Simon Property Group, a real estate investment trust and the nation’s largest developer of malls, mixed-used and outlet centers, continues to see plenty of opportunity in the mall.
“I’m pleased with our financial and operational performance in the third quarter,” said chairman and chief executive officer David Simon, during a conference call going over third-quarter results on Friday. “We saw increased leasing volumes, occupancy gains, and total retail sales volumes. Demand for our space from a broad spectrum of tenants is strong and steady, and we continue to strengthen our unique retail real estate platform through our growing development and redevelopment pipeline. This combined with our A-rated balance sheet, really sets us apart and allows us to focus on the future. We raised our dividend again to $2.10. We’re now at our historical high overcoming the arbitrary, capricious closing of our real estate during COVID[-19].
“The mall continues to be a unique gathering place,” Simon said. “If you talk to really new and exciting companies like Shein or Skims…they all believe in our product. And so we’re seeing a rejuvenation of the younger consumers wanting to hang out at the mall.”
Simon cited some interesting growth possibilities including putting up micro or mini distribution facilities within certain centers or in retailers, and investing more in lower-tier malls, which up to now have generally provided cash flow for improving top-tier malls. “I do think there’s a real potential to improve them because in many cases, we’re the only game in town. And given the lack of supply and our ability to reinvest, I do think we can make real strides in the bottom tier,” Simon said. “Not with every asset,” he added, “but the majority of them. So that’s a big focus going into 2025, without question.”
The company’s net income for the three months ended Sept. 30 was $475.2 million, or $1.46 per diluted share, down from $594.1 million, or $1.82, a year earlier.
The quarter included a non-cash net loss of $49.3 million due to the mark-to-market accounting for a fair market adjustment of the Klépierre exchangeable bonds issued in November 2023. Additionally, income in the year-ago period included non-cash after-tax gains of $118.1 million primarily due to the partial sale of the company’s interest in its SPARC joint venture with Authentic Brands Group.
Real estate funds from operations grew 4.8 percent to $3.05 per share in the third quarter compared with $2.91 a year earlier. Domestic and international operations had “a very good quarter” and contributed 15 cents of growth driven by a 3 percent increase in lease income.
Domestic property net operating income increased 5.4 percent and portfolio net operating income increased 5 percent compared to the prior year period.
In other third-quarter results, occupancy as of Sept. 30 was 96.2 percent, a 1 percent increase from 95.2 percent a year ago. Base minimum rent per square foot totaled $57.71 as of Sept. 30, compared with $56.41 a year ago, an increase of 2.3 percent. “We still have room to grow our occupancy, but more important than that is bringing in the right tenants in the right center in the right location. That’s a huge focus for us,” Simon said.
Reported retailer sales per square foot was $737 for the trailing 12 months ended Sept. 30.
The board declared a quarterly common stock dividend of $2.10 for the fourth quarter, an increase of 20 cents, or 10.5 percent, year-over-year. The dividend is payable Dec. 30.
On Sept. 12, the 184,000-square-foot, phase two expansion of Busan Premium Outlets in Busan, South Korea, opened with new fashion and sports brands, “in vogue” food and beverage brands, and ample gathering and green spaces, the company said. Simon owns 50 percent of this center.
On Aug. 15, Tulsa Premium Outlets in Jenks, Okla., opened with 338,000 square feet. Simon also owns 100 percent of this center.
Last quarter, Simon’s digital marketplace was rebranded Shop Simon, from Shop Premium Outlets, to include sale and discounted merchandise from Simon’s regular-priced retailers while continuing to offer outlet products. Additionally, a nationwide marketing campaign, Meet Me at the Mall, designed to depict malls as a go-to destination across generations, was launched.
On the SPARC joint venture, Brian J. McDade, executive vice president and chief financial officer, said: “SPARC underperformed as the lower income consumer continues to be more cautious in their spending. We first highlighted the inflationary impact in the second half of 2022 relative to this consumer. Performance was below expectations at Forever 21 and Reebok. SPARC and JCPenney did, however, record sequential improvements in comp sales during the third quarter, which sets these brands up well for the important upcoming holiday season. We are not sitting still, and we expect to have some positive announcements by year-end with respect to these businesses.”
