Simon Property Group (SPG) Q3 2026 Earnings Call: FFO Guidance Raised

Key Takeaways

• Real Estate FFO rose 4.7% year over year to $1.28 billion, or $3.37 per share, supported by higher lease income, cost discipline and acquisitions completed in 2025.
• Domestic property NOI increased 6.6% in the quarter. Portfolio NOI, including international properties at constant currency, grew 6.7%.
• Simon Property Group raised its full-year 2026 Real Estate FFO guidance by $0.10 to $13.30-$13.40 per share. The midpoint implies approximately 5% growth from 2025.
• Leasing remained strong, with nearly 1,200 leases signed across more than 4.3 million square feet. Initial base minimum rent on new deals increased 17%, while tenant allowances declined 10% per square foot.
• Mall and Premium Outlet occupancy reached 96.5%, matching the highest combined level since 2016. Comparable tenant sales increased 4.9% during the quarter.
• The company ended the quarter with approximately $9 billion of liquidity, repurchased 1.1 million shares and raised its quarterly dividend 4.5% year over year to $2.30 per share.

Core Financial Data

Business and Operating Performance

Tenant sales productivity across malls and Premium Outlets reached $852 per square foot, up 14.8% year over year. Total sales volume increased 6.8% in the quarter and 7.1% over the trailing 12 months. Comparable sales rose 4.9% and 5.0%, respectively.

Management said sales growth was broad-based across platforms, regions and categories. Restaurants recorded their strongest quarter in three years. October traffic remained in line with the third quarter, at approximately the mid-3% growth range.

Simon signed nearly 1,200 leases covering more than 4.3 million square feet during the quarter. New deals represented approximately 25% of leased square footage. Management also said the prospective leasing pipeline was 30% higher year over year, with demand from established retailers, emerging brands, restaurants and local operators.

The company had $1.2 billion of development and redevelopment projects underway at quarter-end, based on its share of net costs, with a blended expected yield of 9%. Management later noted that recently approved projects had increased the active pipeline to approximately $1.4 billion, with more than $4 billion of additional potential projects behind it.

Simon plans to break ground on Sagefield, a new development south of Nashville, with an expected opening by the end of 2028. The 100-acre project is planned to include more than 80 retail stores, restaurants and community spaces.

The company also agreed to acquire University Village in Seattle. The transaction is expected to close in the fourth quarter, subject to customary conditions. Management said the acquisition should be modestly accretive in 2027 and accretive to net asset value from day one, although pricing and yield details were not provided.

Management Guidance

Simon Property Group raised its full-year 2026 Real Estate FFO guidance to $13.30-$13.40 per share, up $0.10 from its previous range. At the midpoint, management expects approximately 5% growth from the $12.73 reported for 2025.

For 2027, management said leasing activity should remain the primary growth driver but did not issue formal guidance. It indicated that higher interest expense could create an FFO headwind of approximately $0.30 per share, subject to changes in financing markets.

The board declared a fourth-quarter dividend of $2.30 per share, up $0.10, or 4.5%, year over year. The dividend is payable on December 31 to shareholders of record.

Risks and Watch Items

• Higher refinancing costs reduced third-quarter FFO by $0.05 per share year over year. Management expects an approximately $0.30-per-share interest expense headwind in 2027, although the estimate remains sensitive to market rates.
• Management said visibility into 2027 sales remains limited until the 2026 holiday season is complete.
• Reported FFO included $0.27 per share of noncash after-tax losses related to mark-to-market adjustments on an exchangeable bond and the revaluation of a publicly traded equity security.
• University Village remains subject to customary closing conditions, and management did not provide acquisition pricing or initial yield information.
• Woodbury Common and U.S. border assets were growing more slowly than the overall portfolio, partly reflecting softer international and cross-border traffic.

Analyst Q&A Highlights

Capital allocation: Management expects share repurchases to remain part of its capital allocation strategy after completing the remaining approximately 450,000 shares associated with offsetting the Taubman transaction issuance. Year to date, Simon repurchased 3.4 million common shares and limited partnership units for $667 million at an average price of $198.97.

Acquisition discipline: Simon does not intend to acquire weaker properties solely to gain access to a few attractive assets in a portfolio. Management said acquisitions must consist of high-quality, well-located retail real estate where the company can add value at a fair price.

Development returns: Tenant demand remains the primary requirement for approving projects. Management said developments are supported by signed leases, letters of intent and additional tenant interest. The current pipeline is expected to generate a roughly 9% return and is being funded through free cash flow.

Financing strategy: Simon expects to refinance approximately $2 billion of unsecured debt maturing in 2027 through a mix of commercial paper and longer-term unsecured issuance. The company may also use secured debt and international financing in Europe and Japan where advantageous.

Ancillary revenue: Management sees additional growth potential in Simon Brand Ventures and the Simon Media Network. The strategy combines Simon’s physical properties, digital channels and customer database to drive traffic for retailers and attract advertising from travel, financial services and hospitality companies.

Full Earnings Call Transcript

Complete Earnings Call Transcript

Management Remarks

Operator

Good day, and welcome to the Simon Property Group Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Tom Ward, Senior Vice President of Investor Relations. Please go ahead, sir.

Thomas Ward

Thank you, Chuck, 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 you, please let me yourself to one question. I'm pleased to introduce Eli Simon.

Eli Simon

Good evening. We delivered another excellent quarter of financial and operational results. Domestic property NOI grew 6.6%, and real estate FFO per share grew 4.7% compared to the prior year period. Our results reflect continued operating momentum across all of our platforms, healthy leasing fundamentals and the added contribution of our acquisitions last year. Traffic growth accelerated in the third quarter, further in a trend we have seen throughout 2026. Sales productivity is at record levels for each of our platforms, underscoring the health of the retailers in our centers and the quality of our real estate.

Our portfolio is well located in growing markets, and our ongoing investment keeps our centers the destination of choice for shoppers and retailers alike. Last week, we announced that we entered into an agreement to acquire University Village, a premier open-air retail destination in Seattle, one of the most attractive markets in the country. This acquisition reflects our focus on owning the highest quality assets and the center's exceptional mix of national brands, local boutiques and restaurants to make it a natural fit for our portfolio.

We see real opportunity to build on the centers nearly 70 years of success through leasing, operations and future expansion. University Village expands our local presence alongside our recently rebranded the district at Northgate, where we opened our first multifamily property with additional retail this summer. We look forward to serving the Seattle community, retailers and shoppers at both of these assets in the many years to come. The transaction is expected to close in the fourth quarter, subject to customary closing conditions.

Moving on to leasing. Tenant demand remains widespread from established national and international brands to emerging fast-growing concepts. During the third quarter, we signed nearly 1,200 leases totaling over 4.3 million square feet. New deals represented approximately 25% of total square feet leased. Year-to-date through the third quarter, initial base minimum rent per square foot on new deals is up 17% year-over-year, while tenant allowance per square foot is down 10%. In other words, we are achieving higher rents while investing less capital per deal. Our pipeline of prospective deals is well ahead of where it was a year ago at this time.

On the retailer sales, the malls and premium outlets were at $852 per square foot, up 14.8% year-over-year. Importantly, total sales volume increased 6.8% in the quarter and 7.1% over the trailing 12 months. Comparable sales grew 4.9% in the third quarter and 5% over the trailing 12 months. On to our development and redevelopment activity, where at the end of the quarter, we had development projects underway across all platforms, with our share of the net cost totaling $1.2 billion at a blended yield of 9%. We continue to be very excited about the projects under development as well as our pipeline given the strong tenant demand for best-in-class retailers and restauranteurs we have for these new developments and redevelopments.

Separately, next Thursday, we will break ground on Sage field, our new ground-up development south of Nashville, which we expect to open by the end of 2028. It will be a truly special center with over 80 retail shops and impressive lineup of restaurants across 100 acres with a number of community gathering spaces. More to come on this exciting development. Finally, in September, we launched our new brand campaign, it's a Simon thing. For the first time, this campaign brings all of our centers together under the Simon name, highlighting what makes a visit to our center is different. Customer response has been tremendous. It's already the most engaged campaign in our company's history, and we expect that enthusiasm to build throughout the holiday season, which is good for our tenants.

And with that, I'll turn it over to Brian who will review our financial results from the third quarter in more detail and provide an update on our outlook for the remainder of the year.

Brian McDade

Thank you, Eli. .

Real Estate FFO was $1.28 billion or $3.37 per share in the third quarter compared to $1.22 billion or $3.22 per share in the prior year period, an increase of 4.7% per share. Higher lease income, including overage, along with disciplined cost management and our acquisitions last year drove a $0.27 contribution from our domestic and international operations. As anticipated, higher net interest expense reduced FFO by $0.05 year-over-year. Reported FFO was $3.09 per share in the third quarter compared to $3.25 per share in the prior year period. .

This third quarter includes $0.27 per share of noncash after-tax losses from [indiscernible] realized mark-to-market adjustments to the Clay Pier exchangeable bond, and the revaluation of an equity security that became publicly traded during the quarter and is held in one of our unconsolidated other platform investments. Domestic property NOI increased 6.6% year-over-year for the quarter and 7.3% for the 9 months. Approximately 120 basis points of growth for both the third quarter and 9 months was attributable to our acquisition of the remaining TRG interest. Portfolio NOI and which includes our international properties at constant currency, grew 6.7% for the quarter and 7.2% for the 9 months.

Malls and Premium as occupancy at the end of the third quarter was 96.5%, a 50 basis point increase sequentially and a 10 basis point increase year-over-year, driven by our strong leasing activity. This ties our highest combined occupancy level since 2016. The mills occupancy was 98.9%. Average base minimum rent for the malls and premium outlets increased 6.1% year-over-year, while ABR for the mills increased 11%. And occupancy costs at the end of the quarter was 12.4%. Turning to the balance sheet. During the quarter, we were active in the debt markets by issuing $800 million of U.S. senior notes in 2 tranches, with a combined average term of 7.7 years and a weighted average rate of 5.45%. We also completed 7 secured loan transactions totaling approximately $970 million at a weighted average interest rate of 6.33%. And through the first 9 months of the year, we've closed 25 secured transactions totaling $4.67 billion at a 5.3% average rate.

We ended the quarter with approximately $9 billion in liquidity. The momentum of our results, together with the improvement in our capital efficiency has increased our free cash flow generation by more than 7.5% year-to-date. That combined with our natural deleveraging balance sheet gives us a real competitive advantage. With net debt to EBITDA of 5x and a fixed charge coverage ratio of 4.6x, we have the flexibility to continue to invest in our portfolio to make our assets even better. Turning to dividend and share repurchases. Today, we announced our dividend of $2.30 per share for the fourth quarter, an increase of $0.10 or 4.5% year-over-year. The dividend is payable on December 31 to shareholders as of the record date.

Importantly, during the quarter, we repurchased 1.1 million shares of our common stock -- and year-to-date, we have repurchased 3.4 million shares of common stock and limited partnership units for an investment of $667 million at an average purchase price of $198.97 per share. Finally, on to '26 guidance. Given our results for the first 9 months and our current view for the remainder of the year, we are raising our full year 2026 real estate FFO guidance to $13.30 to $13.40 per share, a $0.10 increase compared to the range previously provided. At the midpoint, the new range represents growth of approximately 5% as compared to our $12.73 of real estate FFO last year.

Thank you. We are now available for your questions. .

Operator

[Operator Instructions] And our first question for today will come from Michael Goldsmith with UBS.

Question-and-Answer Session

Michael Goldsmith

Eli, on University Village, can you give us a sense of the going in yield and what you think the stabilized yield could be after the leasing, operating and expansion opportunity opportunities you mentioned? And just maybe more broadly, does the acquisition change at all how you think about Open Air versus include malls in terms of tenant demand growth and where you want to deploy capital?

Eli Simon

Sure. Thanks for the question. So on the first, unfortunately, 1 is we obviously haven't closed yet, but 2 is based on the agreement. I can't provide any detail on pricing. What I can say is that the transaction will be modestly accretive next year. NAV accretive day 1 and we're very excited. We think this will grow well above our average portfolio growth for the many years to come given the quality of the asset in the market. .

Unknown Executive

Overall, I do not think of this asset as an open air center versus another asset is in a closed center. It's really not how we run our business, Stanford's Open Air, Rosebel fields, and closed and we lease them the same, which is to make sure we have the best tenants for that asset to serve the customers in that market. And that is -- that's really how we operate. And so on further acquisitions, we look at if there's opportunity to buy really, really good retail real estate and well-located markets where we think if we can operate it and operate it, lease it, run it, potentially expand it, that we can add value. And it's at a fair price, we will do it. But we never had 1 conversation internally where we said this is outdoor versus indoor. That's just not the way we think about our portfolio, we think about our portfolio today and the potential growth of the portfolio we want to own really good retail real estate where tenants want to be and where customers want to shop.

Operator

Your next question will come from Samir Khanal with Bank of America.

Samir Khanal

Good afternoon, everybody. I guess, ELI, there's clearly a lot of good momentum here on leasing. Given the healthy organic growth across the portfolio that we're seeing, how should we think about sort of the building blocks to growth next year at the bottom line, right? As you balance this continued leasing momentum, this operating momentum you're seeing against the headwinds from higher refinancing costs and any other offsets we need to consider.

Eli Simon

So thanks for the question. So we're obviously in the midst of our budgeting process now I think we spent literally 24 hours in the last 2 weeks going through property by property, which is exciting because I think what's exciting is that we are seeing strong demand and depth of demand across the portfolio, not concentrated in any given geography or any product type or any type of tenant, but really across the portfolio. And so obviously, that's the key driver.

The key driver of growth, obviously, is leasing and leasing velocity. That said, there are other factors, including sales, which is until we kind of see how the holiday season plays out. It's really hard to have a great view on 2027 sales until the biggest months in 2026 are complete. And on interest expense, it's no secret. And we've said this, I think, last quarter, it will probably be in that similar $0.30-ish range of headwinds next year. Obviously, this is volatile right now. So we don't have a great number either, but it's going to be something like that, but we feel confident in the portfolio, confident in our ability to execute and we'll obviously have more about guidance in February of next year when we report our fourth quarter earnings.

But when we look at the business today, we really do remain excited about the opportunities. And again, it's not just the leasing. It's the development. It's our Simon Brand Ventures business. It's really across the board. And so obviously, it's on us to execute, but we'll give you more detail on that early next year.

Operator

The next question will come from Caitlin Burrows with Goldman Sachs.

Caitlin Burrows

Maybe just on the acquisition side. Obviously, you did the deal in Seattle recently and have been somewhat active over the past year or 2. But as you go forward and look at the different opportunities that are out there, discuss -- I know you've talked about before the different criteria for what makes something attractive to Simon, but to what extent you might be interested in a portfolio and say there's x amount of properties in the portfolio. you say that each 1 would have to kind of stand on its own with those criteria? Or might you consider a portfolio where you'd kind of go for the whole thing, even if some weren't that great on their own? .

Eli Simon

Thanks, Caitlin. So I would say we are not going to buy for buy and safe. And to me, buying a portfolio to get a few good things, but take some things that you might not want to me, that's buying for buying sake. And that's really not in our plan right now. or plan to the extent we're active in the acquisition market, which as you said, we have been in the last couple of years, obviously, we bought Brico last year, which has been a phenomenal story for us. We bought Philips Place, which will have some exciting news next year on building a multifamily building there with additional retail. We bought the mall, to luxury outlets in Italy, where we're going to be expanding the one in Florence next year.

And so if you look at those transactions and obviously look at University Village, those are great assets that we want to own, and we want to own them forever. And so buying a portfolio to get 1 or 2 of those assets would maybe take 4, 5, 6 of the assets that we don't feel that way. We feel good enough about the ability to grow internally with our redevelopment program, buy back stock, release, remerchandise our existing assets, and we'll run the business that way. And so when you look at the criteria again, really good, well-located real estate, where tenants want to be where shoppers want to be, where we think our platform can add value to it at a fair price. If we can do that, we'll do transactions. If not, we have more than enough to do with our existing portfolio, which obviously has been very active on the development and redevelopment side.

Operator

The next question will come from Michael Griffin with Evercore ISI.

Michael Griffin

Eli, I'm curious if you can expand a bit on kind of customer demand and sales patterns there. I mean it seems like traffic continues to increase. Has this resulted in larger average ticket sizes, greater purchases. And then it seems that the demand is pretty broad-based, but I'm curious if there are any categories or price points that maybe are performing a little worse than you might have expected? Or does it seem like it's full steam ahead as we head into the holidays.

Eli Simon

It's a great question. So I would say, generally speaking, that it is very broad-based. -- it is across platforms, across geographies, across categories that we have seen growth. And that growth is again, 4.9%. It's obviously impressive for the quarter. But I think what's more impressive is if you recall, in August, I said this is where we started to hit tougher comps last year. Our 2-year stack that 7.2% growth, which is actually 80 basis points above the 2-year stack in Q2. So really, growth is accelerating from a sales perspective. And it's the same story that we talked about in the second quarter at leisure, juniors brand luxury watches, jewelry, One thing that is a nice story is we had actually the best quarter in 3 years in the restaurants in the third quarter. which that business has obviously been sort of flattish, I guess, I would say, but we actually had a really nice growth story there.

And so what we've seen is traffic is up and sales are up and so it's hard for me to really say that people are buying more per person. People are buying bigger baskets. But I would say they are -- dwell time is up, they're going to more stores. And I think part of the reason they're going to more stores is we're adding more relevant stores at these centers. We're adding great retailers, expanding national retailers that have been in our malls for a long time, complementing them with new brands that might be coming from overseas or coming from online and are getting into our mall portfolio. And so we really haven't seen any slowdown in October traffic in line has got this 2 hours ago, in line with the third quarter in sort of that mid-3% growth range. And so what we're hearing from the retailers is optimism for the holiday season, which is, as you know, is our Super Bowl, our time to shine. And so we're focused on getting these stores open and continue to add these new relevant retailers to our portfolio.

Operator

Next question will come from Vince Tibone with Green Street Advisors.

Unknown Analyst

I wanted to ask about how we should think about the strategy going forward. I believe you have about 2 million shares left to repurchase to effectively offset the new shares issued as part of the Todman deal. So -- what I'm really trying to get out is, like after presumably you do a little bit more buyback related to the Todman, -- like do you see share repurchases being a big part of the capital allocation toolkit in the coming years? Or was the buybacks really just desire to offset the Todman deal. And once those shares are done, it's going to be more focused on redevelopment or other acquisitions or other capital uses.

Eli Simon

So first, just, Vince, it's actually about 450,000 shares left to buy back that million change shares that we issued for Taubman. But the way I think about it is we love owning our assets. And if we can own more than at a price that's attractive, we're going to do it. the reality is we generate a significant amount of free cash flow after dividend and after capital. We're naturally deleveraging. We're effectively sub-5x now. And so we see the embedded growth of that $1.2 billion development pipeline that's in the ground today, but we know there's the $4 billion of shadow pipeline plus behind it.

And so I look at it and say, we're generating the free cash flow, it's a very good use of free cash flow. It doesn't preclude us from doing acquisitions. It doesn't preclude us from doing developments and redevelopments and so do I think that we will continue sort of a steady cadence on the buyback? I do. Obviously, we're going to evaluate market conditions. We're going to be thoughtful on it and not just do it to do it. But if we can do it accretively and do it with excess free cash, that's pretty interesting. I mean if you think about it, the business is growing round numbers, $200-or-so million dollars a year, so to stay at 5 , that's $1 billion of leverage. I mean that's pretty powerful. Again, I'm not saying we're going to add leverage to buy back stock, but this business is a powerful machine.

And I think 1 of the uses of the free cash flow that we're generating should be to buy back our stock because I look at it and say, "I'd love to own more Sawgrass going through that leasing plan in detail yesterday. -- it's incredible. And if we can own more of it, let's own more of it. And so we're not going to have any specific guidance around it besides, obviously, as you said, we'll finish buying back the Taubman stake, but we will be thoughtful about it. And as Brian said, we bought back at $199 per share this year, which is, I think, is pretty disciplined. And so we'll see, but it would not surprise me if we continue to do more even after we buy back that remaining piece.

Operator

Your next question will come from Craig Mailman with Citi.

Craig Mailman

Just kind of curious, I know Eli, you had said that the rate environment is fluctuating, and there's a lot of visibility, which is -- feels like been the case for a while here. But as you guys think about kind of the cost of capital or your normalized cost of capital to go or no go on projects. I mean, you just spent time talking about the amount of free cash flow that you're throwing off and what leverage does if you kind of don't issue every year. I'm just kind of curious how disconnected your cost of capital is from the rate environment today, given how much free cash flow you throw off and how we should think about kind of that tied to the rate environment versus maybe some other companies that are more that need to hit the capital markets to fund new investments.

Eli Simon

So it's a great question. So I'd say -- I mean, the cost of capital is -- it's still connected to the rate environment. I mean just definitionally, I guess. But when I think about our development pipeline or development projects, we had our capital committee meeting. On Monday for a long meeting, which is good because there's a lot of projects. When I look at that, the first thing I look at every single time is, is there tenant demand. That's sort of the overarching principle. If there's no tenant demand, I don't really care where rates are and what hypothetical spread we can build to, we're just not going to do it.

So first and foremost is do we have tenant demand? And the answer is yes. And so when I look at building at our $1.2 billion pipeline, is really $1.4 billion if you fast forward to today, right? We added approved projects on Monday. That's a, I would say, 300 basis point spread more, I guess, now with rates that they've moved in the past week or so.

And so over a long time period, which is how we think about these developments, we're not merchant builders that are looking to flip, which you've got to time it exactly right and say, okay, my 300 basis point spread and when I deliver it and when I stabilize it, I'm going to hit ex-spread so I can make my 20% IRR, we look at it and say, if I'm building to a 9% return, and I'm going to own this forever. The cost of capital is important, of course, -- but that's a very healthy spread, a very healthy spread. But again, it goes back to the tenant demand and the projects that we're talking about, it's not just names on a page, it's signed leases. So we're really building with signed leases, with signed LOIs and with depth behind those. And the other piece that I think is important is that these returns are only on the capital we are investing.

But if you look at a Brea, look at a South Dale, look at a Brierwood, those returns were great, but we've added South. I think it's something like 80 new tenants because of the transformational project we did, Brea, which is still not even fully opened, I think, it fully opens in the next week or 2 with all the restaurants. We're going to change that whole inside of the mall adds capital for renovation and I continue to add new tenants and those tenants are comping up 10%, 12%. Those are the tenants that have already been here. The new tenants, they're going to be comping up not even until this time next year. And so it's a good position to be in. And I think, yes, the fact that we are building this from free cash flow, all cash is 100% a competitive advantage. And when the world turns -- if we have the tenant demand, and we like the math, we can still do it when others can't, which makes it even more valuable real estate when we're done. So again, as rates are high, we're incredibly disciplined on what we do. If they go down, we're incredibly disciplined on what we do. We look at every dollar, we look at every tenant. We look at every basis point. But where we are today, we have not changed really our viewpoint on this development pipeline because rates went up, I don't know, 50, 60 basis points from where they were this summer.

Operator

Next question will come from Handel St. Juste with Mizuho.

Ravi Vaidya

Gedeon the line for Handel. I hope you guys are doing well. How should we think about internal growth going forward at this point? Occupancy at 96.5% seems it's near its all-time highs and with maybe further upside seeming a bit light. Can you offer us color on the in-place rent bumps? And how does that compare to the leases you're signing? So I mean the internal growth, obviously, I don't know if you consider internal or not is obviously the development or redevelopment is a big part of it. which I just talked about, the $1.4 billion, which is really $1.2 billion with the $4 billion pipeline behind it, that's earning a 9% return. So that's $450 million of incremental EBITDA, that's pretty good. And so that's a big part of it. But if you exclude that, our job is to continue to remerchandise these centers. And that's not a -- we get to 10% we stop, okay? There are foots on the gas oil. We don't say, okay, we only have x number of leases at the sign and then we're done. That's not how we operate. We say, okay, how can we be better?

If you go to South Park, if you go to Boca, the centers have had incredible growth coming out of Cover the last 4 or 5 years. And when we went through our budget meetings last week, it wasn't, okay, we did a great job, which we did and the team did a great job, it's what's next. And what's next is continuing to remerchandise, add more productive tenants -- and if you look at it, we're signing new deals today at $78 a foot. And last year, it was at $65 a foot. -- and as tenants become more productive when we can bring in more productive tenants to the center, they can pay more rent and NOI grows. And so yes, we get rent bumps. Yes, we get renewals that are in, call it, the mid-single-digit return -- mid-single-digit growth.

But for us, the -- our business is to continue to add the right tenants that can add to the center, and we're going to continue to do that, and we'll continue to redevelop appropriately on many of these centers as well over the number of years ahead.

Operator

Next question will come from Michael Mueller with JPMorgan.

Michael Mueller

Can you give us a sense as to Pesage feel what the cost is? And what sort of yield are you expecting to achieve with that? And just 1 last 1 to tack on to it. Just what sort of pre-leasing levels did you need to see to pull the trigger on it to start it? .

Unknown Executive

Yes. So I would say the -- right now, I don't feel comfortable saying the cost the yields are the same, in line with all the other stuff we're doing. And so the pre-leased, it's not -- it's less a specific number. It's really -- it's more art than science. We don't have a number that approves deals. It's a number and the number -- and the names of certain tenants. And so it's -- we want to have certain tenants that we think are really important. It's where the conversations are with the other tenants, what's an LOI, how deep is the pool behind those tenants.

And so definitely more art than science, but it is going to be very, very exciting. We're honestly ecstatic about it. It's going to be like something that we have not built before. You'll see some renderings, I think, when we do our groundbreaking next week, but it's an Austin market. It's the path of growth and the tenant demand has been really strong. And so we're excited and hopefully excited for everyone to come see it in a couple of years' time.

Operator

Your next question will come with Alexander Goldfarb with peper sandler .

Alexander Goldfarb

There. Eli, I think it's been -- I think you mentioned the new program called One Simon if I had that correctly, it sort of combines all the brands. But a bigger topic is -- and I've asked you this about like the Simon Brand Ventures and increasing the ancillary income. But as social media, AI and everything accelerates at a pretty incredible clip.

How do you guys -- how is it that you guys think about trying to monetize more of the way that people interact with the malls versus like obviously, your retailers, they're doing the same thing. So like everyone has their own social media, everyone has their own AI. Now you have AI agents that go shopping for you would find the best deals. How do you guys look at this so that, one, you can sort of maximize the revenue that you have, but two, that you're not sort of competing with your customers who are your tenants .

Unknown Executive

Sure. Thanks, Ali. So first, the campaign, it's a Simon thing. I encourage you guys to look at it on our social media channels. It's a very good campaign been very well received, and it's exciting. And so when I think about our ancillary business, it's to me is -- I think there's a tremendous opportunity here. And when we went through these budget meetings on these properties in the last 2 weeks, what we've seen is that I think we're just scratching the surface -- and I don't think it's really cannibalization with our retailers, it's complementary for them.

What they want is they want footsteps in their doors. And our job is to bring footsteps to the mall. And then there is now an ability, we think, to even drive a specific footfall to these tenant stores. And so that's a combination of our digital presence. It's a combination of our database. It's a combination of our physical presence at the malls and at our Premal and at our mills properties. And so it's a pretty exciting time. It's early days, obviously, with the Simon Media Network that literally, we launched or signed, I should say, some of our first contracts in the last week or so. And so it's -- it really is complementary to the retailers. -- because at the end of the day, everybody wants more traffic and everybody wants more sales, and that helps everybody. And so we are on the same team. We view our retailers as partners.

And we think we have a mouse trap now not just obviously in the physical footprint in terms of a mall, but in our digital channels in our databases to help drive traffic to their stores. And then the other thing is, obviously, we think that's an incredibly interesting mousetrap, so to speak, for nonretailers, too, for companies in the travel space for a company in the financial services space and in the hospitality space to look at it and say, we have the most well-qualified customers because they are here to shop into spend. And so we're having conversations not just with our tenants, but also brands and companies outside of our retail ecosystem.

So it's exciting it's growing, and hopefully, it's growing significantly more in the years to come.

Operator

Your next question will come from Ron Kamdem with Morgan Stanley.

Ronald Kamdem

Just a quick 1 for me. I think you talked about the strength in sales from the retailer side. I guess I was just wondering is there any difference between either the full price and the off-price and how sort of the tourist destinations tourist centers are performing, if that's all consistent. And then my second follow-up, if I may, is when you think about the sales numbers, when you're having conversations with retailers about store opening plans, does it see more rational more this time around because we've gone through the cycle where there's been some overbuilding -- just curious, any color on that as well.

Unknown Executive

So on the first part, so I would say the malls have outperformed the outlets just a little bit. I think that's honestly, is less the fact that's a mall or an outlet, but more of some of the higher growth categories, specifically luxury watches, for example, or just not in the outlets. So I don't really read too much into that. The junior brands are similar and both the athleisure brands are growing in both men's and women's apparel are growing at both. It's just there's a few categories and a few tenants that are just in the malls that are not in the outlets. And so I wouldn't read too much into that.

All 3 platforms have been growing each quarter this year. On the tourism side, I think it's a couple of things. Clearly, Florida remains incredibly strong, and that's not just Miami, but that's Tampa, Orlando, incredibly strong. I would say Woodberry, which relies obviously on a good chunk of international tourism has been okay. It's growing. It's less than it historically has been. It's still an incredible asset and the growth is incredible. I think there's just a few idiosyncratic things there about certain customers coming into the U.S. that just aren't right now. That's the only -- that's really the only 1 of note I would say the border is growing again, both the Canadian border and the Mexican border assets and the U.S. side of it are growing maybe a little bit lower than the portfolio overall. -- which, again, those are more outlets than malls.

And so that, again, kind of skews that outlet versus small number. But even Vegas, which is interesting, who had sort of had a little bit of a lull at the beginning part of the year, we've seen real growth there, not just at Crystals in a forum, but even Vegas North had a great quarter. And so it's really all positive. Again, I'd like Woodberry to grow a bit more than it has like the border assets grew a bit more than they are. But it's overall, not no other real weak spots in growth. As far as the stores, I mean listen, tenant demand is very strong. And that demand is broad-based. It is the national retailers that have been in our centers in our portfolio for a number of years. It's new emerging brands. It's restaurants. It's the best local and regional operators -- and so when we look at it, the demand is strong, and I think they are realizing that you have to have stores at the best centers to grow a business.

E-commerce is great, but without stores to control your brand presence to control your distribution, direct-to-consumer distribution in the physical world, it's hard to really be a successful modern brand today. And so I think that's led to this pipeline that is up 30% year-over-year, but the national retailers that have been in our portfolio for decades, that group, it's up 40% and so what they're seeing is that we need to open stores, and we need to open stores throughout the portfolio in the best centers and with a landlord that they can trust, who's going to reinvest into their space, into their center and bring traffic. And so I think it's all good news from the leasing perspective.

Operator

The next question will come from Juan Sanabria with BMO Capital Markets.

Juan Sanabria

Just wanted to just the 30% number you talked about, was that the leasing pipeline that is up year-over-year my question -- and my actual question is we've seen some of the kind of high-end boutique retailers like Armed moved to nontraditional locations, like smaller outdoor shopping centers or lifestyle centers Curious on how Simon and its various formats plays into that strategy or if it's maybe a detriment or like the traditional setting that they would look to be in digging in closed malls and kind of how you're trying to be part of the solution for retailers like Armes. .

Unknown Executive

So obviously, I'm not going to talk about any specific retailer. But I would say we have great relationships with all the luxury retailers, and we are actively talking about adding space, and expanding an existing footprint. -- and adding at different centers throughout the portfolio. So there's always opportunities or there's always options for retailers to locate. That's what makes this business fine and it's business competitive. -- is there's always places for retailers to go. It's our job to create the best physical product and bring the best qualified traffic where they're going to do the most volume. And sometimes, that will be with us. Other times, it's not which is perfectly fine with us, and we'll make sure that we have the right retail mix for each and every property.

And so the -- our luxury business remains very robust we have great relationships with all the luxury retailers. And so we look at it and say, if they choose to go somewhere else that is perfectly fine with us, and we hope they do great business there, and we will keep on doing what we're doing on our assets and worry about how we continue to make our assets better.

Operator

Next question will come from Floris Gerbrand Van Dijkum with Ladenburg.

Floris Gerbrand Van Dijkum

So just curious on 1 of these questions on growth. And Clearly, you have a lot of contractual growth. Could you remind us again where your ethanol pipeline stands today? I think it was 310 basis points last quarter. And then also, how much of that S&O pipeline is tied to your transformational developments and redevelopments. And then maybe touch on not just the -- those -- that capital that's being spent that obviously gets a return of, you say, around 9%, probably a little bit higher than that. But also, what does that do to each property tenant sales and potential cap rate compression, how much value -- presumably you're creating a lot more value than simply the return on capital?

Brian McDade

Lars, it's Brian. So SNO is 290 basis points since the end of the quarter. We're not going to go into the varying pieces and parts to it. It is what it is. It encapsulates the entirety of the business and where we sit. -- the rest of your questions are just cut of speculation. So it's not a hard facts. And so -- we're very pleased with our investments. We believe we create material value for shareholders through this investment funded with our free cash flow and would expect that we will continue to do so.

Floris Gerbrand Van Dijkum

Yes. I would say it's CaPre compression matters if you're going to sell, right? When we do, we did a bra, we're not selling. And so do I think it's worth a lot more, 100%. it doesn't really matter what I think because we're not going to sell it. And we're not going to go take it to the market to see what people will bid. But I would say high level -- if our sales -- not if, our sales grew at 4.9% for the quarter, there's a few transformational projects, they grew at double digit for the quarter. And so it's an exciting time to be reinvesting into high-quality retail real estate. .

Unknown Executive

We like the cash flow profile coming off because we're funding you with free cash flow. -- floors. So ultimately, you asked about cap rate, but for us, it's about cash flow growth. That's what we're focusing on.

Operator

Your next question will come from Rich Hightower with Barclays.

Unknown Analyst

Okay. Great. So Brian, 1 for you, if you don't mind. So obviously, you guys chopped a lot of wood balance sheet-wise during the quarter, made some really good progress on the remaining 26 maturities and even into 2017. So -- but there still remains some remaining 26 maturities as I kind of look at things as of 9/30. So just wondering what the plan is there. And how do you think about the -- I don't know if it's a trade-off or just how do you think about that balance between extending maturity and sort of optimizing coupon as you think about those moves?

Unknown Executive

Sure, Rich. Great question. Thank you. Balance of the year, really on the unsecured, we have a maturity -- $750 million maturity that we prefunded earlier in September, so that will get repaid with the existing cash on hand. There's a small stub remaining of the Clay Pierre exchangeable as well, about $38 million that will get addressed via cash -- the rest of that balance is outstanding commercial paper, which we will continue to roll in the front end of the market. .

The secured side, we are actively -- we've paid off 2 mortgages subsequent to the end of the quarter, that address 2. And then we have actively refinanced 2 of the other maturities for the balance of the year. So we will simply continue to roll the majority of our debt balances -- and then as we get into next year, certainly on the unsecured side, there's about $2 billion maturing -- we would expect to put that back into the unsecured market. I think you're going to see us take a little bit of a barbell approach probably use the front end of the curve a little bit more in the commercial paper, but also issuing the 5-, 10- and 30-year 5 in the unsecured market. We like the secure market, we've got a competitive advantage relative to secured debt -- and so I would expect that some of our maturing secured debt next year is repaid and unencumbered with unsecured borrowing.

We also have the opportunity to fund ourselves internationally where there's advantage rates, Europe in Japan. I do think you'll see us take advantage of a little bit more of that next year to continue to bring down our overall cost of financing, but also to further hedge our equity positions in those respective jurisdictions.

Operator

Next question will come from Linda Si with Truist.

Linda Yu Tsai

On initial base minimum rent per square foot on new deals being up 17% year-over-year, but tenant allowance per square foot down 10%. Is this because you're -- there's less space available, so you have more negotiating leverage with tenants. And so you're achieving higher rents and investing less capital per deal? And then how do you think about the sustainability of this trend?

Unknown Executive

Sure. So I mean, I would never say we have any negotiating leverage. Tenants are free to come to our centers, go to other centers, go to the street, go to shopping centers, strip centers stay online. So I would never say we have any negotiating leverage. With regards to the trends, I mean, listen, the reality is the tenants want to locate in well-located centers were a landlord invest capital and the deals we strike or the deals we strike -- and we look at it and there is a lot of demand. There's a lot of demand from a lot of different tenants. A lot of tenants want to get bigger in place.

A lot of tenants want to come into the shopping centers. And so our job is to choose the right merchandise mix for each center, but we are not hearing anything that would indicate that the demand from existing and from new tenants is slowing in any way, shape or form. -- honestly, it's increasing. And so our job is to go space by space and determine what's the right tenant and the right cost and the right rent and the right capital cost for each tenant. -- which we do and we signed what I forgot, 1,000 leases last quarter 200 leaks. 325 So it's a lot, right? So that's 1,200 individual negotiations -- and what spits out is there are those stats, but they're obviously pretty good. But really, what we're focused on is growing free cash flow over time, and that's just obviously a piece of it.

Operator

Next question will come from Greg McGinniss with Scotiabank.

Greg McGinniss

This is Victor Fed on its Greg. Do you see international becoming a bigger part of your growth strategy within the next couple of years? And where would you like to add scale -- and as you think about where to deploy capital overall, how do the returns and the ability to push rents internationally compared with the U.S. ?

Unknown Executive

So I would say, do I think internationally becomes a significantly bigger part, probably not -- we love what we have internationally with obviously the outlets across Canada, Mexico, Europe, Asia, -- we obviously love our stake with Clay Pierre. That management team is fantastic. They're doing an incredible job. But as we saw when we acquired the mall assets in Italy from caring January last year. If there's opportunities that make sense, of course, we'll transact. And so there's no set plan of I want to go more in this country or this geographic region, it's really -- if there's an opportunity, we evaluate opportunities across the world every day.

We look at expansions in Japan and Malaysia, for example. -- existing assets. We look at a new ground-up development in Korea on the outlet side. And so it's not a focus to go and say expand internationally. But if there's opportunity, of course, we'll do it if we think it makes sense for the company.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Eli Simon for any closing remarks. Please go ahead.

Eli Simon

Thank you all for your questions, and we look forward to seeing many of you soon in Atlanta in a few weeks. Thanks.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.