Billionaire shopping mall magnate David Simon said Monday a 30% six-month drop in shares of Simon Property Group presents a more compelling investment opportunity than making a reputed bid for embattled department store chain Kohl’s.
“We think it’s an opportunity to be opportunistic in terms of buying our [own] stock back,” Simon told analysts on the company’s first quarter earnings call. “Don’t believe what you read or any rumors out there. We’re really focused on growing our existing platforms and taking advantage of the opportunities that our lower stock price represents,” he added.
The outspoken chief of the Indianapolis-based REIT, which owns a global portfolio of retail, office and hotel properties as well as stakes in ventures that control dozens of brands including JCPenney, Reebok and Eddie Bauer, was also unequivocal about the opportunity that currently exists in the domestic market, where Simon said rents and occupancy were up.
“We signed more than 900 leases for more than 3 million square feet in the quarter and we have a significant number of leases in our pipeline,” Simon said of the three-month period ending March 31st which marked the best quarter of deals since 2016, and the lowest occupancy cost in 7 years.
Compared to the volatility being seen in Europe, Asia and Latin America, he said domestic demand was very strong, noting that most worldwide brands, restaurants, entertainment operators, retailers and tenants “view the U.S. as the place to be.”
In-Store vs eCommerce
Three or four years ago, every global retail brand wanted to be in China, Simon said, whereas today, the highly uncertain economic environment is favoring the domestic market that the 61-year-old CEO said was experiencing excellent rental demand and making real estate a great hedge against inflation.
“Inflation is a huge issue and we need to do everything we can to figure out, as the world and individual countries, how to deal with the impact of inflation for the lower-income consumer,” he said, noting that the company’s own portfolio was not yet seeing an effect.
In a similar vein, Simon also commented on the recent post-pandemic shift that has been hammering eCommerce players and platforms such as Amazon and Etsy for the past few months — even harder than shares of Simon.
“What we’re seeing generally is outperformance in the physical [retail] world and less performance on the internet,” Simon commented, “and that’s not just for our brands, but across essentially every retailer.”
Speaking of Simon’s own basket of brands, Simon commented that JCPenney’s liquidity position was strong, with $1.3 billion in cash, no borrowing against its line of credit and performance ahead of plan after the Texas-based department store chain was acquired out of bankruptcy in 2020.
Big Things for Reebok
At the same, Simon was especially optimistic about the company’s other investment platforms, namely its SPARC Group joint venture with Authentic Brands, and its acquisition of Reebok, which it acquired for $2.5 Billion from Adidas last summer.
“We anticipate great things from this iconic brand,” Simon told analysts, warning of near-term losses due to integration costs followed by long term growth.