Simon Property Group Inc.'s David Simon on Aug. 1 touted the company's deal-making and operating prowess in adverse market conditions and brushed off the notion that the mall business is moribund.
"I hate to say it, but we're really experienced in tougher times," Simon said on the company's second-quarter earnings call. "We actually do our best work at tougher times. ... I will tell you it's not a very fun environment. We're working extra hard. We're pounding the pavement more than ever. We've got to go get deals."
The mall REIT reported 5.0% growth during the second quarter in total portfolio net operating income — a performance one analyst deemed "very strong" — giving its shares a boost on the Street. The growth of online sales platforms and concomitant changes in consumer behavior have undermined investors' confidence in regional mall REITs, and today even vaunted names in retail real estate are trading at significant discounts.
On the call, Simon acknowledged that market conditions remain "a little bit rocky" but said the company is dealing with retailer issues "head on."
"Every situation is case-by-case," Simon said of the company's tenants. "I'd rather we weren't dealing with this environment, but we are, so we just deal with it head on, do the best we can. But I think we'll be leading the charge within our own industry."
At the end of the Q&A segment, Simon framed the current environment as a reprise of other challenging stretches in the retail industry's past rather than a new and more profound kind of trouble.
"I don't buy that equation," the executive said of the concerns about the mall business' long-term future. "That's not how we're operating our business. Do you need to be maybe a touch more conservative? Do you have to hoard a touch more capital? Do you have to be a little more flexible with retailers? Of course. But we don't see the end of our business."
Simon Property shares were trading up around 1% at midday Aug. 1.