It was a far more upbeat tone in an earnings report than has been heard in some time out of the nation’s largest mall owner, Simon Property Group, as shoppers have reportedly started to return to physical retail.
“Between being cooped up, between being locked down, between the stimulus, between celebrating that the country is still around … there’s clearly some level of euphoria around that,” Chairman and CEO David Simon told analysts during the post-release conference call Monday (May 10), before noting it would be impossible to quantify what is a long term sustainable return and what is the exuberance of freedom from the living room making itself felt along with the consumer population.
Moreover, Simon noted, pockets of the country containing major retail centers like New York and Los Angeles are still under traffic-suppressing shutdowns, global tourism is stalled and occupancy rates are below a year ago.
As for the quarterly figures, there were all kinds of concerning numbers still on the board. Revenue for the first quarter of 2021 was down 8.4 percent, coming in at $1.24 billion versus $1.35 billion a year ago. Funds from operations fell to $934 million from $981 million the previous year. Lease income slipped to $1.14 billion from $1.3 billion, a symptom, according to Simon, of the number of lease deferrals the company agreed to over the course of 2020.
However, the base minimum rent per square foot ticked up slightly to $56.07 from $55.76 in the year-ago period. The firm’s top tenants include Gap Inc., L Brands and PVH, and department store chains Macy’s and J.C. Penney.
Moreover, Simon noted that lease negotiations are currently underway with various retail players, some of which have proved to be “difficult,” according to the CEO’s remarks on the earnings call. And though he declined to name any names as to which retailers exactly were proving to be a problem, he did attempt to send a strong message to those players during the call, telling investors, “if they’re not paying what we think is fair, we’d just rather sit on empty space.”
Though the headwinds are still blowing, he noted, the tailwinds are also there, apparent and pushing the space forward as exuberant consumers are headings back out to the mall.
“We are encouraged with what we are seeing in terms of sales traffic,” said Simon noted. “Suburbia is hot, suburbia is the place to be … We plan to take advantage of what I don’t think will be a short term scenario. I think this will play out for several years and we’ve got some really good stuff in the redevelopment pipeline.”
Given what the firm identifies as a favorable launch path for its reopening, Simon revised its anticipated earnings upward to between $9.70 to $9.80 per share in funds from operations for 2021, compared with a previous forecast of $9.50 to $9.75 a share.
Simon’s shares were down in after-hours trading by about 2 percent, a break with the trend thus far this year that has seen the firm’s share price pick up by 50 percent.
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