Retail

Mall Owner CEO Concerned About Retail Bankruptcies Continuing In 2019

Mall Owner CEO Is Worried Retail Bankruptcies Could Continue Through 2019

David Simon, CEO of Simon Property Group, one of the biggest mall owners in the United States, said he’s concerned there could be more retail store closures and bankruptcies on the way this year, according to CNBC.

"There are some retailers out there that we're nervous about," Simon said on Friday (Feb. 1) during a call with analysts. "We are concerned about a few [retail bankruptcies] that should shake out in the first quarter."

He did not name the companies.

Simon, like many other mall owners, has been struggling with a dearth of store closures, ranging from tent-pole mall fixtures like Sears to smaller stores like Teavana. Speaking of Sears, Simon is also part of an unsecured creditors committee that’s saying Sears can’t be salvaged, even as Sears Chairman Eddie Lampert is actively trying to do so.

After Sears filed for bankruptcy, Simon said he put the former retail giant “in the rearview mirror,” and that the situation was “tragic.” He also said he would fill the empty space left by Sears and other bankruptcies with hotels, gyms and office spaces.

Furthermore, Simon noted that the majority of retailers that are struggling are extremely levered.

"We have a long list of retailers that have struggled,” he said. “And 80 to 90 percent of that list [has] been over-levered so they couldn't turn left or right."

Despite his concern over future bankruptcies, Simon doesn’t expect as many to happen in 2019 when compared to last year and 2017.

"The days of a rising economic tide ... don't lift all retail boats," he explained. "You've got a lot of outperformance and a lot of underperformance."

Simon is in a more favorable place than most other mall owners, like CBL Properties and the Washington Prime Group. Simon's properties are in more densely populated areas with good foot traffic, and the company has a good amount of liquidity, so it can handle redevelopment endeavors.

"I think we've never been busier on the alternative uses," Simon said, adding that he thinks the future of the mall is going to be all about the idea of "live, work, play."

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