SPG — Q2 2026 Financial Report Analysis

Q2 2026: rents and mall sales up, and the headline GAAP figures point the wrong way

Simon Property Group, the largest US mall and outlet owner, grew Real Estate FFO to $3.29 per diluted share, up 7.9% from $3.05, and raised its full-year guidance for the second quarter in a row. The growth came from higher rents in fully leased malls and a larger portfolio, not from filling empty space: US occupancy was 96.0%, the same as a year ago, while base minimum rent rose 6.3% to $62.42 per square foot.

The GAAP headline numbers are misleading in both directions. Total revenue jumped 19.5% to $1.79 billion, largely because Simon bought the last 12% of Taubman Realty Group (TRG) on October 31, 2025 and now reports 11 of TRG's malls line by line in its own statements. Before the deal, Simon already owned 88% and counted its share as a single line. GAAP net income to common shareholders fell 13.1% to $483.1 million ($1.49 per share vs. $1.70), because Q2 2025 included a one-off, non-cash after-tax gain of $0.21 per share tied to Forever 21 leaving Simon's retail venture. Without that gain, last year's EPS would have been $1.49, the same as this year.

Why FFO matters more than net income for a REIT

GAAP net income subtracts depreciation, an accounting charge that spreads a building's cost over its assumed life. For a mall owner that charge is very large ($459.9 million this quarter), but well-kept, well-located property usually doesn't lose value the way that charge suggests. Funds From Operations (FFO) is the REIT industry's standard fix: net income with real estate depreciation added back and gains or losses from selling property removed. It is closer to the cash the property portfolio produces and the base the dividend is paid from. Simon's main measure, Real Estate FFO, goes further and also removes results from its retail and e-commerce stakes (Catalyst Brands, Rue Gilt Groupe, Jamestown), gains or losses on revaluing those stakes, and mark-to-market swings on its Klépierre-linked derivative. What's left is the profit from the malls and outlets themselves.

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