David Simon might just be sitting out the battle for Kohl’s Corp. after all.
Simon, who is chairman, chief executive officer and president of Simon Property Group, threw cold water on rumors around the company’s dealmaking — although he didn’t specifically address reports, including in WWD, that the real estate firm offered to buy Kohl’s for $68 a share, or $8.7 billion.
“Don’t believe any rumors or media reports concerning our M&A activity,” Simon said on a conference call on Monday as he walked analysts through strong first-quarter results and his outlook for the year.
“We’re really, really focused internally and obviously, given where the [Simon Property Group] stock has performed over the last couple of months, we think it’s an opportunity to be opportunistic in terms of buying our stock,” Simon said.
Shares of Simon Property ticked up 1.1 percent to $119.50 in after-hours trading on Monday and have mostly traded below $130 over the past couple months — well below the roughly $160 it started the year at.
Although a Kohl’s acquisition would have been somewhat out of character for Simon, the thought was that he was interested in buying the retailer to sync it up with J.C. Penney, which the real estate company helped buy out of bankruptcy.
Kohl’s has been dogged by activist investors for more than a year and lately has been evaluating takeover offers with the help of Goldman Sachs, reportedly fielding interest from Hudson’s Bay Co., Sycamore Partners, Leonard Green & Partners and others.
Simon — a landlord who has lately been bitten by the retail bug — was in a position to win Kohl’s if he wanted to. But there is plenty in the portfolio to work on. He has a joint venture with Authentic Brands Group — SPARC — that bought Reebok this spring and also owns Lucky Brand, Forever 21, Eddie Bauer, Brooks Brothers and others.
The CEO suggested there’s enough to work on for now — particularly with the Reebok integration just starting — although anything can happen in the world of dealmaking where buyers run hot and cold depending on the moment and the circumstances.
Simon assured analysts, “The capital allocation that I see is either to the shareholders [with stock buybacks or dividends] or to grow our existing book of business.”
Clearly, Simon sees himself operating from a position of strength with the current business.
The firm’s funds from operations — the standard financial yardstick for real estate companies — grew 12.1 percent to 1 billion in the first quarter from $934 million a year ago.
Occupancy rates at Simon’s U.S. malls and premium outlets rose to 93.3 percent in the quarter, up from 90.8 percent a year ago. And the company also upped its dividend, set a new share repurchase program and carried liquidity of $8.2 billion, with $1.1 billion in cash, on its balance sheet.
Looking ahead, Simon Property has penciled in comparable funds from operations of $11.60 to $11.75 a diluted share, an increase from the $11.50 to $11.70 previously projected.
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