Simon Property Group 1Q16 Earnings Call Notes

Simon Property Group’s (SPG) CEO David Simon on Q1 2016

We were cautious and we remain cautious

” look I think a quarter ago we were cautious, we continue to be cautious. I don’t want to mention specific retailers whether they paid rent or not paid rent. The only one that’s filed bankruptcy thus far is Paxton [ph]. I am sure there were some pre-petition amounts that we wrote-off in the quarter. I mean it’s not overly material and that’s part of what we have dealt with for 60 years retail bankruptcies. So we remain cautious, our biggest reason we were cautious, is that the U.S. economy continues to flatten out, I mean there is not a lot of growth I suggest you look at a lot of industries in our beyond real estate to see what’s going on in the U.S. economy and it is what it is.”

We don’t see the death of brick and mortar

” the media about the death we don’t see it, demand is fine. Properties are getting better, we got supply and demand in our favour, no one’s building Class A Outlets or Malls to any degreeable issue, certainly there will be retail space that gets re-focussed which will help us obviously in supply and demand equations and I just — I don’t view it beyond that.

A lot of money has been spent in e-com and it’s not showing up for retailers. Best opportunity continues to be brick and mortar

The Internet is not the panacea. A lot of CapEx have been spent there. It’s not showing the returns for retailers, so I think they are going to — their biggest and best opportunity continues to be bricks and mortar and you know we’ll keep plugging along.”

There are a few tenants out there who may or may not go bankrupt

“We are consumer oriented company, and I mean we are the basically the worldwide economy is flattening. There is a lot of stuff out there. And we are just being a lit bit of cautious. And obviously I mean, we all know there is a few tenants out there that may or may not go bankrupt may or may not close the bunch of stores. We’ve got to be — we have got to be judicious on how we model their future.”

I’ve lost the argument about the correlation of retail sales and ability to drive rents

” I’ve lost the argument, so I will admit defeat, okay. I will admit defeat publicly. We have lost the argument on the correlation or lack thereof between retail sales and our ability to drive rents, which happens I believe that are more toward supply and demand and then retail sales, because as you know if retailer is not producing results and there are lease happens to come up, we have the ability certainly to replace them with a retailer that’s going to be more productive.”

If you’re not profitable, investors have to fund those investments

” I think at the end of the day the all retailers have to be profitable. All e-commerce player have to be profitable, unless you know Wall Street and other investors are going to fund those investments.”