Simon Property Group Raises Guidance After Q2 Earnings, Occupancy Gains

Simon Property Group is easing off the tariff alarm it sounded earlier this year after posting better-than-expected second quarter numbers.

The Indianapolis-based, retail-focused real estate investment trust reported a net income of $556.1 million this past quarter, compared with $413.7 million in the first quarter of this year and $493.5 million during the same period last year, according to its latest earnings call. Simon’s real estate funds from operations (FFO) also saw a bump up to $1.15 billion in the second quarter, up from $1.11 billion over the previous 90-day period and $1.09 billion year-over-year. 

Occupancy across the REIT’s portfolio was also strong at 96 percent, a 10 basis point increase from the first quarter of this year and a 40 basis increase year-over-year — a sign of persistent tenant demand. Although, base minimum rent per square foot saw a slight decline to $58.70. 

Simon modestly raised its minimum FFO guidance for this year as a result, now at $12.45 per share versus its previous minimum expectation of $12.40 per share.

“Retail demand is really unabated,” Simon CEO David Simon said during the call. “And the physical shopping environment continues to be the place to be. So we’re quite bullish about what we’ve done, what we are doing, where we are going, despite all of the headlines that are out there. 

“You read about all of these companies that are restructuring, now they’re going to lease their properties better, now they’re going to manage their balance sheet better, now they’re going to bring in new management and be better, this, that and the other thing — there’s one group, one group that’s never done that, and that’s us. All we’ve done is run our business appropriately, and we’ll continue to do so.”

Yet, that’s not to say that the tariff uncertainty hasn’t affected Simon’s operations and its tenant base. The REIT closed about 1,000 leases in the second quarter spanning 3.6 million square feet, compared with 1,300 deals spanning 5 million square feet the previous quarter. It also purchased only one (albeit prominent) property this past quarter, paying $512 million for Swire Properties’ majority stake in Miami’s roughly 500,000-square-foot Brickell City Center.

“Even though we raised [minimum guidance] we’re still very cautious about the economic environment,” Simon told an investor during the earnings call. “Tariffs are a real cost of doing business, and the only consistent thing about tariffs is that they’re consistently changing.”

Still, Simon said he expects the tariff volatility question to dim by 2026, as specific policies are hammered out and importers and suppliers figure out their new cost structures. 

Nick Trombola can be reached at ntrombola@commercialobserver.com.