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Simon Property’s David Simon Highlights Strong Results, Talks Sears Closings

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On Simon Property’s Q3 call, David Simon reported another record quarter with continued strong operating and financial results. “Our investment in our product remains unabated with a long-term view of creating compelling integrated environments with critical mass that service the hub of retail, dining, entertainment and socializing within their communities.”

He said that the REIT completed several significant new developments and redevelopments in the quarter or under construction and others and revealed more transformational mixed-use activity that will further enhance the value of the company’s real estate and grow its cash flow.

Turning to the results, he highlighted FFO by $1.90 billion or $3.05 per share, an increase of 5.5% per share compared to the prior year. “We continue to grow our cash flow and report solid key operating metrics. Total portfolio NOI increased 4.1% or approximately $188 million to-date. Comp NOI increased 2.3% for the year-to-date period.”

Leasing activity remains solid, he said, pointing out that average base rent was $53.88, up 2.8% compared to last year. The Mall and Premium Outlet recorded leasing spreads of $7.59 per square foot, an increase of 13.9%, he said. “We’re pleased that retailer sales momentum continued in the third quarter.”

The company’s mall and premium outlets was $650 compared to $622 in the prior year period per foot, an increase of 4.5%, and sales were strong across the portfolio in the third quarter, Simon said on the call. “Retail sales productivity has increased each month over the last 12 consecutive months.”

As for occupancy, he said that at the end of the quarter was 95.5%, an increase of 80 basis points for the second quarter and an increase of 20 basis points compared to prior years.

He also addressed Sears, noting that “over the last several years, as you know, including what we just recently did at Phipps, we have reclaimed a number of our unproductive department stores in our portfolio. The reclamation of unproductive space, specifically some department stores, is an unprecedented opportunity for us to dramatically enhance the productivity of the space, our centers overall. And we will continue to proactively recapture additional stores to further enhance our centers.”

The SPG portfolio currently has 33 Sears stores that Sears has closed or announced they will be closed, he said and of those 33 stores, “we have, through proactive action, controlled 22 of those 33, five of which are in our joint venture with Seritage. Of those 17 that we control, Sears will no longer exist in 2019. They will be demolished, replaced and redeveloped.”