“It’s safe to say that we’re going to anticipate some bankruptcies,” said Simon, chairman and chief executive officer, on a call with analysts after the company reported first-quarter results. “We are looking at few others that will see how the rest of the year shapes up.…I think most of the bad news is behind us.”
During the first quarter, Simon’s funds from operations — the standard financial yardstick for real estate companies — rose to $1.08 billion from $1.03 billion.
In the company’s U.S. malls and premium outlets, occupancy grew to 95.1 percent at the end of the quarter on March 31, up from 94.6 percent a year earlier. And retailer sales per square foot a rose 3.1 percent to $660 for the past 12 months
The company’s net operating income grew by 1.7 percent for the quarter.
“NOI growth was impacted by approximately 100 basis points due to the impact of retailer liquidations and bankruptcies resulting higher bad debt expense, unfavorable foreign exchange rates and slightly lower NOI from properties undergoing significant redevelopment,” Simon said.
The landlord is redeveloping space at more than 30 of its properties, including 10 former department stores.
Richard Sokolov, Simon’s vice chairman, added, “There are still a great many tenants that are happy to have the opportunity to get in to take advantage of the inventory that we have now….We still have a lot of retailers internationally that are trying to come into this market that have significant space needs. We are growing the e-tailers because they all have made the decision they need to have a bricks-and-mortar presence and we still have the brand extensions from our existing retailers.” Brands being spun off of portfolio companies could also coming knocking for more space, he said.
But the company is clearly thinking beyond the box.
It’s testing ShopPremiumOutlets.com in beta mode and keeping a finger to the wind.
Asked on the call about the online business Simon pointed to Amazon, Google and WeWork, now called The We Company, as examples of firms that grew beyond their own borders.
“We’re not even close to those companies, but you have to think about our product just along those lines — and that we start somewhere as we get traction, we add to it,” he said.
The companies on the site handle fulfillment, but Simon said one day it could be handled from the mall or the outlet.
“It is early days,” the ceo said. “And I think the retail receptivity has been rewarding. Otherwise, we wouldn’t have started it. If the retailers hadn’t expressed an interest in our product, we would have killed it a couple of years ago.”