David Simon, chairman, chief executive officer and president of Simon Property Group, is one the highest-profile landlords in the mall world — but on Monday he was getting a little credit from Wall Street for his side hustle in retail.
And Simon argued for a broader view on the work his company does, one that takes into account all those malls and rent payments, but also the company’s investment in licensing powerhouse Authentic Brands Group and stakes in retailers such as J.C. Penney Co. Inc., and its SPARC joint venture, which owns Forever 21, Lucky Brand and Brooks Brothers.
Simon’s third-quarter funds from operations tallied $1.18 billion, or $3.13 a share — and Simon stressed that that included 30 cents a share from “our interest in the Forever 21 and Brooks Brothers licensing ventures for additional equity ownership in Authentic Brands Group. We now own approximately 11 percent of ABG.”
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Penney’s, Forever 21 and Brooks Brothers were all scooped up out of bankruptcy.
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“SPARC outperformed their budgets on sales, gross margins and EBITDA [earnings before interest, taxes, depreciation and amortization],” Simon said. “And we’re very pleased with the J.C. Penney results. The Penney’s team has stabilized. The business improved financial results. And we’ve added private and exclusive national brands to it.
“Penney’s success is an excellent example of how to better understand our company. We appointed Stanley Shashoua as the interim CEO nearly a year ago and look at the results. Much like the variety of our investments, no other company or industry has the capability to put an executive in an interim role and produce these results. This is a testament not only to Stanley but to the Simon culture.”
The Penney’s torch has now passed to the new CEO Marc Rosen.
And Simon wants his company to get credit for all the progress.
“Our current [stock] multiple of 13-times is approximately three turns lower than our historical average and screams very cheap compared to the REIT sector at 24-times and in many cases, even close to 30,” Simon said. “We have unequivocally proven with our results year-to-date that we’ve overcome the arbitrary shutdown of our business due to the pandemic, and our cash flow has bounced back dramatically, which many had doubted.
“We have growth levers beyond our real estate assets that are unique attributes of our company,” he said. “We have proven to be astute investors. We have unique business models and diversity of income streams.”
Later in the call, he added: “You call us a mall company. I think we’ve proven to be beyond that. And that’s what I encourage you to focus on.”
But Simon also stressed that it was important to remember that the company still gets 80 percent of its cash flow from its domestic property business.
“Look, I’m excited about what we’re doing,” the CEO said. “I do think it’s still — it’s more it’s a tail wagging the dog, but you know, it’s an important tail and it’s a beautiful tail and it wags nice and is very friendly.”
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