Simon Property Downplays Interest in Acquisitions Following Reported Kohl’s Bid
Simon Property Group, the largest U.S. mall owner, says it isn’t shopping around.
The company’s CEO denied the retail landlord is interested in making any acquisitions, despite reports that it's looking to bid on the embattled Kohl's chain and a huge mall portfolio up for sale.
“I would suggest that please don’t believe any rumors or media reports concerning our [mergers and acquisition] activity. Don’t believe what you read or any rumors out there,” David Simon, who also serves as chairman of the company, told Wall Street analysts Monday during a first-quarter earnings call.
The CEO was upbeat about Simon Property’s performance in the quarter following the worst of the pandemic, saying leasing demand was strong, with global retailers now turning to the United States as a less risky environment and safer haven to open stores than Asia and Europe. And the company’s malls haven’t experienced consumer spending slowing down because of inflation, according to David Simon.
“So far we’re not seeing it in our portfolio,” he said.
Last month, the New York Post reported that Simon Property and Brookfield Asset Management, which jointly own retailer J.C. Penney, planned to compete with several other suitors for Kohl’s, which has faced off against several dissident shareholder groups. Simon Property and Brookfield intended to make an $8.6 billion offer, according to the Post.
In addition, French mall operator Unibail-Rodamco-Westfield has said it plans to divest its U.S. properties by the end of 2023.
On the call, an analyst alluded to Unibail in a question to David Simon, asking, “How do you think about acquisitions? There’s rumored to be a very large seller out there with pretty good malls. In any scenario would you be a buyer of those?”
In response, Simon didn’t specifically mention Kohl’s or Unibail. But he played down any media reports on acquisitions on Simon Property’s part, saying the company is “really, really focused internally” — with plans for a stock buyback because it believes its shares are undervalued — not acquisitions.
Simon Property’s board has authorized a new common stock repurchase program, effective May 16. The company will be able to purchase up to $2 billion of its common stock over the next 24 months.
The CEO also said Simon Property, which is based in Indianapolis, is focused on its “existing platform.”
In the first quarter, the company saw the lowest number of lease terminations in the past five years, according to David Simon. And there was leasing momentum, with over 900 leases for more than 3 million square feet signed. The CEO added the company also has a significant number of leases in its pipeline.
“Demand is very strong,” Simon said.
Mall occupancy was 93.3% as of March 31, compared to 90.8% at that time last year.
A report by BMO Capital Markets noted that Simon Property was downplaying any talk of M&A activity. And the firm was cautious about the outlook for Simon malls.
Though brick-and-mortar stores have “rallied versus e-commerce as COVID has faded, we favor more defensive shopping centers versus discretionary malls within retail amidst increased macro uncertainty,” BMO Capital wrote.
But Placer.ai released some upbeat figures on mall foot traffic on Monday. It reported that, during April, visits to indoor malls were only down 0.3% compared to April 2019, “meaning they’ve almost completely recovered.” In March, visits to indoor malls were down nearly 10% versus March 2019.