think it looks good, frankly. I think when done right, I think it adds to our centers. We have our digital directories, allowed us to search for real-time inventory through Simon Search at our centers, which gets great usage. And so it's something that we are focused on. I'm focused on. We think there's a really big opportunity here clearly, malls, retail centers at large are having a cultural moment. People realize that they're not going away. Young people want to hang out here. And there's an opportunity to, I think, really take advantage of that because we can provide to people who are looking to advertise something that really nobody else can. And so we're focused on it. Again, I don't know when we think about this over the long term, but we think there's tremendous opportunity to really grow this business. And obviously, it's a great business today, but we really do think that there's an opportunity to make this business much bigger over time.

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

Hoping you could talk a little bit about your retention strategy. Are you looking to maybe pull that back given the strength of demand and the ability to drive leasing spreads on new deals, particularly for in-line tenants? And if you could talk about kind of the spread between leased versus occupancy and how that shifted with the 1 million in bankruptcies noted and the lease-up of some of the space subsequently.

Sure. So on the retention side, it's a space-by-space decision that has so many different factors that go into it. It's a relationship with the tenant. It's do we -- what's the replacement not just rent, but are they adding to the center. It's a complicated story, but it's something we focus on. The team is obviously very focused on downtime, right? We still are running. Yes, the long-term growth, we also obviously have to focus on cash flow in the intermediate term as well. So it's -- I wouldn't say it's materially changing. But to the extent that we think there's an opportunity to replace a tenant with someone who is going to perform better and add more to the center, add more traffic and then obviously, the rent would be higher as well. We'll look to do it. But it's not like we're going and making a blanket assumption or a blanket call on that. It's really space by space, tenant by tenant, center by center is how we think about that. On the SNO...

Juan, we're still trending around 310 basis points of signed but not open. And really, that got backfilled by the 1 million square feet of leases, right? The open leases were backfilled with some of the work we've been doing since we captured the Saks outlet business.

Our next question is from Floris Van Dijkum with Ladenburg Thalmann.

Maybe obviously, very strong NOI growth, even excluding the TRG, 7% plus and sales growth through the roof with 13% plus. Maybe talk a little bit about the breadth of that sales growth and talk -- I mean, is this just your top 50 assets carrying the portfolio? Or how is the rest of the portfolio doing? Or what's the bifurcation between your top 50 or 100 assets versus the rest of the portfolio?

Sure, Floris. So it's definitely broader than the top 50, right? It's a pretty broad story. Frankly, the sales trends are pretty similar to what we talked about last quarter that luxury remains very strong on the full price side for sure. On the outlet side, too, but most of the -- or I would say most, but some of the strength of the luxury or tenants that just don't have outlets. Obviously, the jewelry side, the watch side, that remains very, very strong, continues to grow. No real sign of slowdown there. But if you look at the juniors brands, which is targeting sort of the Gen Z customer, we've had 16 straight months of positive comps there, which is pretty staggering, obviously, given all the macro noise out there. And if you think about a customer group that could be hit, it would be that group, and that's continued to grow both new retailers or new entrants in that space, but obviously, the legacy retailers as well. And so the other trends are still holding. Restaurants, again, are a little bit softer than the rest of the portfolio. I think maybe that's economic based, but I think there's also other factors, right? Alcohol sales are down. That's obviously something we can't control. But the story remains positive. Florida remains very, very strong from Jacksonville and St. Johns, obviously, the greater Miami area and Boca over to Naples, Orlando's remained very strong, even the Panhandle continues to grow. That's been a good sign. The border is growing now, but a little bit less than the rest of the portfolio, which impacts the outlets more, right, just given that we have more outlets on the borders than full price. A couple of better outlets, again, are growing a little bit lower than the overall primarily due to the international travel, which, yes, it came here from the World Cup. But if you look at our outlet portfolio, Vegas is a key component of that. Orlando is a key component of that, which obviously didn't have -- both didn't have World Cup matches. But Orlando also coming off of 12 months of 10% to 15% comp growth. So that naturally slowed down a little. But the reality is it's a broad-based story that, yes, the luxury is very strong, no doubt. But this is not 10, 15 centers carrying. This is malls, this is outlets, this is mills. They're all positive comping. And traffic is up across all of them, too. So that's a good news story, is obviously, back-to-school has hit, I don't know, probably 2/3 of the country right now and then the remaining part as we speak. And so that's a good news. And then we look to the holiday season from there.

Our next question is from Rich Hightower with Barclays.

I was curious if you could give us an update on TRG. And I think last quarter, you sort of talked about the level of excitement there and some of the upside. And maybe just give us an update on where we stand there? And when do you think that comp really starts to kind of normalize within the contribution to the whole, I guess?

Sure. So we were as excited, more excited, continue to be excited, all of the above on TRG. So the EBITDA margin, we've increased the EBITDA margin on those assets that we manage. I remember, there's a few of the assets that we don't manage as part of the portfolio. But the assets that we manage, we've increased the margin by 300% this year. And I would say there is probably another couple of hundred basis points -- sorry, 300 basis points. There's another couple of hundred basis points to go. And that's everything from our purchasing contracts, janitorial, cleaning, it's our parking, it's marketing and sort of you name it, we're focused on it every dollar. We're incredibly focused on it. From a comp perspective, the 120 basis points Brian talked about, that's just surely we added 12% additional ownership, right? So that it goes away in the next 2 quarters. And then that doesn't -- that obviously goes away, right? Because then we'll have owned the remaining interest for a year. Obviously, you did the deal at the end of October, so that narrows as the year goes on. But we think there's a lot of upside over time. And again, we did not make that deal for the next year, for the next quarter. We made that deal for the long term to own really, really, really good assets and then to do what we do, which is upgrade the merchandise mix, reinvest into them. We have some really exciting stuff going on at Green Hills that hopefully we can announce sooner than later, putting significant amount of money into that center, both on renovation, adding great, great tenants, really changing that center sort of like what we did with Southdale in Edina, but in one of the best, if not the best market in the country. International Plaza, putting significant renovation to start soon. Cherry Creek, we just finalized our renovation plans there to continue to make the best asset in the market better. So it's a long-term story for us. The additional contribution from the 12% obviously goes away soon, but we look for those properties to have significant runway for growth into the future, we're very happy, and we're very excited about the opportunity with those assets.

Our next question is from Mike Mueller with JPMorgan.

You have about $4.5 billion of unsecured debt coming due in 2H in '27, I think about $1.5 billion of cash. Can you talk about how you're thinking about those maturities in the cash today?

Mike, it's Brian. We're as focused as always on our balance sheet and preserving our liquidity. We're active across a variety of markets. We've done 2 deals in Europe in the past quarter, certainly looking around the globe for interest opportunities. We've not yet accessed yen funding, but that's certainly we're considering. There's a variety of other capital markets executions that are out there. So we have flexibility. Certainly credit spreads are incredibly tight, obviously, pricing off a higher base rate. But ultimately, there is plenty of capital in the world today to refinance our debt. But certainly, we're still going to be up against a raising interest rate environment or a higher interest rate environment. At the beginning of the year, we guided towards $0.25 to $0.30 of negativity of interest expense on this year. We're about $0.10 into it. So we've got about $0.20 to go for the balance of the year. And that's under the current interest rate kind of market environment. And then as we head into next year, to your point. And so we certainly are being proactive about our interest expense and managing it appropriately.

Our next question is from Craig Mailman with Citi.

Eli, it's always helpful going through the development pipeline and kind of what you guys -- the opportunity you have there with the $4 billion. I guess. But as you look at the size of your company, right, $4 billion is 2% to 4% of your total market cap. I'm just -- it's all very helpful and it's all value accretive. But is there a way to, I guess, create a step function in earnings growth from here? I know Brian was just talking about the liquidity you have and you guys are searching the globe. I mean, is there any type of opportunity above and beyond the -- continuing to fix the portfolio, drive earnings from there to kind of grow the platform further and drive maybe that incremental growth above and beyond what malls and retail generally can deliver on a year in and year out basis?

Sure. So there's definitely opportunity. It's something we're always focused on. The great thing about the balance sheet that Brian mentioned is that we can do and will do all of the above to do development and continue to reinvest into our properties. We'll continue to evaluate buying back stock. We still love to own more of what we own, I guess, is the best way to say it. And we know the embedded growth profile given that pipeline that you talked about. But we're also not going to do something just to do it. I think I said this last quarter and it remains true, is we'll buy stuff and look at acquisitions as accretive that we think we can operate better on our platform, but it has to be at the right price. And so we're not going to do something just to add scale. I don't think it's the right thing to do. But the reality is we have $9.3 billion of liquidity. We're in a business or in a balance sheet that's naturally deleveraging based upon our free cash flow generation. And so we'll continue to evaluate. And if there are opportunities, the great thing is we know we can execute. We have the team to execute it. You look at what we did with Brickell last year, we are -- our year 1 yield there is over 100 basis points higher than our underwriting. And that's because we bought really, really, really good real estate at a good price and also because we're operating it, we're leasing it very well and -- but we're laser-focused on it. So we'll continue to do transactions like that to the extent that they are out there, but we're not going to chase stuff. And if others want to chase stuff, that's fine. But we love our portfolio. We love the assets we own. We'll continue to reinvest in them and continue to make those assets better. And if there are opportunities or when there are opportunities, we're ready to go and we can move quick and then add value that way. But we look at it, we've grown NOI 4-plus percent for the last 4, 5 years now, I guess. We have $1 billion in the ground in development. We got $4 billion behind it and much, much more behind that, that we're actively working on sort of the shadow part 2, I guess. So we're focused. We look to continue to grow cash flow, but we're going to do it smartly, and we're going to do it by adding great assets over time. And if nothing is out there that we can transact on, that's fine. We'll do what we do and grow the cash flow of the existing assets.

Our next question is from Vince Tibone with Green Street.

Comparable tenant sales are up about 6% year-to-date, which is much stronger than the last few years. I just -- how should we think about potential upside to 2026 NOI and FFO growth from overage rents if these strong sales trends continue for the rest of the year? If you could also touch on just kind of what's baked into guidance right now in terms of sales growth for the portfolio, that would be helpful.

Sure. So I would say we've seen no signs of a slowdown at all, frankly. In fact, traffic which we have, traffic accelerated in July. And I don't think anybody asked about traffic, but traffic was up 2%, I think, in the quarter and 3.6% in July, a good number. So I felt like we should say it. But -- so we have not seen any change in sales. I would say that sales are the one thing that we cannot control. Obviously, there's a lot of macro factors, geopolitical, political, political, right, with an election in a couple of months that are out of our control. And so I would say when we think about the guidance, I think it's fair to say that if the sales trends continue, we'll be above the range we guided. But the reality is it's very hard to know how sales are going to perform. Clearly, overage and sales-based rent is back-end weighted, obviously, as you go towards the holiday -- to the holiday season. And so the guidance effectively assumes a slowdown. If we -- if it stays like this, then we obviously will be above that range. But it's -- we don't really feel comfortable guiding at the same growth just because it's something we can't control. We can control leasing. We can control how we manage expenses, but we can't control sales. And so although there's nothing that we've seen that would suggest the slowdown is imminent, we thought it was prudent to guide with some sort of sales moderation. But again, very strong numbers. If you look at the -- for the 6 months, it's 6.3% comp growth. That's obviously very good. And there are tougher comps in the back half of the year. The malls really started there more positive upward trajectory this time last year. So there's a bit tougher comps too that we will see, but we are hopeful that the consumer is shown to be resilient. Obviously, stock market being at or near record highs is not insignificant, but that's sort of, I guess, the best way to summarize sales. I don't know, Brian, anything?

No, I think you covered it well, Eli. Ultimately, we would expect if the current conditions continue, that will be a further contribution beyond our -- what's baked into our guidance for the year.

Our next question is from Tayo Okusanya with Deutsche Bank.

Quick question. Eli, you kind of -- you mentioned comments before about jewelry being very strong. And I guess everything you seem to read in the news is that diamond prices are going down and the younger generation is not buying diamonds and things like that. So just trying to understand a little bit better why that particular category is doing well. And if there are any categories in particular that you kind of worry about saturation as well?

Sure. So I would say that the jewelry space, frankly, for jewelry and watches, it's coming from a variety of price points. It's clearly the luxury, the uber luxury that just very -- honestly more demand than supply of those types of items. So that allows prices to go up and the consumer is there. But also there's been a lot of new entrants into the space on sort of more of the -- I guess, more affordable price points. So there's a lot of new entrants in this space that we're doing business with that are -- that have great-looking stores, attract maybe that younger consumer. And so it's a category that's important for us. I think, again, these things go in cycles, they change over time. But right now, that is -- it's a trend that we are -- we see, we're focused on. And so it's -- we continue and expand the relationship and expand the stores with some of the more established players, players in the luxury space that we have great relationships with and want to continue to do more and more business with. But also there's this new entrant, again, at a different price point, but they are creating really great stores, great environment that they're focused on getting that younger consumer in an environment that is Instagrammable, right, for lack of a better word. And so it's sort of how we view all of our leases is that we want to go where the consumer goes. And we have a great team. We have boots on the ground. across the country. We have a great team that's focused on new and emerging brands. So we go where the customers are and want to give them more of what they want. And so that's really what we're doing in that space.

Tayo, I think you also see just given the outperformance of the U.S. relative to the rest of the globe that you continue to see luxury retailers bringing their product here, their newest and greatest product, because this is where the action is. So as long as that continues, we think that the trend line will hold.

Our last question is from Ronald Kamdem with Morgan Stanley.

Great. I just had a quick one, just AI related. We're a couple of months into this journey now. And when you're thinking about sort of your business and as well as sort of the retailer business, where do you think we are in terms of the adoption of these tools to better understanding where the customer is coming from and starting to see some tangible benefits? Is it still too early to see tangible results? Just curious like how that's been sort of going, both for your business and the retailers that you partner with?

Sure. I mean it's obviously early days. I don't know if it's the first inning, third inning, but it's definitely early days. I would say from the SPG perspective, I think where we've made leaps and bounds strides over the past several months, and there's so much more we can do, so much more we can do with our data. We're seeing real efficiencies and insights from our -- think about it, we have, I don't know, 29,000, 30,000 different leases, so many different REAs, so many different documents and joint venture documents, loan documents, et cetera. So we're seeing a lot we can do in that space to be quicker, to be more efficient, so much we can do on the marketing front. Again, we have hundreds of centers, so many different retailers. And so the ability to create imagery that's quicker, that looks better is meaningful for us. It's early days, and I'd say the retailers, again, same thing, right, from what we're hearing is that everyone is starting the journey. They're focused on it, but it's not a -- I don't think there's been a sea change in how anybody is operating. I think it's just stepping back bigger picture, I think it makes us more bullish on physical real estate, physical retail. I think we've seen it the younger cohorts, the most excited to come to the mall, the most excited to shop in the mall. As individual websites potentially become harder to navigate to from individual retailers, the physical real estate, the ability to have their brand representation becomes more and more important. And so that leads to more money being reinvested into the stores, creating a better, more unique experience. So we think it's great for us long term. But as far as adoption and anything like that, it's obviously early days. And we do -- as I mentioned earlier, with the Simon Media Network, AI will be a big component of that and our ability to sort through our data better, right, which is a lot, as you can imagine, with billions of visits a year and hundreds of billions -- $100-plus billion in sales. It's a lot of data, a lot of leases, a lot of tenants. And so there's a lot we can do there to be with our Simon Media Network and related entities that's really getting up and running. But overall, we look at this as great for us long term. And our job is to continue to make our properties where retailers want to be and where customers want to be, and that's really what we're focused on.

We have reached the end of our question-and-answer session. I would like to turn the call back over to Eli for closing remarks.

Thank you, everybody, for your questions, and have a great week.

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