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Simon Property Group 4Q16 Earnings Call Notes

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David E. Simon

I could go on a 400 word diatribe, but I wont

“Moving on from our results, now could be the time on the call where I could go into a lengthy philosophical discussion on the popular misconceptions about the mall business, created by the never-ending current public narrative. And I could counter that by pointing that we have 434 department stores in our portfolio, and only one is vacant, and how in the recently announced department store closing, we have only one closure in our portfolio, or how we have added more than 275 sit-down or quick-service restaurants, more than 20 entertainment concepts, and more than 80 big box tenants across our portfolio over the last four, five years, or how we’ve added mixed use components to our centers in the last several years, we have built 10 hotels and residents representing nearly 3,000 units, or how according to a recent survey a Generation Z members, a group that outsizes Millennials, 70% of those surveyed visit the mall at least once a month and visit more than four stores during the visit, or how the consumers still like to shop in stores, because they want to touch and feel the products before they make a final decision, or how online retail sales have grown to less than 10% of total retail sales, and that the retailers who occupy our centers represent approximately two-thirds of those total online sales, or how leading e-commerce retailers, like Warby Parker, Blue Nile, UNTUCKit, Shinola, among others, are opening physical stores, because the inherent advantage a physical location provides as well as being a natural extension to the digital world, or how basket sizes are higher, return rates are lower in stores compared to online purchases, and margins are much higher in the store than they are in the Internet, or how emerging brands like GUIDEBOAT, NIC+ZOE, Peloton, to name a few, continue to see the mall as the launch pad to build their brand awareness, as a result of the significant traffic they experience being at the mall, much like Apple or Microsoft did several years ago, or how we are making all these changes and enhancements to our center, even though Congress has tilted the scale towards e-commerce by not implementing the Marketplace Fairness Act, which not requiring the sales and use tax to be paid by consumers who buy products online, even though they are required to do so under existing laws. But I could do that, but I won’t, because we’ve talked about that all before”

Aero management team was able to generate more cash flow because they weren’t worried about beating comps

“I’ll tell you a fascinating thing that I’ve learned at Aéro – with the Aéro investment. So and it’s just the dynamic of Wall Street, retailers, chasing Internet sales, there is a whole philosophical discussion that will take too long on this call to do. But one thing at Aéro that I learned is that that management team could produce higher level of profitability, higher gross margins if they didn’t have the Wall Street constraint on worrying about comp NOI or comp sales growth i.e. they could generate more cash flow because they’re not worried about posting a comp sales number that’s below market expectations.”

Retail is a dog eat dog world now

“We did experience less store closures last year than we did in 2015, the way we had suggested we would, that’s why our occupancy went up, but I’m not going to sugarcoat it, retail environment is not – it’s not robust, it’s doggy dog right now.”

We’d like to see retailers dedicate more funds to improving the store environment

“Well I think, it all depends upon what point are they in their financial equation. Look, I think – and again, this is more philosophical, but what we’d like to see from the retail community is a dedication back to improving the store environment. We think a lot of the capital that has been put forward has been to chase Internet sales, a lot of that has been done through promotional efforts. And between that and the promotions required to get them to buy online between the cost of shipping and the returns, it’s not a great model for them.”

Leveraged buyouts have been a bigger problem than the internet for our retailers

“Let’s talk about the casino business. You could say the gaming could all go online. But if you’re Steve Wynn, you build the best product, you have the best service, and lo and behold, people show up, they gain, they participate, they stay there, and he gets great returns on equity. He has got unbelievable conviction and he puts his money where his mouth is. We need that in our business. What’s hurt our business in retail, frankly, is that there has been too many leverage buyouts with too much debt, and we all know no matter how good a retailer you are, you’re going to run into ebbs and flows. And lo and behold, when you run into that scenario, you’ve got a balance sheet that can’t withstand it. I can’t tell you how much pressure is because of that as opposed to because of the Internet. We can go chapter and verse, and what that also does means they don’t invest in the stores.”

Simon Property Group 3Q16 Earnings Call Notes

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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.”

Simon Property Group 1Q16 Earnings Call Notes

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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.”

Simon Property Group 4Q15 Earnings Call Notes

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Simon Property Group’s (SPG) CEO David Simon on Q4 2015 Results

Traffic at our malls was flat for the year

“I know you’ve all heard about mall traffic decreases. But let me give you some facts based on our internal data across the largest retail portfolio in the U.S. and not just estimates derived from arbitrary algorithms. Traffic at our Malls was flat for the year including the Holiday season, traffic at our Premium Outlets increased 1.5% for the year and more than 2% for the holidays, and traffic at the Mills increased slightly for the year as well.”

Consumers are going to the store more educated, doing less browsing

“So remember we get the overall traffic number and yet most of the folks that quote — most of the folks that quote numbers are based on algorithms, so it’s not real necessarily data like we have, and number two, is it is derived from certain stores. So it doesn’t, it necessarily equate the mall traffic and it gives you store data but not mall traffic data and that’s the distinction that I really important to make. And I will tell you the trend though with mobile technology is that the consumer today clearly is going to the physical environment more educated, they’re doing less browsing and they’re going to less stores.”

We are out of the big deal business

“Well, look, I think what Bilerman said earlier, asked earlier, I mean we are out of the big deal business. So people can speculate all they want. And I do think the market should understand and as our plan that we will be conservative on buybacks. As some of the higher — I understand Tom that some of the higher estimates out there on first call were due to the buyback number. So that’s part of the issue there.’

The second half of 2015 was a perfect storm for wounded retailers

“we did experience in ’15 a number of bankruptcies of kind of the really poor performing retailers. There was clearly a slowdown in retail sales in the back half of the year. And then when you couple that with the tourism issue, you couple that with the normal weather, I mean it was so to speak a perfect storm, and it took a lot of retailers out.”

Rick Sokolov

Able to release space from bankrupt tenants at reasonable cost

“Hi. This is Rick. In fact, we were doing very well with that releasing. What we are going to do is we are not going to put our space on sale, we are holding margins. In fact, the rents for foot of the space that has to lease are above the rents of the tenants that left because of bankruptcy and we’re making sure that we are getting in the right tenants at the right price, at the right space. So we’re on track with that, and there you’ll continue to see the benefit of that coming into this year as more of those leases open.”

Miscellaneous Earnings Call Notes 10.29.15

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E*TRADE Financial (ETFC) Paul Thomas Idzik on Q3 2015 Results

There’s a big penalty for a bank when it crosses $50B in assets in the form of greater regulatory spending

“as I said many times in previous calls when this topic comes up, none of our owners are going to reward us by tiptoeing over $50 billion and incurring all the costs and distraction. If we go over $50 billion, it will be when Mr. Pizzi and I and the rest of the team are confident that it’s going to make sense for our owners.”

Volvo’s (VOLVY) CEO Martin Lundstedt on Q3 2015 Results

We see a strong year for trucks in North America

“Trucks North America, we can say that North America – when we start with the macroeconomic view on North America, I think we see the same thing as many other people see. It is a solid growth also for next year, so we don’t see any kind of other things in North America compared to what most, I would say, macroeconomic people see.”

Brazil is probably not coming back for two years

“I think that also one should recognize that Brazil is most probably not going to come back into some kind of high growth or anything like that for – I would say don’t anticipate that for the next coming two years at least because Brazil has to go through quite a lot of things. We don’t see the boom in terms of raw material prices. And not only prices, also the demand is actually coming down and that was very much what fueled the economy in Brazil.”

Whirlpool’s (WHR) CEO Jeff Fettig on Q3 2015 Results

Currencies have experienced a global reset

“Given the significant economic shocks this year, we believe that currencies have experienced a global reset, and we are prepared to operate this changed environment going forward.”

Europe is a split market

“On Europe, again it’s a split market, if you want to say. But Eastern European market demand continues to be very slow and very much down, which is driven by Russia and Ukraine…The western side, on the other side, I would say its stronger than anticipated. The most markets are in a very healthy and robust phase.”

China -4% right now

“China has been slower in terms of market events than we expected, kind of coming into the year. Its at around minus 4% right now, and for that market, it’s a big decline, although in general terms its not and we don’t think that it should have a significant impact on our business”

State Street (STT) Joseph L. Hooley on Q3 2015 Results

It’s certainly a positive that markets have rebounded month to date

” it’s certainly a positive that markets have rebounded month-to-date here in October. I would point out just for completeness that emerging markets now are pretty close on a month-to-date basis back to the third quarter average. They had really dipped in late September, and what’s particularly important to us is the average over the whole quarter. So I would – I’d hesitate to try to claim any kind of victory based on the first three weeks of October, and obviously we’ve got another couple months to go. But I would agree with you that it’s certainly been helpful to see the equity market positive news on the first three weeks of the month.”

Royal Caribbean Cruises’ (RCL) CEO Richard Fain on Q3 2015 Results

Bookings are strong even in China

“The Caribbean and China which makes up approximately two thirds of capacity are significantly more booked than last year at higher rates. The strength of these two products is more than offsetting continued pressure in Latin America.”

Our feelings are good about China

” our feelings are good about how we see China. We think the opportunity is still very, very strong. So that’s kind of our perspective on China.”

Bank of Hawaii’s (BOH) CEO Peter Ho on Q3 2015 Results

CRE has been the headliner for loan growth but we are pretty mature in the cycle, and our core relationships will probably begin to pull back

“all of our lending categories are performing very well right now. So CRE has been the headliner for a good amount of time. It continues to be through the third quarter and we think we still have some space left in this cycle for continued growth. Having said that, we are pretty mature in both the commercial and in particular the commercial real estate cycle and really what you are likely to see is as our core relationships begin to pull back in light of pricing in the marketplace, you will likely see us doing the same.”

Consumer lending strong

“on the other consumer side, home-equity and indirect and installment and credit card, those portfolios are growing very nicely for us. And really, I think a reflection of what’s happening with the economy here in town.”

Comcast’s (CMCSA) CEO Brian Roberts on Q3 2015 Results

Comcast venturing into wireless service

“we believe that wireless obviously is an important area for consumers and how they are in the future. And today, we have incredible success with our Wi-Fi network, which is the largest in-home Wi-Fi network, as well as a terrific out of home Wi-Fi, we’re seeing a majority of bits travel over the Wi-Fi network. But it takes about six months to activate the MVNO. We’ve had told everybody that before, we were going to trial some things and test some things after we activate and we’ll update people as that progresses.”

Ford Motor’s (F) CEO Mark Fields on Q3 2015 Results

We are seeing stabilization in China

“just a couple comments on the China industry, we are seeing stabilization and as Bob mentioned we do expect to lift from the stimulus package. And as he mentioned we are seeing showroom traffic improve, we are seeing closing ratios improve and unquestionably we see this as a really good opportunity, because 70% of our sales have the engines that are eligible for the stimulus.”

Expect stronger for longer in the US

“We would characterize the U.S. industry as healthy and borrowing any type of shock whether it would be economic or policy related. We do see industry sales staying well supported at the current levels through the next few years or in other words we expected to be stronger for longer.”

The industry is going to have to do a lot of work to increase fuel efficiency by the end of the decade

“if you look 2019 and 2020 I mean I think there’s a lot of work the whole industry is got to do at that point in time in response to your compliance particularly around the machines and fuel economy, but I think we feel good about where we are up until 2019, but then there is a sort of a step level increase and we are all going to have to continue to work on particularly with more electrification that’s going to be required in that timeframe.”

Coach (COH) Victor Luis on Q1 2016 Results

We’re bucking the trend of a weak environment in China

“In terms of China, as you mentioned, we’re really pleased to be bucking the trends that many of our traditional competitors are reporting…our team is managing our brand incredibly well in what is of course a very turbulent environment, not only with the exchange rate fluctuations and the impact on traffic into Hong Kong and Macau, but also the domestic stock market gyrations which are now very well-publicized.”

PACCAR’s (PCAR) CEO Ron Armstrong on Q3 2015 Results

European outlook continues to improve

“The European economic and truck market outlook continues to improve. GDP growth expectations for this year are 2.6% in the UK, which is PACCAR’s strongest market in the region, GDP growth is also accelerating on the continent…We expect the strong market conditions to extend into next year.”

Simon Property Group’s (SPG) CEO David Simon on Q3 2015 Results

Bankruptcies in 2015 but better comps than expected

“We are obviously had a lot more bankruptcies in ’15 than we did in ’14 and the other impact we’ve had on the negative side is that we’ve lost certain amount of percentage rent from the outlet business because of the fact that the strong dollar has also heard tourism shopping and we’ve seen that impacted more in the outlet business, the outlet tourists centers then we had in the mall business. The mall comp sales have been a better than our expectations and our leading portfolio in terms of that.”

Applied Industrial Technologies (AIT) Neil A. Schrimsher on Q1 2016 Results

October declined from September

“I mean we had a weakness in July, some expected. That continued through August. And off of that lower base, September probably came in modestly positive. As we look month-to-date through October, I’d say sequentially, it’s around 2% decline that we would see off that period”

CBRE Group’s (CBG) CEO Bob Sulentic on Q3 2015 Results

Our strongest growth is in Europe

“we are not seeing a lot of pressure. I would tell you where we are seen the strongest growth is in Europe. You saw the results this quarter, we expect that continue, but we saw good growth in places where people did not necessarily expected. In Greater China, we had nice growth. In Australia, we did, so we have not felt a lot of meaningful pressure at this point and the backlogs of business we have suggest that year should finish out nicely for us.”

Not seeing any deals die because of lack of capital

“From what we have seen, there is sufficient capital from other sources to step in. As I mentioned earlier, we have been anticipating that the rate of growth in sales will come down to a more sustainable level and we still believe that that is likely to be the case, but we are not seeing deals die basically because of a lack of capital”

Mondelez International (MDLZ) Irene B. Rosenfeld on Q3 2015 Results

13 percentage point currency headwind

” Based on current spot rates, we estimate currency to have a negative 13 percentage point impact for the year, a little more than our previous estimate of a 12-point impact”

The European retail environment is challenging

“the European retail environment is challenging. And I think we have been able to hold our own quite well. They’re interested in some of the very same things that our retailers around the world are interested in: what’s happening in health and wellness, what’s happening on the innovation front. And as long as we continue to drive traffic to their stores, we’re an important partner.”

AGCO (AGCO) Martin H. Richenhagen on Q3 2015 Results

Another robust harvest putting pressure on farm economics

“Another year of robust global harvest is putting pressure on commodity prices, and more challenging farm economics has reduced demand for agricultural machinery, especially for larger models.”

Argentina has increased import allowances

“the biggest export market outside of Brazil, or the market that we ship the equipment from Brazil to, is Argentina. And as you’re aware, the last few years they’ve had import restrictions that has really reduced sales in that market. This year, though, there has been some increase to those import and import allowances.”

Walgreens Boots Alliance (WBA) Stefano Pessina on Q4 2015 Results

Global healthcare markets are ready for change through scale

“The global healthcare markets, and perhaps the U.S. market more than any, are ready for change, and open to new ideas and new approaches that throughout provide scale. As the leading global healthcare company, we have the potential to play a defining role in this evolution.”

We’re not doing the RAD deal to increase our negotiating power with the payer and PBM

“Well, we have not done this to increase our negotiating power with payer and PBM. We have done this because we believe that we can extract a lot of synergies, rationalizing the combined company for, I would say, from internal sources and the harmonization of prices”

This deal will not reduce competition because we’re in an environment with lots of competition

“at the end of the day we are in an environment where the margins are decreasing. So it was decreasing. We are in an environment where there is a lot of competition. And the fact that we put together two companies will not reduce the competition – not just the competition among pharmacies.”

Macerich’s (MAC) Management on Q3 2015 Results

Apparel sales are struggling with lack of a distinct fashion trend

“On the negative side, apparel sales are only showing modest sales per square foot gains, if they struggle with a lack of a distinct fashion trend increasing competition from large format retailers and sluggish consumer settlement”

We anticipate bankruptcies will likely be comparable or higher than in previous years

“Looking towards the end of the year, we are anticipating that bankruptcies are likely to be comparable or higher than in previous years. Many of these retailers are public companies and based on their current stock prices the markets are pricing in a significant risk of bankruptcy. Contrary to the previous year, we are expecting less store closing as part of the bankruptcies as many of the retailers are prime candidates for restructuring with a smaller store base. Again, we believe the lower quality centers will be disproportionately impacted.”

Chains will use bankruptcy to their advantage to reduce store count

‘these chains will use bankruptcy potentially to reduce their store count.Outside of bankruptcy it’s more difficult, because the landlords will typically require some buyout or compensation and many of the companies have not – there’s been very few examples where companies have been successful doing that.”

Manitowoc (MTW) Kenneth W. Krueger on Q3 2015 Results

Deteriorating demand for tower cranes

“our third quarter results were disappointing, as deteriorating demand for tower cranes in the Middle East and Asia coupled with lower than anticipated all-terrain and crawler crane shipments, all contributed to the shortfall in revenues. The current global economic environment affecting customer demand is unlike any cycle we’ve seen in the recent past. Uncertainty among our customers is mounting due to emerging market peers, ongoing question over Chinese growth outlook, persistent depressed oil prices and slowing domestic growth. ”

The third quarter was one of the most difficult operating environments in recent memory

“The third quarter proved to be one of the most volatile and difficult operating environments in recent memory. Manitowoc has weathered many economic cycles and our team has proven its ability to manage the business without compromising our competitive position in the marketplace. This cycle should be no different.”

Delphi Automotive Plc (DLPH) Q3 2015 Results

China was significantly weaker than expected, but we are now starting to see a pickup in orders

“we’re real optimistic. We’re still optimistic about China. For the third quarter, it was significantly weaker than what we originally estimated. If you recall, our outlook was China up about 3.5% or 4% in the third quarter; ended up actually being down 9%. So it was very fluid. For the fourth quarter, our original outlook was China volume up roughly 5%. Current outlook is basically down a point. However, when we look at sequentially third to fourth quarter, we are starting to see a pickup in orders, a strengthening in the market, sequential growth in vehicle production”

The New York Times (NYT) Mark J. T. Thompson on Q3 2015

NYT exploring ways to deal with ad blockers

“Now ad blockers have been much in the news perhaps this is a good moment to give our perspective on that topic. As you know the Times’ digital subscription revenue stream means that we are significantly less expose the most publishers to the impact of ad blockers. Nonetheless, let me make it clear that we oppose ad blocking. The creation of quality news content is expensive and digital advertising is an important way in which we and other high-quality news providers fund news gathering operations. We are exploring a number of options including but not limited to technical solutions to mitigate the impact of ad blockers should the threat increase.”

Strength in luxury, technology advertising

“We’ve seen in Q3, and I think this will continue in Q4 real briskness in the luxury business. We saw real briskness in Q3 in the technology business. I think that will continue. And then there are other categories like retail where we just have less visibility and where there tends to be more volatility.”

We are a journalism play

“we are a journalism play. We are a news and features and opinion provider with multiple platforms, and we’re very interested in the synergies between the platforms. ”

BorgWarner’s (BWA) CEO James Verrier on Q3 2015 Results

Lowering sales guidance thanks to weakness in China and global commercial vehicle markets

“Our reported sales growth is now expected to be between minus 6% at the low end and minus 5% at the high end. This is compared with minus 5.5% to minus 2.5% previously. The change in our sales growth guidance is primarily related to two things. The impact of weaker than expected market conditions in China on our business and weak commercial vehicle markets around the world.”

SImon Property Group 2Q15 Earnings Call Notes

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Our share buyback should be taken as a signal that we are out of the big deal business

“I think it should also signal, we are out of the big deal business. So I think no ones picked that up, but we don’t see any big deals on the horizon for us. So we are obviously very focused on the development, redevelopment as you know I mean I stumble I’m not a very good reader of a text, but you look at our activity in the redevelopment and new development it’s astronomical, it’s industry-leading lots of great stuff going on and I think that’s the way to look at it.”

Four categories of retailers growing in malls: international, e-tailers, brand extenders, and brand new concepts

“think there’s four categories of retailers that we’re really seeing a lot of business with. International retailers, the e-tailers that are looking for a presence in our properties. We recently just announced and have opened Blue Nile and Bauble Bar, and we’re working with a number of others that want to come into the properties. Our existing retailers that are looking to grow through brand extension. Maybe you just saw Dick’s announce the Chelsea Collective this fall. L Brands is rolling out White Barn Candle. And the last are just the new retailers that are coming online and just to – we’ve done deals recently with Mont Blanc, Frye Boots, Jo Malone’s, Suitsupply, [Aritskina]. All of these are really exciting concepts that are relatively unique in the number of stores, and that’s going to separate our properties.”

Lot’s of new entrepreneurs opening concepts

“And I would just say this, Michael, what’s exciting – yes, we have had bankruptcies this year, it does take time to replace them. But the amount of new concepts and new entrepreneurs coming into our environment, whether it’s restaurants, the e-commerce going to physical brand expansion is really at a – is that high and our leasing folks…So I mean in that sense it’s comforting to see that there is whole host of new entrepreneurs they want to be in our own environments.”

Retailers have barbelled

“look would you say generally there is obviously the whole movement towards value on one hand and luxury on the other continues. The general – the good news about that is we’re positioned in both of those barbells extremely well. But that’s not to say people lose sight of that, that’s not to say the middle American mall isn’t doing well.”

Malls still serve their purpose

“it’s ignored from a media point of view, there’s assumptions made about those assets, there is extrapolation because one mall went out of business that all malls are going out of business. But I would say to you that the solid middle malls throughout America continue to do well, serve their purpose.”

These new retailers are much more sophisticated than the entrepreneurs we dealt with 10 years ago

“One comment I would make to you on the new retailers we are dealing with is that they are substantially more sophisticated than the crop of new retailers we dealt with say 10 years ago, better financed, much more focused on their niche and it’s been much easier to deal this new crop of entrepreneurs than might have been the case.”

Simon Property Group 1Q15 Earnings Call Notes

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Occupancy 95.8%, leasing activity remains strong

“Occupancy was 95.8%, leasing activity remains strong and healthy. The malls and premium outlets recorded leasing spreads of $11.19 per square foot, an increase of 18.9%”

Feeling good about buying back stock at these levels

“We couldn’t buy any stock back because we were in our blackout period when the announcement came. And as I look at other companies and their valuation and I look at ours, and our growth prospects and our track record, I continue to think we are extremely well positioned. As I look at history year-after-year, quarter-after-quarter and all that we’ve got going on, look at our valuation compared to our peer group and I feel very comfortable that we are a very strong and good investment.’

Storng dollar making for increased volatility in tourist markets

“I would tell you that it’s just really volatile right now on some of those tourist markets where there is a good month, a good week, and then there is a bad month and a bad week. So it kind of balances out, but I would say it’s safe to say that the strong dollar is affecting to some extent sales in some of the really highly international assets that we have but nothing that’s going to change our financial profile or earnings or any of that. But it is a lot more volatile, you hear occasionally in South Florida a little bit, you hear – we haven’t seen anything at Woodbury but I’ve heard a lot in New York, now we have no exposure there but you hear and then when I say hear, I’m hearing from the retailers, but with something to pay attention to it.”

The consumer is still cautious I think

“I’d still say generally we are still dealing with a cautious consumer, it’s safe to say and it’s volatile. So the comment I heard about the tourism also applies to just the domestic consumer as well. The patterns of the consumer are tougher to predict right now. I still think there is – confidence is getting better, but there is still a lot of debt being reduced and it’s still there is a good month, good week, and then a bad month, a bad week and the pattern is sloppy enough but it’s certainly not getting busters.”

Weather expense was even worse than last year

“I probably shouldn’t mention it but we had another awful winter in northeast. For those of you in Boston only, we have a lot of exposure in northeast. Believe it or not, our snow expense was higher this year than last year across the portfolio. So we still had to deal with a little bit of the weather, but we are dealing with a cautious consumer and we are delivering – the good news is, we are delivering results in that environment. That’s all we can do.”

Listing growth retailers

“the tenant that has the broadest footprint in our portfolio is L Brands, with Victoria’s Secret and they are doing great results, and they are growing and they are expanding and they are adding things to the Victoria’s Secret stores. But we are doing with a lot of international retailers that people haven’t — DAVIDsTEA has come down, we are growing UNIQLO, we are growing H&M, we are growing Sephora, and we are growing Altar’d State, which is a great retailer that has got a significant growth platform.”

Simon Property Group 3Q14 Earnings Call Notes

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Overall business conditions remain healthy

“Overall business conditions remain favorable driving increases in our key operating metrics and cash flow. We continue to see strong demand for space across the portfolio. Occupancy increased across the portfolio. Leasing activity is healthy. ”

Online retailers have to have stores. Stores have to have online

“on Amazon, leasing space, I’m not — it’s, all the details aren’t out, but there’s clearly a benefit for the overused word, omnichannel bricks and clicks, however you want to describe it, there’s a real benefit. In fact, it’s very interesting when I see Sears as a online retailer, depending on which study you look at. I mean, they’re anywhere from — they’re clearly in the top 10. They may be as high as #5. And I would argue it’s because of their physical presence that allows them to be so important in the online presence. And you’ve heard it from retailers that the synergy between having the physical and the online presence and now the move toward mobile, and how its all been integrated. So — and clearly, we’ve seen a number of pure online retailers going to physical stores. So the — it’s got to be in the equation for a retailer to have a physical presence. I don’t think there’s any question in that. And as our retailers have gotten more sophisticated in the online world, I think that’s going to play to our benefit.”

Millenials like the mall

“the research that we’ve done has shown that the millennials are, in fact, very supportive of the mall channel and are very much focused on going on there”

Purchase made in store fulfilled online are part of our sales

“that’s — in our leases, even if it’s done in the store but fulfilled online that’s part of our sales. That’s not really too much of an issue.”

Simplistically, I think the consumer remains cautious

“Simplistically, consumer, I believe, is — continues to be somewhat cautious. The good news is, there’s an environment, where I think, at some point in the near future, they will be less cautious, lower oil or lower gas prices, better job environment. Hopefully, wage growth, continuation of lower interest rates, just some of those out there. But they’re still cautious. And that’s how we’re planning, so we’re running our business.”

I think back to school was spotty

“The [back to school season] I think it was generally spotty. I mean, I think, it was certainly wasn’t robust, and I think it still represented the cautious consumer.”

We don’t buy anything unless we think there can be improvements

“we don’t buy any asset if we don’t feel like we can improve it. And there’s — so that’s kind of a thing that we have regardless of what we do, whether it’s new development, redevelopment or importantly, acquisitions. What can we do to beat the growth rate that may exist.”

If you want to maintain a relationship, you can’t pinch pennies

“we believe in repeat business with our retailers. So we’re always calibrating — and we don’t — we’re not perfect at this. Believe me, we make mistakes all the time. But we’re always trying to calibrate the win-win, all right? How do you keep the retailer who is our — is our customer in addition to the consumer happy? How do we reach our financial goals? But we are not getting the last dollar because we do multiple deals, multiple business with them, year-after-year, day-after-day..we’re not trying to get to the point of no return. We’re trying to find that balance. And I’ll be the first to tell you, sometimes we don’t do it, sometimes we make mistakes, but we’re always trying to find that balance for future positive relations with our clients going forward. Just like any other business.”

Simon Property Group 2Q14 Earnings Call Notes

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We’re seeing a cautious consumer right now

“Well, look, the fact is the consumer generally is still very cautious and we see that across the board. There is no denying that, from – as you know, a number of retailers, both low and medium and even high-end, are all seeing somewhat of a cautious consumer. And that’s certainly is affecting retail sales in our properties. So that continues to be the case. We have our work cut out for us, with respect to that issue. We think it’s – we don’t think it’s a shift issue going from. We’ve done a lot of research here.

We don’t think it’s a shift from the – to online from physical. It’s really more of an indicator that the consumer right now is pretty cautious. So – and I think a lot of that is just all the macro stuff that’s out there. We’ve seen it before. We certainly have some retailers that have their issues which will put – puts focus on us to release their space. But again, I mean, those things ebb and flow, but we’ve got our work cut out for us with regard to just kind of a consumer that’s cautious right now.”

Traffic isn’t down, it’s flat, but these aren’t important months anyways

“Well, it’s not down double-digits, okay. I don’t know where you get that data either. Now, it’s not – I would say mall traffic is generally flat, the summer months are not big until late July and August because they’re back to school. June is not an important month. Early part of July is not. So we’ll see what happens.”

Consumer is cautious, but generally economy is improving and that will move the consumer forward

“I do think that the consumer has been cautious and for all sorts of reasons. The sense on the macro side is that – and part of that was a move toward durable stuff, but the fact that matter is, I do think there is a law here and I don’t view it as a long term role. I do think, the economy sounds, feels like it’s getting better and with that the consumer will move forward.”

Don’t blame Simon for negative GDP

“GDP of last quarter it was down 3%. I had nothing to do with that. I did my fair share, I built, I redeveloped, I hired people, I gave raises, I did everything I can to juice the economy, so don’t look at me. Okay?”

More bankruptcy of mall tenants

” there’s going to be a little volatility in through it, because there are some – we have a little bit more bankruptcies this year than we did the last couple.”

Focus on the return on Equity

“if you over improve stuff and you don’t get the right return on equity you kind of get – you’ve kind of done it and that’s great and the architects can pat themselves on the back, but the question is where is the cash flow. ”

Private market value still more expensive than stocks

“if you look at the value in the private markets and what’s being paid and look at where our stock is trading. And I think you could certainly make the argument that the private market is certainly more expensive than public stocks.”

Simon Property Group 3Q13 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“For the malls and the Premium Outlets, comparable property NOI growth was 4.9% for the quarter, driven by tenant sales up 3% to $579 per square foot.”

“the thing that I am focused on in our mall business — and when I say mall business, I include the outlets, is that we have to make — we’ve always made retailer service a priority. So Rick and I are as good as sucking up to retailers as possible, okay? Sometimes, Rick is better than I am, but we both can suck up when required. The one thing we don’t do the way I would like us to, is I really want to — I want to provide better service to our consumers, the actual shoppers. And whether that’s — something we instituted last year was just surprising delights, come to the mall and we’re going to give you a free cup of coffee, we’re going to schlep your bags. We’re going to make your visit really better. ”

“September was a pretty bad month in terms of traffic and sales for all retailers. And we’re starting to hear and feel the traffic is bouncing back in October. But clearly, clearly, the general economy has slowed…But the fact is, we’re not denying that the world — the U.S. has actually slowed.”