David Simon

Mall owners have had a particularly rough few years. The rise of e-commerce drew shoppers from bricks to clicks, a trend the pandemic only exacerbated when governmental orders kept everybody confined to their homes.

But to hear David Simon tell it, brick and mortar is back, and Simon Property Group, the nation’s largest mall owner, has gotten through the worst of it.

“We were flatlining pre-COVID; obviously we got hurt during COVID, and we bounced back nicely,” Simon said during the company’s first-quarter earnings call on May 1. 

“We have finally turned a corner on lease spreads, demand, more commitments from retailers and more retailers wanting to open stores all driving pretty good demand,” Simon added.

And it’s not all talk for Simon. The Indianapolis-based mall owner ended 2022 with $673.8 million in net income — an increase from the $503.2 million it netted the year before — and its funds from operations (FFO) reached $1.183 billion, higher than the $1.17 billion the year before.

Simon kicked off 2023 on a good footing by exceeding its expectations — with FFO increasing from $2.70 a share in the first quarter of 2022 to $2.74 in the first quarter of 2023 — and raised its FFO guidance by 5 cents for the year. David Simon attributed that to strong tenant demand, netting more than 5.9 million square feet of leases in the first quarter with 25 percent of that from new deals, and retail sales in its properties increasing.

“Tenant demand is excellent, and brick-and-mortar stores are where shoppers want to be,” Simon said. 

Simon also continued to make slight moves away from the retail space, gearing up to start construction on about 2,000 residential units and hotel rooms and purchasing a 50 percent stake in Jamestown in October for an undisclosed amount.

“We have a residential pipeline that looks really attractive and hotels that are creating really good values,” Simon said. “That for us is a real opportunity.”

But it hasn’t all been rosy for Simon. Its $295 million loan tied to The Shops at Mission Viejo in Southern California was sent to special servicing in February 2023 after Simon missed the maturity; and it had to pump more money into JCPenney after a less-than-stellar 2022 for the department store chain it bought in 2020.