Simon’s Faces Worst Revenue in Nearly a Decade

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Simon Property Group, the largest mall owner in the United States, faced its worst quarter in nearly a decade as the coronavirus pandemic forced malls to close and battered retail sales.

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The Indianapolis-based real estate investment trust posted $1.06 billion in revenue in the second quarter of this year, a nearly 24 percent drop from the first quarter of 2020 and its worst quarter on record since the $1.04 billion during the second quarter of 2011, Simon announced today. Simon’s revenue was also lower than the $1.14 billion Wall Street analysts expected it to pull in this quarter, Reuters reported.

David Simon, the chairman and CEO of Simon, blamed the impact on revenues on unpaid rent and abatements for retailers during the pandemic and the loss of 10,500 shopping days in the quarter ended on June 30.

“We went out of the way to abate rent for thousands of local small businesses,” Simon said during Monday’s earnings call.

“I’m pleased with the resilience of our portfolio and solid profitability,” he added. “Our profitability was achieved despite our portfolio being closed to the public.”

Simon collected 51 percent of its rents for April and May combined, 69 percent in June and about 73 percent in July, Simon said during the call. Simon has sued Gap, accusing the company of using COVID-19 as an excuse to not pay $107 million in rent, Bloomberg reported.

The REIT also lost about $215 million after giving rent abatements to tenants, mostly locally-owned shops and restaurants.

“It’s all moving in the right direction,” Simon said about the rents. “We haven’t given up on Q2 collections, other than what we abated and wrote off through bankruptcy. We expect to reach a deal on the vast majority.”

Retail has been reeling since the coronavirus pandemic as stay-at-home measures to curb the spread of the disease forced stores to shutter in mid-March. J.Crew, JCPenney, Brooks Brothers, Muji, Neiman Marcus and Lucky Brand Jeans, among others, have filed for bankruptcy since.

Simon had reopened nearly all of its 200 properties across the U.S., except seven in California that it was forced to re-close recently as cases in that state flared up.

And, while it posted lower than expected revenues, which Simon announced after the market closed, its stock increased by nearly 5.3 percent on Monday after The Wall Street Journal reported it was in talks with Amazon for the e-commerce giant to lease anchor space in malls to use as fulfillment centers. (Simon declined to comment on the discussions during the earnings call.)

The REIT also recently put out a bid with Authentic Brands Group to buy the bankruptcy Brooks Brothers for $305 million (which Simon expects would see a return within a year) and scrapped its plan to buy mall owner Taubman Centers for $3.6 billion because of the pandemic.

Simon ended the second quarter with $8.5 billion in liquidity and $3.6 billion cash on hand, the company said.