Empire Mall parent company reports rebound as it tries to salvage distressed retailers

Aug. 11, 2020

Simon Property Group, which owns The Empire Mall and is the world’s largest retail real estate company, sees business rebounding after the companywide shutdown earlier this year.

Simon lost nearly 10,500 shopping days across its portfolio.

Net income in the quarter that ended June 30 was $254.2 million, or 83 cents per share, compared with $495.3 million, or $1.60 per share one year ago.

“We have generally been encouraged by the shopper response, particularly in certain locations, after reopening,” chairman, president and CEO David Simon said in a statement.

“These trends reinforce that our portfolio is an attractive destination for consumers. We remain committed to supporting our thousands of local and regional small businesses and restaurant entrepreneurs by granting rent abatements for the period they were closed.”

As of Aug. 7, 91 percent of tenants across the portfolio had reopened, and about half of those that are still closed are shut down because of restrictive government orders in their respective communities and states.

For malls that reopened in early May, tenants reported sales about half of what they were a year ago, Simon said. By June, that had increased to 80 percent of prior year volumes.

The pandemic had a dramatic impact on the retail sector, Simon said in a call with analysts, adding the most recent recession “pales in comparison to what we’re dealing with now.”

“Obviously, the amount of bankruptcies in our sector is tremendous.”

He compared it to what retail experienced in the early 1990s when it took from two to four years to overcome setbacks.

“And again, I’m not making that prediction here, but I don’t think it’s going to be an immediate snapback,” Simon said.

“That doesn’t mean our company can’t do great work, the important player in getting the country back, help the local communities and all that stuff. But you know, it’s going to take time. There’s no doubt about it, and this is different. This is not your grandmother’s recession.”

The company has made bids for distressed retailers Brooks Brothers and Lucky Brand Jeans, he said. It’s reported to be looking at J.C. Penney Inc.

With buying retailers out of bankruptcy, Simon is acquiring inventory “at or below cost,” he said. “We expect any equity investments should be returned within a year after integration of operations.”

Simon was asked by analysts about the possibility of working with Amazon to fill vacant big-box stores at mall properties.

A report in The Wall Street Journal earlier this week said the two companies were looking at putting fulfillment centers in former Sears and JCPenney locations.

He said he would not respond to “market rumors or speculation” but that “more and more retailers are distributing their e-commerce orders from their stores … so they’re fulfilling from their stores and … the curbside pickup or all sorts of fulfillment options are available. That’s a good trend long term for us.

“But beyond that, I don’t want to get into logistics or any kind of speculation really around Penney and/or Amazon.”

Companywide, Simon said there are “probably too many department stores per big mall.”

Sioux Falls has lost two of its four in recent years – Younkers, which Dillard’s had said it planned to redevelop, and Sears, which is being temporarily leased by the Federal Emergency Management Agency.

“But generally, the real estate is really good, and we’re going to densify it. I think the idea that what we had was working on over time will be — will continue. I mean, we may — we may have to get through this rough patch that the industry is going through,” Simon said.

“But this is good real estate that can be redeveloped. Our basis is very, very low. Our basis in the department stores … is very low. So I think  there’ll be a number of opportunities for us to redevelop that real estate.”

Sioux Falls retail market in 2020: Uncertainty mixed with some signs of life

 

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Empire Mall parent company reports rebound as it tries to salvage distressed retailers

Simon Property Group, which owns The Empire Mall and is the world’s largest retail real estate company, sees business rebounding after the companywide shutdown earlier this year.

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