Simon Property Group CEO David Simon
Anjali Sundaram | CNBC
Simon Property Group Director David Simon said Monday that the company is still looking to hire additional retailers, having already filed for bankruptcy Lucky Brand, Brooks Brothers and JC Penney.
“We take inventory at or below cost,” Simon said, explaining the company’s purchasing strategy during a conference call with analysts. “There’s profit in that.”
“We keep looking for other opportunities,” he said. “We do our fair share of trying to keep this world as normal as we can.”
As an example, the CEO notes that saving Brooks Brothers from a total liquidation would save about 4,000 jobs alone.
“I’m not buying into this analysis you got that we buy these retailers to pay for our hair,” he said.
Shares of Simon Property fell about 1% in trading after hours, after closing more than 5% on the day. A report late on Sunday said Simon had been in talks with Amazon to open warehouses at some closed Sears and JC Penney department stores had boosted the company’s share price on Monday.
So far this year, more than 40 retailers have filed for bankruptcy. CEO Simon compared the trend rippling through retail to the early ’90s, when there were more lasting effects after a wave of bankruptcies, including the rise of e-commerce, more than the period after the Great Recession, where the trends returned to normal relatively earlier.
“We expect more of a lasting impact here,” he said. “This is not your grandmother’s recession … we’re dealing with many more bankruptcies.”
Profit drops as coronavirus shuts down malls
Even though Simon has the balance sheet to track transactions, revenues and revenues have declined in the last period.
For the quarter ending June 30, Simon Property said its net income fell to $ 254.2 million, or 83 cents a share, from $ 495.3 million, or $ 1.60 per share, a year ago. Revenue fell 24% to $ 1.06 billion.
Analysts expect the mall owner to earn 98 cents a share on revenue of $ 1.14 billion, according to Refinitiv estimates.
Funds from operations – a metric used by real estate for investing in real estate, which excludes certain costs such as depreciation – fell to $ 2.12 per share.
Simon’s retail properties in the US closed about 10,500 business days in the fiscal second quarter due to the Covid-19 crisis.
The largest owner of the U.S. shopping center said it collected about 73% of its retailers’ rents in July, with about 91% of its rents reopening to businesses because coronavirus taxation measures have required it.
It said it collected about 51% of its contractual hair for April and May combined, and roughly 69% in June. It said these percentages are not adjusted for any rental reductions that were assigned to tenants to provide some relief.
In June, Simon Property sued one of the largest tenants, Gap Inc., for failing to pay more than $ 65.9 million in rent and other expenses.
“We still have retailers we need to deal with,” said David Simon. “Some tenants have not paid rent. They have contracts they are required to pay, but some tenants have not paid.”
Simon said the company was “generally encouraged by the shopper’s reaction” as they reopened.
Analysts, meanwhile, were impressed with the percentages of hair collection compared to some of Simon’s peers in the mall.
“Importantly, most of the properties are open and rental collections are trending in the right direction after the openings,” RBC Capital Markets analyst Wes Golladay said in a note to clients.
As of June 30, Simon Property said the occupancy rate was 92.9%, down from 94.4% a year ago. It said minimum rental price per square foot was $ 56.02, up 2.8% from a year ago.
It ended the quarter with $ 8.5 billion in liquidity, including $ 3.6 billion in cash and $ 4.9 billion in available capacity under its revolving credit facilities and a term loan.
Simon Property shares have fallen about 55% this year, as of Monday’s market. The company has a market value of $ 20 billion.
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