Greetings, Welcome to Simon Property Group's first quarter 2026 earnings conference call. At this time all participants are in listening mode, a question and answer session will follow the formal presentation.if anyone requires 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. You may begin.
Thank you, Sherry, and thank you all for joining us this evening. Presenting on today's call are Eli Simon, Chief Executive Officer, President, 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 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 one hour. For those who would like to participate in the question-and-answer session, we ask that you please respect our request to limit yourself to one question. I am pleased to introduce Eli Simon.
Good evening. I want to start by thanking all those who sent kind notes following my father's passing. His impact on our company and our industry is truly powerful. Turning to the quarter, we're off to a very good start for 2026, with first quarter results that exceeded our plan. Occupancy gains, increased shopper traffic, and higher retailer sales drove strong cash flow growth in the quarter, reflecting solid fundamentals across all our platforms, the resilience of the consumer, and the strength and breadth of tenant demand we have for our centers. Retailer demand remains broad-based, spanning new and legacy retailers across a wide range of categories in all of our platforms and geographies. During the first quarter, we signed more than 1,100 leases totaling over 4.7 million sq ft. Approximately 25% of our leasing volume in the quarter was new deals.
We have completed more than 75% of our 2026 expirations and are ahead of where we were at this time last year. We have a robust and expanding pipeline of deals that is significantly larger than this time last year, reflecting continued demand from a diverse mix of tenants. Turning to development and redevelopment activity. We have projects under construction at 29 centers, with our share of net costs of $1.06 billion at a blended yield of 9%. Approximately 50% of the net cost is for mixed-use projects, including approximately 1,200 units of multi-family residential at Brea Mall, Briarwood Mall, and Northgate, and more than 400 hotel keys at Northshore Mall, Roosevelt Field, and The Domain.
We also have exciting redevelopments of former anchor boxes underway at Brea Mall and the Fashion Mall at Keystone, where we'll be adding more productive new retail, restaurants, entertainment, and fitness uses. We have an additional $1 billion of projects that will have the ability to start construction this year, including new developments, anchor redevelopments, and international redevelopments and expansions. Beyond that, we have approximately $3 billion of projects in our pipeline that could start over the next several years, investments that will make our great centers even better. All of these projects will be funded from internally generated cash flow, and we will maintain our track record of discipline in how we allocate capital, rigorously evaluating each project against our return thresholds. We have complete flexibility in our development pipeline.
We can be patient and adjust timing depending on construction costs or market conditions. We can also invest counter-cyclically, delivering product when others can't. These accretive development and redevelopment activities deliver strong yields, enhance our portfolio, and drive long-term growth in cash flow, FFO, and dividends per share. Moving on now to retailer sales. Malls and premium outlets were $819 per sq ft in the quarter, up 11.8%. More importantly, sales growth accelerated. Total sales volume increased 5.6% over the trailing 12 months and 8.8% in the quarter, with comparable sales growth of 6.5% for the first quarter. Our re-merchandising efforts are clearly showing through in total sales volumes, with strong growth across our portfolio and across categories such as luxury, jewelry, athleisure, and juniors.
With that, I will now turn it over to Brian, who will review our financial results from the first quarter in more detail and provide an update on our outlook for the remainder of the year.
Thank you, Eli. Real estate FFO was $1.2 billion, or $3.17 per share in the first quarter, compared to $1.1 billion, or $2.95 per share in the prior year period, growth of 7.5%. Domestic and international operations both performed well and contributed $0.27 of growth, driven by increased lease income along with disciplined cost management.
As anticipated, higher interest expense and lower interest income combined were a $0.05 drag year-over-year. Reported FFO of $2.91 per share includes $40 million or $0.10 per share of accelerated stock compensation expense, which reduced real estate FFO by $0.02 per share and other platform investments net of tax by $0.08 per share. Domestic property NOI growth was strong and increased 6.7% year-over-year for the quarter, with approximately 120 basis points of that growth attributable to our acquisition of the remaining TRG interests. Portfolio NOI, which includes our international properties at constant currency, also grew 6.7% for the quarter. Malls and premium outlets occupancy at the end of the first quarter was 96%, an increase of 10 basis points year-over-year.
The Malls occupancy was 99.2%, an increase of 80 basis points year-over-year. Average base minimum rent for the Malls and the Premium Outlets increased 5.2% year-over-year, and the Malls increased 9.1%. Occupancy cost at the end of the quarter was 12.7%. Shifting to return of capital, today we announced our dividend of $2.25 per share for the second quarter, an increase of $0.15 or 7.1% year-over-year. The dividend is payable on June 30th. In the first quarter, we repurchased approximately 965,000 shares of our common stock for an investment of $175 million at an average purchase price of $181.59. Turning to the balance sheet.
During the first quarter, we were active. We completed 10 secured loan transactions totaling approximately $2.3 billion at a weighted average interest rate of 5.25%. We also issued $800 million of senior notes that we used to repay our $800 million of notes that matured on January 15th. We also amended, restated and extended our $5 billion revolving credit facility at a 15 basis point lower pricing grid. We ended the quarter with approximately $8.7 billion of liquidity. Subsequent to the end of the quarter, we closed on the refinancing of the Shops at Crystals via a five-year CMBS loan that was priced at 4.83%, the lowest retail fixed rate coupon CMBS financing completed over the last four years.
Turning to Klépierre's exchangeable bonds. During the quarter, we settled the conversion of approximately 174 million of outstanding bonds by exchanging 4.1 million shares of Klépierre and EUR 79 million of cash. As part of that, we recognized a non-cash, non-FFO gain of $64 million in the quarter on the exchange of the Klépierre shares. Subsequent to the end of the quarter, we settled additional conversions of 374 million of the exchangeable bonds. Following the exchanges, there are approximately 188 million of bonds outstanding that will mature in November. We currently own approximately 59 million shares of Klépierre's common stock, which represents approximately 20.7% ownership.
The end of the quarter, our balance sheet remains strong, with net debt to EBITDA of 5.0 x and a fixed charge coverage ratio of 4.6 x, supporting our strategy and continued execution. Finally, onto guidance for 2026. Given our results for the first quarter 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 $13.10-$13.25 per share. That compares to $12.73 per share last year of real estate FFO and is a 5% increase at the midpoint. Thank you. We are now available for your questions.
Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. As a reminder, in the interest of time, please limit to one question. Our first question is from Samir Khanal with Bank of America. Please proceed.
Thank you. Good afternoon, everybody. Eli, I guess as it relates to retailer demand, you mentioned it's very strong, and I assume you have a lot of leverage on negotiations with the tenants here. Maybe talk about the pricing power you have in this environment. I know you spoke about, you know, addressing sort of upcoming expirations into 2027. Talk about kind of that growth momentum over the next, let's call it 12 months. Thanks.
Sure. First, we don't have any leverage over the retailers. The retailers can go a lot of places. They can open stores, not open stores, go online, go on Amazon. I would, you know, We're in the first part of the question that we have any leverage or real pricing power over the retailers. I would like, I guess, to on the second part on the pipeline. The pipeline is significant, and what's interesting is the way I look about it's really up across all different categories that we're leasing in today.
That's the legacy brands, that's our new business leasing, which are first to mall, first to our portfolio from either PTC Online or from Asia, from Europe, et cetera. Luxury brands, that pipeline's up. Restaurants are up, and the local and regional business is up. We're really seeing broad-based demand across all our centers, not just sort of the top fortress centers, but really across the portfolio. I think I attribute that to the fact that we're making our centers better, we're making them more relevant. The customers, you know, particularly the Gen Z customer, wants to come to our centers, and you're seeing that in traffic growth, and you're seeing it in the retailer sales.
We're not gonna talk about pricing power, have no leverage, but we feel very good about the pipeline and about our conversations with tenants. On the future expiration. I guess a couple things. One is we are above where we are in our 2026 expirations. It's around 200 basis points or so more than this time last year. What's interesting when talking to the leasing team is retailers are now wanting to talk about their 2027, 2028, 2029 expirations, which historically might have been more of a luxury tenant phenomenon, who think, you know, much like we do in terms of, you know, decades, not quarter to quarter.
We're actually hearing from legacy retailers in our existing portfolio, non-luxury, that actually want to start having those conversations because I think they understand this pipeline too and the interest in our space. You know, we like having those conversations, and I think they've been productive so far.
Our next question is from Caitlin Burrows with Goldman Sachs. Please proceed.
Hi, good afternoon, everyone. Maybe just big picture, wondering if you could go through considering the leadership transition. Do you expect any changes to Simon's strategy and execution? Is there any change to capital allocation priorities between, call it acquisitions, share repurchases versus buybacks, the deep redevelopment pipeline and dividend growth? I know you've been active on all fronts recently. Thanks.
Sure. Hi, Caitlin. As far as leadership changes, we're operating business as usual. We have the best in class team, and we're continuing to execute on our business plan, no change there, and everyone's excited for the future and excited to keep doing what we're doing. With regards to capital allocations, we look at all of it always, I guess I'll just go through the different pieces. Starting off on our development, redevelopment pipeline, which I mentioned, the current project center weighs about $1 billion. We have about $1 billion that will have the ability to start later this year. At least $3 billion behind that we can start over the next several years.
We look at that, each project on a project-by-project basis, incredibly meticulously, incredibly detailed, and we evaluate the market conditions at that time, the retailer demand. Do we think it's the appropriate return? Today, we're seeing very good returns there. You know, doing what we're able to do in this pipeline at 9% +, we feel very good about adding density, adding mixed uses to our centers, we'll continue to do that. If market conditions change, if costs rise from a construction perspective, we obviously have the ability to stop, to pause. This is land we own and we're gonna own forever, we'll do it at the right time. Next area is acquisitions. Obviously, there's been more transactions in the retail market, which I think overall is great. More capital coming into the sector.
When I think about acquisitions, sort of, I've said this before, but it's three key criteria. It has to make our portfolio better. It has to be brand accretive. It has to be an asset that we can, or a portfolio that we can add real value, utilize our skills to operate better, and it has to be at the right price. Last year, if you put aside, the remaining stake in TRG, we did three transactions. The mall outlets in Italy, Brickell City Centre , obviously in Miami, and Phillips Place in Charlotte. All three of those hit those criteria and frankly are outperforming even what we thought and are very excited about those future prospects. Next, I guess you could go to share buybacks. Obviously, slightly slower pace in the last quarter.
Then, you know, a little geopolitical unrest, a little choppiness in the market, we are prudent and waited. You know, as we said last year, we issued a little over 5 million shares to do the last 12% of the Taubman transaction, we fully expect to buy those back. You know, I would expect us to continue to be active, but again, if we do it now, great. If we wait, because we think it's prudent, that's fine as well. On the dividend, obviously the dividend increased. It's been growing at a nice rate. It's something we take tremendous pride in. I'm pretty sure, looking at Brian, I think in the third quarter, we should be passing $50 billion paid as a public company, which is a pretty big number.
That's obviously incredibly important to us. At the end of the day, if you think about the business, we're generating $1.6 billion or so of free cash flow after dividends. We have tremendous opportunities and tremendous things to do with that. If we continue to naturally deleverage because we don't like the opportunities, that's fine too, which we've been doing. I guess that was a long-winded way to answer, really no change in our capital allocation. We continue to evaluate all ideas and all opportunities, and we'll do what's best at any given time, which could be all or it could be none.
Our next question is from Michael Goldsmith with UBS. Please proceed.
Good afternoon. Thanks a lot for taking my questions. Eli, you mentioned the resilience of the consumer. What are you seeing from the consumer specifically? Are there any way that they are changing the way they shop or spend at the centers? Also if you have any data on the Gen Z consumer and how they may be different than some of the other cohorts, that would be helpful. Thank you.
Sure. I would say the sales growth is really broad based. Right, 6.5% comp for the quarter is a, is a very healthy number, and it's really across category. You know, clearly the upper end consumer is doing very well. You could look at the stock market, that should not be a surprise. You're obviously seeing that in the luxury business with some of the brands, frankly, that might have been, you know, a little bit softer in the past couple of years now having starting to see some rebounds. Really you're seeing it in the hard luxury, and jewelry and watches, really, really solid growth.
We're also seeing it in the juniors business, which is, you know, hits that Gen Z customer, both new, juniors brands, legacy juniors brands, all really firing on all cylinders. I think that's a, you know, example of competition is great, because some of these legacy brands needed to innovate, needed to be able to compete with the new, with some of these new brands. I was at the Catalyst office, I guess last week or the week before, and Aéropostale, you know, which is now competing with some new, you know, with some new entrants in that space are doing new things with new influencers that frankly, I had no idea, who they were, but I think for the customer they're targeting, it's working.
We are definitely seeing that across the portfolio. The only thing I would say that is a touch softer is on the food and beverage side, which is basically was flat from a comp perspective. That's probably not surprising seeing some of the earnings from the restaurant groups out there. But, you know, whether it's a trading down effect, maybe one less trip out, that's the only place we're seeing it, but the rest of it is broad-based growth. Obviously, athleisure is still very strong, you know, across the portfolio. The only other thing I guess I could say on sales is the tourist markets that really rely on the European and Canadian international traveler, that is a touch softer.
If you look at Woodbury, you know, Woodbury, I think comp was call it 2.5% versus 6.6%. That's, you know, atypical, right? Woodbury normally you would say is performing well above average, and that obviously is less European international travel into the U.S., and Canadian is a big part of that. From the flip side is you go to Florida and it is, you know, from South Florida, Panhandle, the West Side with Tampa and where we have the International Plaza or Waterside in Naples, and obviously Orlando, which has probably been the best market over the past year. You know, very strong growth there.
On the Gen Z customer, look out in the future, we have some things coming there. I think the way I look at it is you can see it in the sales, you can see it in these customers or in these retailers that are targeting. They are all growing. They want more space, and their sales are proving that they're resonating with that customer.
Michael, this is Brian. I guess the only thing I would add on the Gen Z customer is they were really the centerpiece of our Meet Me at the Mall campaign that we launched with our marketing team two years ago. We identified this as being a growing cohort, we've been investing, we've been bringing the brands to bear that the Gen Z cohort is looking for. Most of our activations and social aspects are geared towards them as well. Big lean in from us. It's been about two years, we continue to see great progress with that consumer.
Our next question is from Michael Griffin with Evercore ISI. Please proceed.
Great. Eli, just curious if you can give us maybe some color on whether it's new or renewal lease spreads and maybe how that compares relative to this time last year. You know, if you look at the portfolio right now, north of 96% leased, are we reaching sort of that structural occupancy? Could we see it go to 96.5%, 97%? Just curious if you can give some commentary there as well.
Sure. Spreads I think is a, you know, not necessarily the most relevant metric. I would say on renewals, historically, over the last number of years, we're sort of in the mid-single digits increases on renewals. Bounces around up and down a little bit from that number, depending on what package of renewals is signed in any given quarter. That's holding true, and we don't see any real change there. As I said, we're looking at renewals further into the future. Retailers were asking us about that, and obviously, we're only gonna do those renewals if it makes sense for us as well.
On the new deals, you know, what I look at is the new leases we are signing are 20%+ , you know, 20%-25% above new leases last year. That is obviously there's, you know, mix is part of that, but really it's the brands understand the importance of having a great physical representation, and our centers are that. You know, we're proud of that. Then, you know, the other thing we're probably more proud of, frankly, is what we call our new business brands are outperforming that increase by, you know, call it another 10% plus on that. The best of the best brands, whether it's some of these beauty brands coming from Asia.
We just opened a Google Store at Fashion Valley, I guess this weekend. New athleisure brands, new home furnishing brands, you know, we're able to have rents there that they are able to pay because they're doing the business and because they're generating the traffic, and they know that it's great for them, and it's gonna help their business grow. Hopefully that answers the first part on spreads. On occupancy, you know, it's interesting. If we wanted to, we could lease up to 97.5%. I have no doubt about that. I think for us, we look at this not a metric quarter to quarter or even a year-end metric, but really what's the right decision long-term for these assets.
Sometimes that might be holding space for another retailer that's coming. It might be taking a little bit of downtime, which again, we don't like to do, and we have an incredible short-term leasing program that keeps the occupancy at a good number. We honestly don't focus if it's 96% now. If it's 96.4% at the end of the year, if it's 96.2% or 96.6%, that's not, you know, what I'm focused on. I'm focused on, you know, excluding the Taubman, 12%, we grew NOI 5.5% year-over-year and, you know, we've grown it at North of four for the last four- years. That's more important than 20 basis points, you know, on the margin.
The answer is yes, there is room to increase occupancy here, but it's not the be all and end all for us. It's really let's grow cash flow.
Thank you.
Our next question is from Alexander Goldfarb with Piper Sandler. Please proceed.
Hey, evening out there. Eli, just a question on data centers. You guys in the past year or so have spoken about how the B malls have rebounded strong and centers that, you know, a number of years ago you would've, you know, sort of used for cash flow now have a second life because of the demand from retailers, and there's a renewed vibrancy to them. As you look at the demand for data centers, and presumably some of your centers have excess power, utilities or what have you, do you see opportunity where, whether they're mini data centers or maybe even converting the entire site to data center, do you see it as an opportunity for any of the excess holdings?
As you look at the portfolio, all the malls, because of this lack of supply, are really their highest and best uses, either as a mall or mixed use venue?
Sure. I would say the answer to the first part is probably 18 months ago or so, we really scoured their portfolio, as you said, both the combination of, again, you know, we don't really use A or B malls, but malls that might have had a lower growth profile or potentially excess land at some other malls to see is there anywhere that makes sense for a data center. We talked to various data center operators, and we couldn't find anything that made sense. Honestly, the power is less available than you would think, especially obviously if it's an existing mall that would stay in place. It's something we, you know, with our team, what we look at, you know, relatively frequently. To date, we have not found anything.
You know, to answer the second part, at the end of the day, we're economic animals, and if there is a higher and better use for the data center that we thought we could sell something and take cash and reinvest it elsewhere, more creatively, we would do that 100%. We haven't seen that to date. As you mentioned, we're excited about the growth prospects there. It's not like we're actively, you know, trying to shed any assets in that regards or try to find alternative uses. We are, you know, doing what we said we were gonna do.
If you look at Smith Haven, for example, you know, we signed a, you know, very important retailer there and, put in capital to renovate, and now we've seen, you know, good growth and good demand. We'll continue to evaluate, but, you know, the demand is there. From the retailers, you know, really up and down the portfolio. We will continue to operate. You know, again, if someone comes and says, "Here's a big price for an asset," and we look at it and say, "There's a better use of that cash," we won't hesitate to sell. It just hasn't happened yet.
Thank you.
Our next question is from Greg McGinniss with Scotiabank. Please proceed.
Hey, thank you. I was just curious on the integration with Taubman, how that's going, what synergies you're finding, and, you know, where you see the best opportunities for reinvesting into that platform, what's now your platform?
Great, thanks for asking that. I'd say from a corporate integration perspective, it's gone, you know, according to plan, effectively fully completed all the corporate integration by the end of April. That's done and it was, you know, well done by the team. We're excited how that turned out. Now on to the assets. We're honestly probably more excited than we were in November or October, I guess, when we finished. It's a combination of sort of using our ability to operate, you know, centers, you know, at a level that increases margin. That's, you know, from an operating expense perspective, that's from a marketing perspective, that's ancillary income, that's parking.
You know, obviously, our short-term leasing program, which I mentioned earlier, to be able to be fully integrated there has been helpful. Our leasing, you know, our leasing department, you know, able to lease these centers, which again, you know, obviously the Taubman team did a great job, but you know, they were leasing these centers, you know, for the past six years of the transaction. Now we're able to do that. More importantly, or most importantly, I should say, is our ability now with our balance sheet to reinvest into these centers. That's frankly what I'm most excited about. If you looked, you know, last quarter, I think a day or two after earnings, we put out a press release, and I'll just highlight three assets briefly that we mentioned.
In Nashville at Green Hills and Tampa at International Plaza and at Cherry Creek in Denver, we're going to invest over $250 million into those centers, starting later this year to really make them, you know, again, great assets, performing great, tenant sales strong and leasing strong, to make them even better, to freshen them up, to make them, you know, look the same that the retail fitting as for the performance of the retailers. You know, we have renderings that, you know, I've shared with some of the retailers, especially the luxury retailers, all very, very excited.
Now, you know, it's our job to go execute that, to sort of take the vision and to, you know, to do, you know, to do the redevelopments or do the renovations, you know, which we're in the process of starting very soon. Obviously, you know, to lease to those tenants that, you know, we think should be in these centers. No different at Green Hills than we did at Southdale, you know, and at Edina, Minnesota, which I don't know if you've been up there, but what we did was sort of revitalize the whole mall. These malls aren't, weren't or are not in the position that Southdale was in.
You know, they're in much better position, but we think we can have an equally strong impact from these programs. You know, International Plaza will be an expansion, probably an outdoor expansion, revitalize Bay Street, which has great restaurants. We think we can upgrade the restaurant mix. Sort of doing what we've been doing across the rest of our portfolio. Now we're able to do it, you know, on these great assets. It's a big focus of ours, sort of a whole of company approach, and that's what we've been telling retailers, and it's true, because these assets, you know, should be and will be better. And that's something that's very exciting for us.
Thank you.
Our next question is from Ronald Kamdem with Morgan Stanley. Please proceed.
Great. Just wondering if you can provide an update on sort of the other platform investments and some of the retail investments, how they've been performing relative to expectations and your thinking in terms of monetization of that, of that platform. The follow-up would be, I think part of the thinking was getting a lot of data from the retailers would be valuable. Just maybe can you talk about how that's been sort of helpful in this sort of new age where everybody's focused on AI? Thanks.
Sure. I guess if you know, think about OPI today, it's basically comprised of three pieces. It's Catalyst, you know, which is obviously the former SPARC and JCPenney businesses. It's Rue La La and Gilt, which, you know, has ShopSimon in it, and it's Jamestown. All three are performing at or above plan for the first quarter of the year. You know, I think the teams, you know, they all have obviously independent management teams. They're doing great. From an operating perspective, I'd say it's business as usual, and they're continuing to execute on their business plans. Again, you know, quarter to or year to date, they've all been effectively at plan. From a monetization perspective, you know, we're opportunistic sellers. We're not planning on anything.
If there's an opportunity and we think it's in the best interest of shareholders, would we do it? Of course. If not, they're all properly capitalized, have proper liquidity amounts, and the ability to run themselves. That's what we expect to happen. If something occurs, that's great too, and we will, you know, not hesitate to monetize if it's in the best interest of shareholders, which obviously we did with our Authentic Brands stake a couple years ago. As far as data, I'd say less data, hard data specifically, 'cause obviously you have, you know, privacy issues and whatnot with that, but really on best practices and learnings. If you think about, you know, just a couple departments from our marketing department, it's incredibly interesting.
Our marketing team talks often to the marketing team from Rue La La and Gilt, and from Catalyst to learn how they're attracting customers, where they're seeing the most efficacy of their ad buys, whether it's TikTok or Meta or, you know, Rue La La and Gilt has big connected TV business, et cetera. That's what I would say is we're more focused on. I think it's interesting from a brand perspective, you know, helps us think like a retailer. You know, for example, the tariff situation, we're able to understand how Catalyst, which is no different than, you know, thousands and thousands, frankly, of retailers in the country are dealing with the tariff refunds and how they're planning for the year.
I think it gives us insights and data from that perspective, but not necessarily hard data that we can monetize because, you know, there's real legal implications there that make it tricky. You know, you mentioned AI. We're learning from them too. I think they're learning from us. You know, we're comparing, again, different tools to use, different programs. How can we provide more customization for the consumer? You know, 'cause these retailers, you know, especially Rue La La and Gilt, are really good at that. For us, we look at it as a symbiotic relationship. Hopefully, we can add some value to those companies. They can add value to us.
You know, we're happy shareholders of those companies, and we expect to continue to be for a while. If something comes up, then, you know, we won't hesitate to do something that's in the best interest of the company.
Thank you.
Our next question is from Floris van Dijkum with Ladenburg Thalmann. Please proceed.
Thanks. Hey, Eli. Thanks for the answers so far. Question on the redevelopment pipeline. Obviously, 9% direct returns appear very attractive. You've got an ongoing pipeline of $1 billion and another $1 billion down the pike, but it's, you know, 1%-2% of your overall portfolio value or even less actually. Could you maybe talk about what percentage of the portfolio you still have left that is yet to receive capital? Then maybe the follow on or the add on is if the direct returns are 9%, what are the actual returns once you redevelop, then you see the benefits in other parts of the center, for example, when you add a or rejuvenate a wing.
What kind of returns have you typically seen in addition to the, you know, the immediate incremental returns? Thanks.
Thanks for the question. I would say we're investing capital in basically every center every year, frankly. As far as large transformational projects, you know, sort of that, if you put aside the $1 billion that's actively under development today and you call it the $4 billion-$5 billion shadow pipeline, that's on, I don't know, probably 20-25 centers we're developing at. I think I said 29 centers today. There's for sure others that are not in there. I don't have an exact number, but you know, some of it is because we don't control the real estate that we'd want to control, to do the, you know, do the redevelopment or do the densification or the mixed use addition or whatnot or whatever makes sense for that center.
I don't, I don't have an exact number, but if sort of the, you know, the fear is that we are running out of things to do we're not. You know, not even scratching the surface. Again, there will be more opportunities across the portfolio over time. You know, we're not gonna go to the extent we don't control a piece of real estate that we wanna develop. We're not gonna just go and buy it just to buy it to be able to do it today, even though we could. It's just not the way, not the way we think about it. As far as the other benefits, it's interesting. It's a question that frankly, I talk with the team about, you know, often, is that we do not underwrite it.
The reason is, you know, we really need to be intellectually honest with ourselves and say, if we're doing a redevelopment, you know, I'm in Indianapolis today. At Keystone, you know, redeveloping the Saks box or the, you know, the former Saks box, which just started, there will be an impact, no doubt. We have to look at it and say, "Okay, for the new money we're putting in, what are we earning?" Knowing that there's going to be a benefit. You know, what I look at is less the incremental, okay, we got, you know, $5 of new rent on this tenant or that tenant because, you know, that sort of day-to-day business and how do you quantify that? It's hard.
I look at sort of say, what are the customers saying? If you look at new projects we opened in Southdale last year and in Brea, just two, for example, both barely fully open. I think the last tenant at Southdale was Tiffany's, which I wanna say opened in February. Brea, Dick's did not open until April, just opened recently, and Life Time isn't open, and I wanna say one or two of the restaurants are not open. Those two centers, on a like-for-like basis, are performing, you know, 1,000, 1,500 basis points above where those similar comp brands are performing across our portfolio.
That's sort of to me, the more important metric because they're showing that the money we're putting in, the development we're doing, yeah, we're earning a 9%, but we're making the center more relevant. If we make the center more relevant, more customers come, retail sales grow. We're going to add new retailers and, you know how do you do the line and cut the line and say, "Well, this counts in the return, this doesn't." It's really hard, that's why we don't include it. We know it's there, and it's something that gives us comfort as we look at, you know some of these bigger projects, you know, that will start over the next year, whether it's Boca or Ross Park or Fashion Valley or what have you. You know, I appreciate the question.
I wish I had a really good number to show you, but we know it's important, and that's why we're excited about the pipeline. That's why you know, we mentioned on the call is this is an important avenue of growth for us and, you know, I think we've shown we have the ability to execute it. It's now we just have to keep, you know, keep doing that you know, in the years ahead.
Floris, all I would add was that the investment in a project, there are multiple projects over time at properties. Roosevelt Field's a great example. We could go down the list of assets that we've redeveloped multiple times over the years and continue to get the appropriate kind of return and the halo effect in the regular part of the shopping center.
Thanks.
Our next question is from Vince Tibone with Green Street Advisors. Please proceed.
Hi, good evening. Eli, I'm curious where purchasing vacant anchor boxes at your center that you don't currently own rank in terms of capital priorities. Ultimately, like, how are you thinking about, you know, the value of control of those spaces and being able to get the best use in that space from a tenant redevelopment perspective to unlock, you know, all the benefits you just talked about versus, you know, letting a third-party owner release that, you know, presumably only cares about the highest unit economics and, you know, less about the mall ecosystem. You know, Simon's been, you know, pretty patient and price sensitive purchasing some of these spaces historically. Just kind of curious how you're thinking about it.
Sure. I guess on the, on the second part, you know, obviously, I don't wanna say every mall, but most of these malls have REAs. We have approval rights, it has to be consistent with the You know, again, not to go through the legal language of each one, that's in our mind. Really we just look at it as what's the price. We evaluate each one independently and say, "What would we do here? Do we want it back? Do we have leasing demand? If we have leasing demand, okay, how do we lay it out? Do we lay it out? How would we, how what's the construction cost of that? What's the return?
Do we think it does anything to the rest of the mall? You know, sort of the halo effect Brian mentioned and I, you know, I was just talking about. If there's something we really want, we can go and make a call and buy it. But typically what we've seen is, you know, we sort of can sit and buy it at the right price. You know, if you look at the price of, you know, some of these boxes that we've been able to get, we're very pleased with them. Obviously then when we run the return analysis, we're very pleased. I don't prioritize, you know, anything really from a capital allocation perspective, you know, besides do we have liquidity for it? Yes.
Does it, you know, does it fit with our objectives? It's something we will continue to do, obviously, is acquire boxes over time. We're only gonna do it, you know, at the right price and, you know, sometimes the right price might be a lot higher than somebody else might have, and sometimes the right price might be a lot lower than somebody else might have. That's fine, and we'll make the decision, are we okay if somebody else does it? Sometimes we are okay, and sometimes, you know, we're not okay. Then we'll figure out if there's a meeting of the minds and there's a price that we can buy it. It's something we sort of do day in, day out.
No, you know not no special, you know, special project. Just sort of ordinary course business. To the extent we have opportunities to buy it at good prices and, you know, have redevelopment plans, we'll buy it, for sure. If you look at some of the projects that hopefully we announce over the next year or so, a number of them will be in boxes that we bought, that we think we bought at an attractive price and allowed, you know, these redevelopments to pencil. That's what we're focused on. You know, we're in this business for a long time.
If we get them today or if we get them in one- year, two- years, five- years, we'll do the right decision for the mall, you know, and for the capital, you know, for our capital allocation.
Our next question is from Craig Mailman with Citigroup. Please proceed.
Hey, good afternoon, guys. clearly it doesn't feel like you guys have capital constraints here with the liquidity and the free cash flow. Just kind of curious from the platform, how much development do you think you could handle at one time and continue to source, you know, new entitlements and new opportunities? Like, is there a limit in the near term, or do you guys have significant excess capacity?
Yeah. I mean, from a capital perspective, significant excess capacity for sure. From a, you know, resources perspective, I mean, at the end of the day, these are all highly local processes, you know, which often involve outside counsel, outside advisors, et cetera. You know, the team is doing a great job. We have a number of projects. I don't feel, you know, that's an issue at all. To the extent we thought it was an issue, you know, we can add human resources highly accretively given, you know, what we're talking about, you know, the potential EBITDA or, you know, NOI creation from these assets. We feel very good about the pipeline.
You know, I'd say the only thing that's out of our control are we're dealing with local municipalities and villages or townships, you know, depending on where the mall's located. That's out of our control. So if we could find a way to do that faster, that'd be great. You know, unfortunately, you're dealing with elected officials, appointed officials, what have you. That's the one thing that's out of our control. The rest of it's in our control, and I feel very good that we can execute on that. Obviously the last piece is, you know, we always have the ability to bring in partners on some of the stuff if we want to. We've done it on multifamily projects. We've done it on a few hotels.
You know, we finance some with construction financing. I look at it and say, you know, as I said, we're generating, you know, $1.6 billion of free cash flow after dividends, and this stuff takes time to build and, you know, doesn't start at the same time. You know, and plus we're basically under 5x levered now too. one turn of leverage is $6+ billion of capacity. That is, like, not close to a thought in my mind. Now, Brian, anything.
No, look we're accelerating. At the end of the day, Craig, you can see it. You heard Eli talk about it. We have great opportunities ahead of us. You should expect us to continue to realize and accelerate on those investment opportunities. You know, we can do things that others can't and quite honestly aren't. What we're delivering today, you know, is new product. There is no new product being built. We believe that's a durable competitive advantage.
Our next question is from Haendel St. Juste with Mizuho Securities. Please proceed.
Hey there. Thanks for taking my question. I've got a quick two-parter on the core portfolio. First, on same-store NOI, up a robust 6.7% in the first quarter. I guess I'm curious if there's any change to the initial guide of at least 3%. Seems to apply some clear decel here over the next few quarters, or maybe we're not appreciating something there. Maybe can you share some color on the current SNO pipeline right now? What's the embedded NOI, and when do you expect that to come online? Thank you.
I'll just do the first part. The same store NOI, we don't call it that. It's domestic NOI. That 6.7% for the quarter, as Brian said, is really, call it 120 basis points of that is from the, you know, 12% stake that we bought in Taubman, last, I guess November 1st. That will obviously play through our results for the second quarter and the third quarter and a little bit less, obviously, in the fourth quarter. We'll probably have, you know, call it ±100 basis points impact on the year. We don't update guidance. We guide to at least 3%.
I think we've guided to at least 3% for a number of years. A number of years now, our job is to outperform that. Obviously, we have a good start to the year, we'll just continue doing what we're doing. You know, we really don't update that guidance besides obviously just wanted to clarify about the Taubman or the former Taubman stake and then, Brian, on the snow.
Yeah, no, snow at the end of the quarter was 310 basis points, Haendel. Usually you see an increase in our business in the first quarter, then it dissipates as the quarter goes down. It's kind of lumpy. 310 basis points, which was consistent with first quarter of 2025 type of level.
Thank you.
Our next question is from Michael Mueller with JP Morgan. Please proceed.
Yeah. Actually have a follow-up on the prior question. How much of an impact did the buyout have, TRG buyout on your operating stats like the year-over-year sales comps and the 5%, base minimum rent growth?
Yes. Honestly, we don't look at it. We look at it and say these, I guess it's 18 assets domestically, right? There are assets, they're Simon assets. You know, besides the domestic property NOI, which is a little skewed from the 12% stake. You know, honestly, we don't look at it. I don't know. They're all SPG assets. You know, that's the way we operate them, that's the way we lease them, that's the way we account for them, that's the way we think about them. The honest answer is I don't know. Did it increase it? I guess, maybe. We don't really think it matters.
We think it matters that they're, you know, assets that we're operating and they're part of our cash flow, and we're growing the cash flow.
Our final question is from Rich Hightower with Barclays. Please proceed.
Hey, good evening, guys. Thanks for taking the question. Maybe one for Brian to go back to the Crystals, CMBS financing. As I kind of look through the debt schedule, obviously you've got a number of secured debt financings kind of coming due over the course of 2026 and 2027. Maybe just, you know, fill us in with color on the market spreads, you know, proceeds and maybe what the I'm assuming it's another, you know, interest expense headwind as you think about refinancing over the next couple of years given the rates on a lot of these loans. Just help us understand the moving parts.
Sure, Rich, no problem. Great question. You know, Crystals was a great execution. five-year CMBS, 480 coupon, which was incredible, probably the tightest coupon we've seen in the last four- years. You know, we're pricing off of a higher base rate. Even with that incredible coupon, you know, we're rolling up that interest expense about 60+ basis points. The rest of the balance of the portfolio refinance we did on average, the coupons up are about 50 basis points relative to maturing. We are still seeing interest expense headwinds as we anticipated. While they've, you know, spreads are at record tights, we are still seeing impacts from base rates. Markets are wide open. We've been active in the CMBS market. We've been active in the life market.
We've obviously been active in the unsecured market. We'll expect to continue for the balance of the year. The original $0.25 - $0.30 headwind that we expected between higher interest expense and lower interest income is still there. It probably is gravitating closer to the $0.25 versus the $0.30 today where rates are. There's definitely still a headwind ahead of us for the balance of the year.
Thank you.
With no further questions, I would like to turn the conference back over to Eli Simon for closing remarks.
Thank you, everybody, for the time today, and look forward to, hopefully seeing many of you, in Vegas or in New York in the coming weeks.
Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.