Mall owner Simon's CEO sees shopper 'euphoria' as people return to stores

• Mall owner Simon Property says shoppers are getting back to malls, but that it's hard to predict what traffic trends are going to look like one year from now.
• "There's clearly some level of euphoria," CEO David Simon said.

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The biggest U.S. mall owner Simon Property Group says shoppers are getting back to malls, but that it's hard to predict what traffic trends are going to look like one year from now.

Simon Property CEO David Simon said Monday that sales and shopper visits are improving week over week, but it is still being conservative in its outlook because it's difficult to know what's going to stick versus what's a short-term boost, he said.

"Between being cooped up, between being locked down, between the stimulus, between celebrating that the country is still around … there's clearly some level of euphoria around that," David Simon said during an earnings conference call Monday.

"It would be impossible for me to tell you what percent that is. … On the other hand, we're still seeing pockets of the country that haven't really seen that yet," David Simon added.

He cited California and New York as two examples where store traffic remains suppressed by Covid-related restrictions. International tourism has also yet to return to malls and outlet centers, he said.

For the period ended March 31, Simon reported an occupancy rate across its U.S. malls and outlet properties of 90.8%, compared with 94% a year earlier.

Total revenue fell to $1.24 billion from $1.35 billion.

Base minimum rent per square foot ticked up to $56.07 from $55.76 in the year-ago period.

Simon's top tenants in terms of how much rent they pay include Gap Inc., L Brands and PVH, as well as department store chains Macy's and J.C. Penney.

"We're making deals with across the board with a bunch of people," David Simon said about leasing activity in 2021. "We do still have some difficult relationships in negotiations that we're dealing with. And again, I won't name names. … But if they're not paying what we think is fair, we'd just rather sit on empty space."

Simon now anticipates earnings of between $9.70 to $9.80 per share in funds from operations for 2021, compared with a previous forecast of $9.50 to $9.75 a share. FFO is an earnings metric used by real estate investment trusts.

Simon Property shares were falling about 2% in extended trading. The stock is up nearly 50% year to date. Simon has a market cap of $42 billion.

Find the full earnings press release from Simon here.

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