Simon Property Group Posts Healthy First Quarter

It’s been a good year so far for the Simon Property Group, the nation’s largest manager and developer of shopping centers, which on Tuesday reported first-quarter gains across a variety of metrics.

Net income attributable to common stockholders was $451.8 million, or $1.38 per diluted share, as compared to $426.6 million, or $1.30 per diluted share in 2022.

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Funds from operations, or FFO, were $1.03 billion, or $2.74 per diluted share, as compared to $1.02 billion, or $2.70 per diluted share in the prior year.

“We are off to a good start in 2023,” David Simon, chairman, chief executive officer and president, said in a statement Tuesday afternoon. “We continue to strengthen our company through disciplined investments and proactive capital markets activities, further enhancing our already strong financial flexibility. Given our current view for the remainder of 2023, today we raised our quarterly dividend and are increasing the midpoint of our full-year 2023 guidance.”

In a conference call with analysts, Simon said the first-quarter results exceeded the plan.

In terms of leasing, “We are seeing strong broad-base demand from the retail community, from many categories,” Simon said. “Even with the economic uncertainty we are running ahead of our internal plan. Demand has really has not changed one iota.” Noting that Simon executives attended the reopening of the Tiffany flagship on 57th Street,” and Fifth Avenue in Manhattan, last month, Simon said, “You have to take a long-term view when you open stores like that.” With luxury retail, it’s “all systems go on that front,” Simon said. He also singled out Dick’s, Lifetime Fitness, Scheels and Lululemon, for steadily opening stores.

“Tourism is returning with our tourist-oriented centers outperforming portfolio average in terms of sales.” Simon said, adding that international tourism is particularly strong in Las Vegas, Georgia and Florida, but still weak in California.

“If we do go into a recession, it will be kind of a regional recession,” the CEO predicted. “I don’t see Florida, Texas, Nevada, Georgia going into a recession.”

Within Simon’s Other Platform Investments (OPI) group, Penney’s and the SPARC joint venture between Simon and Authentic Brands Group, remains profitable, he said. “The retail part of OPI we expect to be profitable in Q2 and Q3, but the vast majority (of the profit) will be in Q4. Retailers will all have tough comps for the first quarter. The fourth quarter will be much better. That does create a little volatility for us.” SPARC includes Aéropostale, Brooks Brothers, Eddie Bauer, Forever 21, Lucky Brand, Nautica and Reebok.

Simon said JCPenney has “got its mojo back” bringing better brands into the store, fixing up the stores, and improving the beauty floors.

Among Simon’s biggest and most successful properties are the Roosevelt Field Mall in Garden City, New York; the Woodbury Common Premium Outlets in Central Valley, New York, and the Mall at Short Hills in Short Hills, New Jersey.

The company estimates net income to be within a range of $6.45 to $6.60 per diluted share and FFO to be within a range of $11.80 to $11.95 per diluted share for the year ending Dec. 31. The FFO per diluted share range is an increase from the $11.70 to $11.95 per diluted share range provided on Feb. 6, or an increase of 5 cents per diluted share at the midpoint.

In addition, Simon’s board of directors declared a quarterly common stock dividend of $1.85 for the second quarter of 2023, an increase of 15 cents, or 8.8 percent year-over-year. The dividend will be payable on June 30, 2023, to shareholders of record on June 9, 2023.

In other results, Simon reported that domestic property net operating income, or NOI, increased 4 percent and portfolio NOI increased 3.9 percent, in each case compared to the prior year period.

At Simon’s U.S. malls and premium outlet centers, occupancy was 94.4 percent as of March 31, when Simon’s first quarter ended, compared to 93.3 percent in the year-ago period, an increase of 1.1 percent

Base minimum rent per square foot was $55.84 at March 31, 2023, compared to $54.14 at March 31, 2022, an increase of 3.1 percent.

Reported retailer sales per square foot were $759, an increase of 3.3 percent for the trailing 12 months ended March 31.

On April 27, Simon opened Paris-Giverny Designer Outlet, in Normandy, France. The open-air center includes 228,000 square feet of luxury and premium brands. Simon owns a 74 percent interest in this center.

Last quarter, construction restarted on a 338,000-square-foot upscale outlet located in Jenks (Tulsa), Oklahoma, projected to open in the fall of 2024. Simon owns 100 percent of this project.

The company indicated that construction continues on redevelopment and expansion projects at properties in North America, Europe and Asia.

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