Mall Owner Simon Property Group Stays Focused On The Suburban Future

There’s no shortage of brick-and-mortar-based retail executives who were happy to bid 2020 goodbye and turn the page on a new year. Arguably, no one is happier than Simon Property Group CEO David Simon. As one of the more colorful leaders in the retail business, he has been candid — and at times pessimistic — about the prospects for the malls and outlet centers his company owns and operates. So when he said during the company’s Q4 and full-year earnings call on Monday (Feb. 8) that he was eager to move on, it was a sincere sentiment.

“Let’s move on from 2020 to 2021, because I do, frankly, want to turn the page on 2020, as I’m sure you all do,” Simon said. “We feel confident we have turned the corner.”

The company’s numbers for 2020 were respectable, given the conditions the company operated within — and Simon’s plans for 2021 have more than a few digital elements sprinkled in. For the full year, the company’s portfolio net operating income (NOI) declined 17.1 percent due to reduced revenues from tenant rent abatements, higher uncollectible rents, lower sales-based rents and a reduction in ancillary property income. For Q4, the company didn’t improve much as the virus continued to surge and consumers went online, with NOI down 23.9 percent.

Simon listed several reasons for his optimistic outlook in 2021 beyond the hoped-for end of the pandemic. First, he pointed out that the company now owns four eCommerce brands — Forever 21, Lucky Brands, Brooks Brothers and JCPenney, which Simon acquired in early 2020 — with combined digital sales topping $3.5 billion. Simon noted that Forever 21 accounted for $75 million in revenue in 2020.

Simon admitted that the company still has uncollected rent issues with some of its biggest tenants, but he was clear that the retailers that wanted to recover would have a seat at the negotiating table.

“Are we back to normal?” Simon asked on the call. “Not yet, but we’re working our way back. Generally, it’s still a very serious, intense negotiation on renewals, and retailers are generally cautious. But the ones that want to grow their business are excited, and we hope to be able to certainly increase our occupancy from 2021. And it’s going to take some time to obviously get back to where we were in 2019. But the healthy retailers that believe in their business, and believe in their plan, are making deals.”

Where will the Simon 2021 growth come from in the physical world? Simon said he sees signs of a significant comeback in Texas and Florida. And for the balance of the year, he’s bullish on the suburbs.

“I do feel very strongly that high-quality suburbs are going to be where the action is in the future,” he said. “And with all of the urbanization that was predicted two or three years ago, the question was, ‘why are the suburbs going to exist if everybody is going to live in an urban environment?’ I’m telling you, the suburbs are going to be hot. And our quality real estate is going to be where the action is for those well-located suburban centers of commerce. And that’s going to be the big change coming out of the pandemic.”