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Simon sees improving retail conditions, analyst says

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The nation's largest mall owner is more confident about the U.S. retail environment, an RBC Capital Markets analyst said following a series of meetings with top executives at the company.

In a research note published Tuesday, RBC analyst Rich Moore told investors that Simon Property Group Inc. said that retailers leasing space in its malls have managed to weather the economic downturn and are already eyeing recovery plans for when the economy improves.

"Management indicated that, in general, retailers appear to have identified the bottom to the current economic environment," Moore wrote. "Most have moved to a mode of low-expense growth and are maintaining reasonable levels of inventory to guard against a further deterioration in the economy. Likewise, most express a higher level of confidence to Simon in pursuing further store openings or maintaining existing stores."

At the same time, the number of bankruptcies by retailers has "returned to more typical levels," Moore said, adding that that should help Simon keep bad debt off its books and square footage occupied at its malls.

Still, the trends aren't universal.

Simon said business is faring better at its malls in New England and California. But performance is "generally flat" in Florida, the Midwest, the South and in Boston.

Simon is based in Indianapolis and owns, or has interest in, nearly 400 properties around the world. The company reported improved quarterly earnings last month due to better retail conditions.

The company lost out its bid to buy rival General Growth Properties earlier this year, but analysts say Simon is in a strong position to make other deals.

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