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Simon’s rent collection inches up in Q2 while profits plummet

Largest mall operator reported net income fell 50%; retail tenants paying higher share

Simon Property Group's David Simon (Getty, iStock)
Simon Property Group's David Simon (Getty, iStock)

Across Simon Property’s portfolio of more than 200 U.S. malls, the company lost 10,500 shopping days from April through June.

Rent collection, unsurprisingly, plummeted during that period. And so did net income, falling by nearly half, to $254.2 million from $495.3 million over the same period in 2019. Revenue fell nearly 25%, to $1.06 billion from $1.4 billion last year.

Those were some of the grim numbers Simon released at Monday’s second quarter earnings call.

CEO David Simon said the country’s largest mall operator has offered its struggling retail tenants rent relief during the pandemic, which has accounted for the revenue drop.

“It’s a lot of judgement calls, it’s all about the relationship,” he said during the call. “We went out of our way universally to abate all local entrepreneurs and businesses.” Simon would not provide details about which retailers were granted relief. He added that the company has not “given up on Q2 collections.”

Simon Property collected 51 percent of its rent from tenants in April and May, and 69 percent in June. The company also released July numbers, which were up: It collected 73 percent of rent owed last month. Those figures do not include rent abatements that the company granted. The company’s occupancy rate was down slightly across its portfolio, to 92.9 percent, from 94.4 percent year-over-year. Base minimum rent per square foot was up nearly 3 percent, to $56.02.

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Those improving rent collection numbers are in line with a recent report from Datex Property Solutions, which found major retail chains paid 80 percent of their July rent, by far the highest amount in months. Simon’s tenants include smaller brands as well.

Simon is one of many landlords that has been aggressive in collecting rent amid the pandemic. The REIT has filed several lawsuits against major retailers to demand unpaid. On Thursday, it again sued its largest retail tenant, The Gap, for $107 million in skipped rent. Simon charged the retailer was “taking opportunistic advantage” of the shutdown by refusing to pay rent across its more than 2,000 stores.

Simon is finding its own opportunities during the pandemic. As part of a partnership with Authentic Brands Group, it is poised to acquire Brooks Brothers out of bankruptcy.

“We have a track record on capitalizing on various value-creating opportunities,” David Simon said during the call. The same day, a Wall Street Journal report revealed Simon Property is in talks with Amazon to turn its struggling anchor stores into distribution hubs. David Simon would not comment on the report, but called those kinds of distribution and fulfilment centers “a good trend long-term for us.”

Contact Sasha Jones at sasha.jones@therealdeal.com

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CoronavirusMallsRetailSimon Property Group