Simon Properties Earnings Show Positive Trends For Brick-And-Mortar Retail

Simon Properties continues to defy the odds, posting a pandemic-depleted but profitable quarter Monday (Nov. 9). The mall and outlet center real estate investment trust managed to post a profit despite a 91 percent occupancy rate and collecting on only 85 percent of its rents.

“Despite COVID-19, we are encouraged by the increases we are seeing in shopper traffic, retailer sales and tenant rent collections across our portfolio,” CEO David Simon said in a statement. “We continue to improve our company through innovative investment opportunities, which, when combined with our A-rated balance sheet, sets us apart and allows us to redefine the future.”

Simon addressed several issues on the company’s earnings call from tax relief to the pandemic to its joint venture with Brookfield Properties to take over operations at JCPenney. He expressed confidence that Simon could increase sales and continue to attract what he called a “loyal and inclusive customer base” that will grow over time. When it came to the pandemic he was proud to the point of defiant in his company’s performance.

“I want to thank my Simon colleagues for their continued resolve in running our business under often trying circumstances t that has been constantly changing,” he told the earnings call. “We have withstood COVID. We have withstood government shutdowns. We have withstood lack of federal and state help, especially in real estate taxes. We have withstood fires in Northern California, hurricanes in Louisiana and elsewhere and civil unrest. And we’re pleased with the cash flow we’re generating. And I want to thank my colleagues for busting their hump and things are looking up.”

Simon was outspoken in his criticism of state and local government for not providing real estate tax relief. He bemoaned the relief given to other commercial real estate sectors including warehouses and pointed out that Simon adds more jobs and community support than other CRE sectors do. He said he hopes local communities will continue to consider CRE tax relief as the pandemic continues to spike.

He also expressed frustration over the lack of coherence in COVID protocols, especially as another wave of the virus looks to be breaking.

“I think the consumer, obviously, is cautious,” he said. “Our quarter over quarter sales, decrease is only 10 percent. So the consumer is starting to come back, they’re wearing masks and, with all our protocols we’re hopeful that the current trend will continue, but there’s certainly no guarantees. And as far as predicting the government and state and local actions I mean, obviously the level of inconsistency is been very frustrating.”

By the numbers for Q3 Simon posted net income of $145.9 million, or earnings of 48 cents per share, compared with the prior year’s $544.3 million, or $1.77 per share. It saw revenues of $1.06 billion, versus 2019’s $1.42 billion. Analysts had forecast earnings per share of 90 cents and sales of $1.08 billion.

The company also announced that its portfolio net operating income for the period declined 22.4 percent — “attributed in part to reduced revenues from agreed-upon rent abatements with some of its retail tenants and lower sales-based rents, which were partially offset by cost-reduction initiatives.”