It almosthas become a tradition for analysts on SimonProperty Group Inc.'s quarterly earnings calls to hit Chairman and CEODavid Simon with a question about the existential crisis facing the mall business,as online sales continue to grow, retailer store closures mount and millennial tastesrevolutionize the real estate business.
Simon'sresponses are a little different every time, but they typically have the same MarkTwain-esque theme: Reports of the mall industry's death are exaggerated.
An analyston Simon Property's 2016 first-quarter earningscall April 26 wanted to know how the company's business planning has evolved inthe last year to accommodate new risks. Simon's response was unusually long anddiscursive.
"Honestly,I think, maybe you're getting caught up in a lot of the media discussions,"Simon said. "I mean, our business is as solid as it's ever been. … Our simplisticview is it's not as bad as people want to write about."
Simonidentified the U.S. economy as perhaps "the biggest issue." Heacknowledged sales at tourist-oriented centers have fallen but said business overallis solid.
"We'llnever use excuses, but I think we have to look at our performance in conjunctionwith what's going on in the U.S. economy. And the fact of the matter is the U.S.economy is flat-line. And yet, we're holding our own and gaining market share witha lot of our properties," the executive said.
Laterin the Q&A segment, Simon elaborated on his comments about the state of theU.S. economy, which he said has moved the company to adopt a "relatively conservative"approach.
"Westill have certain retailers that may or may not impact us. Maybe we budgeted themright, maybe we didn't," he said. "All of that — none of it really isall that material for us, thankfully. We built this company to sustain ins and outsof certain retailers. All of this affects us on the margin. As you know, whetheryou slice us by product type, by geography, by retailer — you cut, slice, bake Europe,whatever — I just think, generally, we're operating appropriately given the growthin the economy."
As forongoing media reports about the depth of the mall crisis, Simon said: "We don'tsee it. Demand is fine. Properties are getting better. We've got supply and demandin our favor."