Simon Property Group (SPG)

Total return at 5 years: 12.1%/year = 7.6% appreciation + 4.4% dividend. The target price ($291) is ex-dividend; the $52 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $387 · Multiples $279) exceeds the market price ($201).

Today — fairly valued: at $201 trades ~27.8% below its value discounted to today (~$279); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — Infravalorado: the target price ($291) plus dividends yield above the required average return (10%) — the business compounds.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$179.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($201) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-8.1%/year) than we project (6.0%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$2.8 bn of owner earnings in year 5 (vs ~$5.8 bn of our base case). It recalculates if the DCF assumptions are edited.

A REIT is valued on price/Core-FFO (not P/E: the accounting depreciation of the property is not an economic cost). ⚠️ The real cash is AFFO (owner earnings), substantially lower than Core FFO —it subtracts recurring capex and non-cash straight-line rent—, and the dividend consumes almost all of the AFFO. It returns capital via dividend; it may issue equity to fund development. Total return adds the dividend collected along the way. In edit mode, the metric, shares, dividend, and exit multiple can be adjusted.

Year 0 (TTM) takes the second quarter of 2026 (30-Jun-2026) as its anchor. Real Estate FFO per share —the adjusted FFO metric the company itself guides and reconciles in its release— grew 7.5% year over year in the first half of 2026 and 7.9% in the second quarter; year 1 starts at 7.5%, in line with the FY2026 guidance raised to US$13.20-US$13.30 per share (midpoint +US$0.08 against the previous guidance), and decelerates smoothly toward 4.4% by year 5, when the renovation and redevelopment pipeline matures and space absorption normalizes to a medium-term pace. AFFO is derived by netting tenant allowances and operating capex from adjusted FFO, per the company's own non-accounting reconciliation; the combined share and unit count (380 million in the quarter) falls slightly on active buybacks (US$211.4 million in the second quarter of 2026), partly offset by units issued in acquisitions.

Today's multiple compresses on its own going forward as the metric per share grows. The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—. Total return adds the dividend collected; the required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $291 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $201, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $291 in 5 years plus $52 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $279. Against the current market price ($201), the margin of safety is 27.8% (trades below the maximum → there is margin) and the total return at that price would be 12.1% annually.

• Current multiple on adjusted FFO. The stock trades at 16× on TTM adjusted FFO, within the reit archetype's 15x-20x band.
• Projected total return. The base scenario projects an annualized 5-year total return of +12%, including appreciation and dividend.
• Dividend yield. The current dividend yield is 4.5%, with a track record of consecutive increases and healthy AFFO coverage.
• Margin of safety. It trades at a real discount to value, though short of the required margin of safety.

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (136%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Predictable cash generation. Fixed rental income plus variable rent tied to sales generates a recurring, low-volatility cash flow quarter over quarter.
• Return on capital vs. the 10% bar. Return on invested capital stands at 10.2%, just above the 10% bar.
• Reinvestment runway. The redevelopment and densification pipeline is moderate relative to the size of the portfolio; there is no significant geographic expansion TAM ahead.
• Earnings quality. Adjusted FFO and AFFO are derived from a consistent and transparent non-GAAP reconciliation, with no significant signs of accounting distortion.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

The central driver of a retail REIT is fixed base rent (volume x price: occupied square footage x minimum rent per square foot) plus variable rent tied to sales reported by tenants above a base threshold. Occupancy (96.0%) measures volume, base minimum rent per square foot ($62.42, +6.3% year over year) measures price, and tenant sales per square foot ($838, +13.9% year over year) determine the variable portion of income. All three move in the same direction in the reported quarter, sustaining Real Estate FFO growth without relying on occupancy expansion.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Recent organic growth. Real Estate FFO per share up 7.5% year over year in the first half of 2026 and up 7.9% in the second quarter.
• Company guidance. The company raised full-year Real Estate FFO per share guidance to $13.20-$13.30, the second consecutive increase.
• Impact of TRG consolidation. The full consolidation of Taubman since October 2025 (previously at 88%) inflates reported revenue growth (+15% TTM) above the underlying organic growth.
• Long-term ceiling. Growth converges toward ~4.4% annually by year 5, a pace typical of a mature operator without a significant geographic expansion TAM ahead.

• Scale and market position. The largest operator of premium malls and outlet centers in the United States, with 254 properties across North America, Europe, and Asia.
• Occupancy and demand for space. 96.0% occupancy, unchanged year over year, with base rent up 6.3% and tenant sales up 13.9% over the trailing twelve months.
• E-commerce exposure. Many tenants are omnichannel retailers that compete with their own physical channel; the structural risk is real though slow to materialize.
• Diversification by format and geography. Malls, Premium Outlets, Mills, and lifestyle centers in the United States plus 42 international properties and the Klépierre stake.
• Dependence on anchors and large tenants. The closure or bankruptcy of an anchor store can reduce traffic across the entire property and force unfavorable lease renegotiations.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Portfolio quality (occupancy + same-store NOI)Occupancy 96.0% · same-store NOI +7.5%
• ✓Dividend coverage (payout over AFFO)78% of AFFO

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Credit rating. S&P A (stable outlook) and Moody's A3 (positive outlook), both investment grade.
• Fixed-charge coverage. 4.7x versus a required minimum of 1.5x, with ample margin over the unsecured debt covenants.
• Leverage on assets. Total debt to total assets of 37%, well below the 65% limit under the debt covenants.
• Available liquidity. Roughly $9.3 billion in liquidity, between cash and available capacity under the revolving credit facilities.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Leadership transition. Eli Simon took over as chief executive officer following David Simon's death in March 2026, who had led the company since 1995.
• Skin in the game. The founding family (MSA group) and executives combined hold a stake above 17% of the equity.
• Capital discipline. Roughly two-thirds of cash flow goes to the REIT's mandatory dividend, with opportunistic buybacks and moderate redevelopment capex.
• Operating track record. Self-administered company since its 1993 incorporation, with more than three decades of continuity in managing its portfolio.

• The REIT sector as a whole has traded at a structural discount to the broader market since the 2022-2023 rate hikes, and investors continue to demand an elevated dividend yield to compensate for the sector's sensitivity to the cost of financing.
• The long-running narrative around e-commerce disruption weighs on the multiple of the entire retail real estate sector, even as Simon's occupancy and sales per square foot show a solid and sustained trend.
• The recent leadership transition following David Simon's death in March 2026 introduces a near-term uncertainty premium regarding strategic continuity, which the market is still in the process of pricing in.

It trades at a real discount to value, though short of the required margin of safety. The business continues to operate with solid metrics — stable occupancy, rising tenant sales, and raised guidance for a second consecutive quarter — without the price fully reflecting it.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at +6%/year (+34% total): the margin of safety protects the downside. The bull (+15%/year, +104% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Sensitivity to consumer spending. Variable rent tied to sales means a deterioration in consumer spending hits revenue directly.
• Cost of debt. Consolidated debt of $28.7 billion is exposed to a more restrictive rate cycle in upcoming refinancings.
• E-commerce and omnichannel. Tenants' own digital channels compete with the physical traffic that sustains Simon's variable rent.
• REIT qualification requirements. Failing the income, asset, or distribution tests would trigger full corporate tax and could disqualify the company from re-electing REIT status for four years.
• Leadership transition. David Simon's death in March 2026 and the handover to Eli Simon introduce uncertainty about the continuity of the more-than-three-decade strategy.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A wide moat and ROIC 10% above the 10% bar, but the margin is limited (+28%) → excellent business at a fair price.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 6% at a multiple/growth of 2.6 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Not applicable — the Magic Formula excludes financials and regulated businesses (EBIT/EV does not capture the operating leverage).

• Howard Marks Perception vs reality + cycle

  The price discounts -8% vs our 6%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor +1%/yr, bull-scenario ceiling +11%/yr over 5y → capital protected, asymmetry in your favor.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: efficient scale, intangibles, cost advantage, switching costs, network effects → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -8%, within what we project (6%) — the story squares with the numbers.