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Simon talks big-picture strategy, GICS change


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Simon talks big-picture strategy, GICS change

The marketshould not expect Simon Property GroupInc. to pursue a spinoff or similarly significant deal for the foreseeablefuture, according to Chairman and CEO David Simon.

On thecompany's first-quarter earningscall April 26, an analystopened the Q&A segment with a big-picture inquiry into the company's strategy.Nearly two years after the spinoff of Washington Prime, now WP Glimcher Inc., the company is left with a high-qualitymall portfolio, a global outlet business, The Mills portfolio and a stake in . Can the market expectthe company to offload any of those segments?

Simonsaid the mall REIT is not likely to pursue a sale of any segment and will continueto own assets across the price spectrum.

"Wehave no intention to spin off any other assets. We think they [the company's businesssegments] are absolutely synergistic … with our retailer relationships. We havethe lowest overhead, lowest cost of capital, given the portfolio. We've got, historically,the best comp NOI growth. So as long as we can continue to do what we're doing,I don't see any reason why we would want to spin anything off," he said. "Theyall fit nicely together."

At anotherpoint on the call, an analyst asked Simon for his thoughts on the likely impactof the breakout of real estate from financials in the Global Industry ClassificationStandard, or GICS. Simon confessed he had "no crystal ball on that front"but said he is confident in the company story.

"The good news of that group is they look at cash flow growth,"Simon said of the potential new capital sources. "They look at earnings growth.They look at balance sheet metrics. They'll compare us to other industries as opposedto just within our sector. They won't be thoroughly focused on NAV — which, again,we can argue about. They won't worry about a quarter here or there of our retailsales. They're going to look at what kind of growth we have in our cash flow, inour earnings. And I think that plays perfectly well with us, given the kind of earningsgrowth that we've had over many, many, many years and many different cycles. Sowe're very focused on trying to solicit them."