Simon Property CEO ‘nervous’ about more retail bankruptcies

Indianapolis-based Simon Property Group Inc., the nation's largest shopping mall owner, managed to navigate through a often-difficult 2018 despite a landslide of retailer bankruptcies. On Friday, in a conference call with analysts, Simon CEO David Simon warned that more closures and bankruptcies are coming.

"There are some retailers out there that we're nervous about," said Simon, without naming specific companies. "We are concerned about a few retailers that should shake out in Q1."

Simon said he didn't think there would be as many retail bankruptcies as the previous two years, but said there are still some lingering questions facing some retailers. The CEO said the company will continue to redevelop spaces vacated by anchor retailers like Sears, J.C. Penney, Macy's and others, and fill them with non-traditional mall tenants such as health clubs and hotels.

"We're excited about the continuation of the evolution of the mall industry," he said, and "the way it's been evolving for 60-plus years."

Simon Property reported significant increases in profit and revenue in the fourth quarter, but the company’s results fell just short of Wall Street expectations.

The real estate investment trust reported funds from operations, or FFO, of $1.15 billion, or $3.23 per share, in the period. The average estimate of nine analysts surveyed by Zacks Investment Research was for FFO of $3.24 per share.

FFO is a closely watched measure in the REIT industry. It takes earnings and adds back items such as depreciation and amortization.

Simon reported profit of $712.8 million, or $2.30 per share, in the latest quarter, up from $571.1 million, or $1.84 per share in the year-ago period—a 25 percent increase per share.

The company brought in revenue of $1.46 billion in the period, up from $1.43 million in the fourth quarter of 2017. Three analysts surveyed by Zacks expected $1.5 billion in revenue.

For the year, the company reported FFO of $4.32 billion, or $12.13 per share, up from $4.02 billion, or $11.21 per share, in 2017—an 8.2 percent increase per share.

Full-year revenue was reported as $5.66 billion, up from $5.54 billion the previous year.

Simon Property said it expects full-year FFO in the range of $12.30 to $12.40 per share.

The company reported retailer sales per square foot at U.S. malls and premium outlets came in at $661, an increase of 5.3 percent over the previous year. Occupancy was 95.9 percent as of Dec. 31 compared to 95.6 percent on Dec. 31, 2017.

Simon's board of directors declared a quarterly common stock dividend of $2.05 per share, payable on Feb. 28 to shareholders of record on Feb. 14.

Simon shares have climbed slightly more than 8 percent since the beginning of the year.  They closed Thursday at $182.12 each.

Please enable JavaScript to view this content.

Editor's note: IBJ is now using a new comment system. Your Disqus account will no longer work on the IBJ site. Instead, you can leave a comment on stories by signing in to your IBJ account. If you have not registered, please sign up for a free account now. Past comments are not currently showing up on stories, but they will be added in the coming weeks. Please note our updated comment policy that will govern how comments are moderated.