David Simon, President and CEO of Simon Property Group
Patrick T. Fallon | Bloomberg | Getty Images
The biggest mall owner in the country is anticipating that the pace of closure of retail stores will decline after a bad start to the year. But your CEO will make no promises.
"I think most of the bad news is lagging behind," Simon Property Group CEO David Simon told analysts in a post-salary teleconference on Tuesday, referring to retail closures and bankruptcies. "But I can not guarantee that."
Simon shares fell more than 3 percent after the real estate investment fund posted $ 1.08 billion, or $ 3.04 per share, at $ 1.08 billion a share, equivalent to $ 1 , $ 03 billion, or $ 2.87 per share. one year ago. That was slightly below analysts' expectations, said Jim Sullivan of BTIG.
In February, CEO Simon said he was "nervous" about some more retail failures in the first quarter. That was before luxury clothing retailer Charlotte Russe, the custom souvenir company Things Remembered and Payless ShoeSource, all went bankrupt later that month. Now, more store closures have already been announced by US retailers in 2019 than in all of 2018.
"It's safe to say … we anticipate some [of those] bankruptcies, "CEO Simon said on Tuesday. We are looking at a few others … let's see how the rest of the year prepares for them. "
One effect of this shake-up, shopping mall vacancy rates rose during the first quarter to 9.3% from 9% in the fourth quarter of 2018, according to real estate research firm Reis. This is the highest vacancy rate the company has registered since the third quarter of 2011, when it was 9.4%, Reis said.
Simon, meanwhile, has been at the forefront of adding new types of renters to their malls in an attempt to keep their shopping centers relevant. This includes taking some of their assets and turning them into "mixed-use" centers with apartments, hotels, office buildings, and fitness centers. At Simon's Phipps Plaza mall in Atlanta, for example, he is adding a Nobu Hotel and a 90,000-square-foot Lifetime Fitness complex.
Earlier this year, Simon said he would partner with Ohio's Green Growth Brands to open 108 stores that sell CBD products this year at their properties, including Roosevelt Field Mall in New York and The Galleria in Houston.
"It's going to take some work this year to balance," all the closures of retail stores with brick and mortar openings, CEO Simon said. He added that Easter traffic in shopping malls was "slow" this year. But Simon is "seeing some rebound" now.
Simon said the mall owner's sales per square meter during the quarter ended March 31 increased by 3.1% over last year to $ 660. He said occupation in its malls and premium shopping centers was of 95.1%, up from 94.6% a year ago. Simon also reaffirmed his outlook for fiscal year 2019.
Meanwhile, Simon is not the only US mall owner to fight this recent wave of store closures. Others are trying to paint an industry chart to show how many of the 2019 closures were forecast, and point out that the closures come from just a handful of retail networks.
"A bit of data analysis lends color to the nature of these closures," Washington Prime Group CEO Lou Conforti told analysts last week. "Six retail chains [account] to 73% of closings this year, compared to 21% in 2016 and 27% in 2018, respectively. So, more concepts are not sinking, just the more. ""
Simon shares rose more than 9 percent in the past 12 months, raising their market value to about $ 52.7 billion.