When S&P Global Ratings upgraded Simon Property Group Inc (NYSE:SPG) to A in August 2025, the expectation was that leverage would follow. Six months later, net debt to EBITDA sits at exactly 5.0x — the same level the company carried into the upgrade. The rating improved. The capital structure stayed.

That is not a breach. It is a structural observation worth measuring.

Source: S&P Global Ratings, A (Stable), August 11, 2025.

The Numbers (As Of Q4 2025)

Net Debt to EBITDA: 5.0x

Simon ended 2025 at 5.0x, down modestly from the low-5x area a year earlier. Management described this as consistent with an A-rated profile.

At A/A3, Simon sits four notches above the BBB- boundary. That distance is wide by any measure. The more structurally relevant corridor is A to A- — if leverage drifts back toward the mid-5x range, the rating conversation could shift before the investment-grade boundary becomes relevant.

Source: SPG Q4 2025 earnings call (February 2, 2026).

Credit Ratings: A (S&P) / A3 (Moody’s)

S&P upgraded Simon from A- to A after two years of deleveraging and occupancy recovery. Moody’s holds at A3, equivalent. Both outlooks are stable.

Source: S&P Global Ratings, August 11, 2025; Moody’s Investors Service.

Fixed Charge Coverage: approximately 5.0x

At roughly five times, Simon covers its fixed obligations with significant headroom. This metric alone is consistent with the current rating level.

Source: SPG Q4 2025 supplemental.

Occupancy: 96.4%

Malls and premium outlets ended 2025 at 96.4% as of December 31, 2025, with mills at 99.2%. Base minimum rent increased 4.7% year over year to $60.97 per square foot. Retailer sales reached $799 per square foot.

Source: SPG Q4 2025 supplemental.

Where The Tension Lives

The rating improved. Acquisition activity remained elevated.

On the Q4 earnings call (February 2, 2026), CEO David Simon noted that tariffs are “clearly having an effect on retailers” and “putting more pressure on them.”

No single tenant dominates Simon’s rent roll — the largest inline tenant represents roughly 2 to 3 percent of base minimum rent. But cumulative tariff-driven margin compression across the tenant base may not surface in occupancy immediately. It can appear instead in renewal spreads, tenant improvement allowances, and backfill velocity on vacated space.

Simon deployed approximately $2 billion in acquisitions in 2025, including the remaining Taubman interest. The development pipeline exceeds $4 billion. Capital of that magnitude can require external funding, particularly if leverage remains near its current level.

2026 guidance includes $0.25 to $0.30 per share of higher net interest expense. Against record Real Estate FFO of $4.812 billion, that translates to roughly $95 million to $115 million in incremental financing costs — approximately 2% of FY2025 Real Estate FFO.

The payout ratio sits at approximately 69%. The dividend increased 4.8% while the interest expense trajectory accelerated. Both trends can coexist — but one consumes retained capital while the other adds to the cost of deployed capital.

Source: SPG Q4 2025 earnings call; Q4 2025 press release (February 2, 2026).

Structural Sensitivities

A sustained acquisition pace at similar leverage impact could shift the 5.0x ratio upward. If that occurs, the corridor between A and A- narrows — not toward distress, but toward a less favorable rating conversation.

Tariff effects on tenant credit tend to be cumulative and slow-moving. One quarter of elevated tenant stress may not alter the structural read. Multiple consecutive quarters could.

If the spread between new lease rents and expiring rents narrows, the NOI growth that supported the upgrade could decelerate.

None of these are conclusions. They are structural variables.

The Structural Read

From a buffer perspective, Simon’s profile is defined not by proximity to the BBB- boundary — that distance is wide — but by how much of the current corridor is being consumed by acquisition-funded growth versus preserved as rating headroom.

The upgrade reflected two years of discipline. The question is whether the capital deployment pace preserves that discipline or gradually compresses the corridor from above.

The slope of capital deployment can matter as much as the leverage level itself.

The numbers tell a story. Whether it changes anything — that part is yours.

Disclosure: The author holds no position in SPG at the time of writing.

Sources:
Simon Property Group Q4 2025 Press Release, February 2, 2026
Q4 2025 Earnings Call Transcript
Q4 2025 Supplemental Information
S&P Global Ratings, A (Stable), August 11, 2025
Moody’s Investors Service, A3 (Stable)

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.