Simon Property Group 3Q16 Earnings Call Notes

Simon Property Group’s (SPG) CEO David Simon on Q3 2016 Results

Malls impacted by strong dollar

“Total retail sales per square-foot at our malls and premium outlets were $604 compared to $616 in the prior year period. Reported retailer centers continued to be impacted by the strong dollar at some of our tourist-oriented malls and premium outlets, reported retailer sales at our centers outside of our tourist oriented centers.”

It’s no surprise that retail has come under pressure

“Now, it’s no surprise that retail generally has come under pressure, lots of different reasons which we could go into but let’s – unless you want to let’s not. But the fact is, and we are impacted as I said to you before by our general GDP growth. And to date, our retail generally is there is no inflation and our nominal GDP growth is 1.5%, yet we’re growing our comps timing. And if nominal GDP, there is some inflation. So maybe real GDP growth is I don’t know 50 basis points. We’re still growing our business with no inflation in our particular business at 3.5% comp NOI that’s not that. It’s not 4% plus that we did last year or the year before, but it’s still in the scheme of being able to grow our business, that’s not bad.”

A lot of retailers have chased e-commerce and not invested in their physical locations

“I think what unfortunately what I think a number of retailers, they’ve not invested in their product, okay. Or they’ve chased the holy-grail of internet sales to the determent of what they should be doing with the physical product, as still people want to go physical shopping. And when they go physical shopping, you’ve got to have a nice physical environment. So we have spent a lot of years wanting to invest in our physical product. And I think that’s our number one focus continues to be we’re well through that”

Acquired Aeropostale

“And let me turn to Aeropostale, we’re pleased to have partnered with GGP, Authentic Brands Group, Hilco and Gordon Brothers to acquire Aeropostale in addition to the existing management team, the ABG Group will add significant operating experience to Aero.”

If Amazon gets to go vertical…

“And again I’m not comparing, I’ll just try to put these things in perspective, I’m not comparing our business to AT&T or anybody else. Amazon, what’s made Amazon great is they’ve had the latitude to go vertical. They’ve gone vertical, they’ve gone content, they’ve gone distribution, they’ve gone retail, and that may be the future of corporate America is that you’re not going to pigeon-hole these comps.”

Have worked through the bankruptcies that we got in ’15

“. Now what we did say when we started this year, our occupancy is up. Firstly it is up, so put that in perspective. We also said our bankruptcy store closings would be down in ‘16, it is down. We had much greater in ‘15, and we’ve basically more or less leased all of the bankruptcies that we got back in ‘15 in a flat-to-tough retail environment. And I think everybody needs to put that in perspective, okay.”

Rick Sokolov

International retailers accelerating focus on properties in the US

“The only other thing I would say to you is that we are seeing the international retailers like Zara, like H&M accelerating their focus on our properties in the United States because there is demand to grow in this market. And we are seeing that.”