Simon (SPG) Q3 2026 earnings review
Simon raises its cash profit outlook while investment losses mount
Simon's shopping malls are signing leases at higher rents and drawing more shoppers, even as non-property write-downs weigh on net profit. Property cash earnings (Real Estate FFO) rose 5% from a year ago to $3.37 per share, while U.S. mall occupancy hit 96.5%. Chief executive Eli Simon raised the full-year cash earnings outlook and the dividend again, though by our math the plan points to 1% growth in the fourth quarter.
| U.S. property profit from centers owned a year ago | +5.4% +6.6% including the Taubman stake buyout |
|---|---|
| Real Estate FFO per share (property cash earnings) | $3.37 +4.7% from a year ago |
| U.S. mall and outlet retailer sales per sq ft | $852 +14.8% from a year ago |
| Full-year Real Estate FFO outlook | Raised $0.10 middle of the range: $13.35 (+4.9%) |
⚖️ Verdict: 🟢 Bullish
The story got better because shopper spending sped up on a two-year basis despite tougher late-summer comparisons, and new leases are signing at $78 per square foot with smaller store-buildout allowances. Raising the full-year outlook also confirmed that management's prior second-half forecast was cautious. One caution: the company cut its net income outlook for a third straight quarter after $0.27 per share of non-cash investment losses, and refinancing will cost about $0.30 per share again in 2027.
The question now is how fast base rent and property profit grow once the October 31 anniversary of the Taubman acquisition removes the luxury portfolio's boost to the averages. If new leases at $78 per square foot drive the gain, rent growth stays near 5% to 6%; if the Taubman mix shift did the heavy lifting, growth steps down in the fourth quarter. Fourth-quarter base rent and the 2027 outlook in February will settle it.
🐂 Bull Case
New Leases Pay 17% More For Less Upfront Cash
Simon makes its money by renting space at U.S. malls, Premium Outlets and The Mills shopping centers. Even with mall and outlet occupancy at 96.5%—tying its highest level since 2016—retailers are bidding up for the remaining spaces. Chief executive Eli Simon said "we are achieving higher rents while investing less capital per deal" across nearly 1,200 leases covering 4.3 million square feet in the third quarter.
- Starting rent on new leases: $78 per square foot this year, up 17% from $65 a year ago
- Tenant allowances (cash paid to help build out stores): down 10% per square foot from a year ago
- Prospective leasing pipeline: up 30% from a year ago, and up 40% among longtime national retailers
- Signed-not-opened (SNO) pipeline, or leases signed for stores still being built: 2.9 percentage points of occupancy
What to watch: the SNO pipeline and average base rent in the fourth quarter after the October 31 anniversary of the Taubman Realty Group (TRG) acquisition. That reading will show how much rent growth comes from these $78 new leases rather than from adding Taubman's luxury malls to the average.
Shopper Spending Cleared Tougher Late-Summer Comparisons
Stronger shopper traffic and store sales give retailers the confidence to pay higher rent and generate overage rent, the extra percentage rent Simon collects when tenant sales pass a set threshold. Heading into the third quarter, the mall owner faced a harder comparison because the rebound in mall shopping started in late 2025. Instead of slowing down, two-year sales growth sped up.
Trailing 12-month retailer sales reached $852 per square foot, up 14.8% from a year ago, while sales at comparable stores rose 4.9% in the quarter. On a two-year basis, comparable sales rose 7.2%, beating the second quarter's pace by 0.8 percentage points, and October foot traffic kept growing around 3.5%. That cash flow is funding a $1.4 billion construction pipeline yielding 9% and an agreement to buy Seattle's University Village.
What to watch: fourth-quarter variable lease income after the holiday shopping season. Because percentage rent is mostly billed at year-end, holiday store sales will decide how much Simon beats its full-year cash earnings target.
Third Straight Outlook Raise Shows The Second-Half Plan Was Cautious
Simon judges its core business on Real Estate Funds From Operations (Real Estate FFO), a real estate cash earnings measure that adds back property depreciation and strips out non-property ventures. Three months ago, the full-year outlook pointed to $6.74 to $6.84 per share for the second half of 2026 by our math, or barely 1% growth from a year ago. Third-quarter results proved that forecast was overly cautious.
Real Estate FFO rose 4.7% from a year ago to $3.37 per share, and finance chief Brian McDade raised the full-year outlook by $0.10 to $13.30–$13.40. By our math, that leaves $3.53 at the middle of the range for the fourth quarter, or 1.1% growth. Part of the fourth-quarter slowdown is real because the 1.2-point boost to domestic property profit from buying the rest of Taubman ended on October 31.
What to watch: fourth-quarter Real Estate FFO per share against the implied $3.48 to $3.58 range. Beating the top end again, as the REIT did in 2025, would confirm that management still pads its fourth-quarter targets.
🐻 Bear Case
Non-Property Losses Cut The Net Profit Outlook Again
"Today, we are once again increasing our full-year 2026 Real Estate FFO per share guidance and raising our quarterly dividend," Simon said. While the company spotlighted higher property cash earnings, it quietly cut its full-year net income outlook for the third quarter in a row, down another $0.15 at the middle of the range to $6.32–$6.42 per share.
The gap comes from investments outside the core mall properties, which Real Estate FFO leaves out. In the third quarter, total FFO per share fell 4.9% from a year ago to $3.09 because of $99.6 million ($0.27 per share) in non-cash after-tax losses on bonds tied to European mall owner Klépierre and a newly public stock held by its retail brand ventures. Over nine months, non-property items cost $0.70 per share.
What to watch: the full-year gap between Real Estate FFO and total FFO per share in the fourth-quarter report. Another quarter of operating or valuation losses in the retail brand ventures would show that non-property investments keep draining shareholder returns.
Refinancing Costs Will Take Another Bite In 2027
As older low-rate loans come due, replacing them at today's interest rates is holding back bottom-line growth. In the third quarter, higher net interest expense cut FFO by $0.05 per share compared to a year ago, as consolidated interest costs climbed 18.5% to $287.6 million. During the quarter, the landlord issued $800 million of senior notes at a 5.45% average coupon and $970 million of property mortgages at 6.33%.
That pressure will not let up next year. With about $2 billion of unsecured debt maturing in 2027, Simon warned that interest expense will likely create "in that similar $0.30-ish range of headwinds next year"—matching the roughly $0.25 to $0.30 per share drag in 2026. McDade plans to limit the bill by borrowing more in Europe and Japan, where interest rates are lower.
What to watch: the initial 2027 Real Estate FFO outlook in February and the interest rate drag baked into it. A headwind above $0.30 per share would eat up more than 2 percentage points of property profit growth.
Taubman Purchase Accounting Lifted Depreciation And Cut Operating Margin
Reported operating income before other items slipped 1.0% from a year ago to $804.5 million even though consolidated revenue rose 13.3% to $1.81 billion. That pushed the operating margin down 6.4 percentage points by our math, from 50.8% a year ago to 44.3%. The drop came from depreciation and amortization—non-cash charges for the wear and tear of buildings and acquired leases—which rose 7.0 percentage points of revenue.
Finalizing the accounting for last October's Taubman buyout added $49.8 million ($0.13 per share) to third-quarter consolidated depreciation, only partly offset by a $25.2 million ($0.07 per share) drop in joint-venture investment amortization, for a net $0.06 per share hit to net income. Because FFO adds back property depreciation, cash earnings were unaffected, but the higher non-cash charges weigh on reported net profit.
What to watch: fourth-quarter depreciation and amortization once the one-time Taubman accounting catch-up is behind the company. A smaller charge will show the normal quarterly run rate for 2027 net income.
💲 Other KPIs
Cash profit at U.S. properties grew 6.6% from a year ago in the third quarter and 7.3% over the first nine months, slowing from 8.5% in the second quarter. Buying the remaining 12% of Taubman added 1.2 percentage points to that growth; excluding that deal, underlying U.S. property profit grew 5.4% by our math.
Simon bought back 1.14 million common shares at an average price of $207.98 in the third quarter, up from $211.4 million in the second quarter and bringing nine-month repurchases to $667 million. That leaves about 450,000 shares to offset the 5.06 million partnership units issued for Taubman. The board also raised the quarterly dividend 4.5% from a year ago to $2.30.
Uncollected rent and accrued revenue owed by tenants fell 3.7% from $934.1 million at the end of 2025, even as consolidated lease revenue climbed 15.7% from a year ago. Falling receivables while rent billings rise shows that store owners are paying their rent on time and collection losses remain low.
🔮 Guidance
Raised. The middle of the range moved up $0.10 to $13.35, or 4.9% growth for the year. By our math, that leaves $3.53 for the fourth quarter, up 1.1% from $3.49 a year ago as the Taubman acquisition laps and interest costs rise. It is the third raise this year, and each move has grown larger: +$0.05, +$0.075, and +$0.10.
Cut. The middle of the range dropped $0.15 to $6.37 per share after third-quarter non-cash mark-to-market losses ($0.27 per share) and Taubman purchase-accounting depreciation ($0.06 net). By our math, that leaves $1.86 per share for the fourth quarter. It is the third cut this year: -$0.31, -$0.165, and -$0.15.
❓ Key Questions
What is base rent growth without the Taubman properties?
Management disclosed that Taubman added 1.2 percentage points to the 6.6% domestic property profit growth, leaving 5.4% from properties owned a year ago. It has not shared the same clean figure for the 6.1% average base rent increase ahead of the Q4 anniversary.
How much revenue do the first media contracts bring?
Chief executive Eli Simon said the company "signed, I should say, some of our first contracts in the last week or so" for the Simon Media Network, including talks with travel and finance brands. Investors still have no revenue or profit figures to size the business.
What will the Nashville and Seattle projects cost?
Simon agreed to buy University Village in Seattle and will break ground next week on Sagefield, a 100-acre retail project south of Nashville opening in late 2028. Management declined to give the purchase price or construction budget for either deal.
When does the 2.9-point signed-lease pipeline start paying rent?
The signed-not-opened lease pipeline sits at 2.9 percentage points of occupancy, down from 3.1 points last quarter as stores opened. Knowing how much of that rent starts in 2027 will show how easily the company can cover next year's ~$0.30 interest drag.