Simon Property Group Inc.'s 2016 fourth-quarter beat was well received and interpreted by some in the analyst community as a compelling counterpoint to the prevailing narrative about regional malls' struggles in a difficult retail environment.
Simon shares were up more than 3% by midday Jan. 31, as the REIT indexes climbed, though more modestly, and the broader markets ticked down.
On the company's Jan. 31 earnings call, CEO David Simon noted that the company saw fewer retailer closings overall in 2016 than it did in 2015 and has little exposure to the recently announced department-store downsizings. He lobbed a tongue-in-cheek jab of sorts at naysayers in prepared remarks.
"Now could be the time in 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 ... but I won't, because we've talked about that all before," he said.
Later, Simon acknowledged that the retail business is a "dog-eat-dog" environment and that requests for rent relief are up. But he credited the company's success to its "belief" in its properties and its willingness to invest in them.
"What we have seen from some in the retail world is, they are not investing in their physical stores," Simon said. "And they are investing more online, and the margins online are not what they are in the physical environment. If they are not keeping up with the bargain that we're doing ... we'd love to get the space back and redevelop it. So we're prepared for any and all scenarios."
Executives noted on the call that the company has successfully refilled 80 anchor spaces over the last five years.
"In virtually every instance where we have replaced an anchor, we've increased our sales, increased the number of reasons that people come to shop our properties, and we've made good returns on our capital," President and COO Rick Sokolov said.