David Simon sees a transitional 2022 with big gains next year – WWD

Simon Property Group Bounce with bricks and mortar retail last year.

But even if fourth-quarter profits come in with a disappointing outlook, chief executive and chairman David Simon said 2022 will be a time of preparation for next year’s big things.

That benefits both the landlord’s business premises to retailers and the development itself. retail operations, including a variety of businesses and partnerships or investments, including JC Penney, the SPARC joint venture with Authentic Brands Group featuring Brooks Brothers, Nautica, Aéropostale, Lucky Brand and Forever 21 as well as Rue Gilt Group.

Simon told analysts during a conference call on Monday that operating income at SPARC will take a hit as the company becomes the operating platform for Reebok, following the closure of ABG on its acquisition of the brand. this month. Rue Gilt will also invest more while JC Penney is spending to build her beauty business and digital operations.

And while rentals are improving, the CEO said the real action will be next year.

“Obviously the last few years with COVID[-19], we have… worked with our retailers. So we just didn’t have, you know, the level of pricing power that we wanted to see,” Simon said. “We’re starting to see that reinforced in our view, and we’re still looking for a win-win between us and our customers.”

The chief executive added: ‘Now we just have to do it. I think there’s so much going on that I can’t say it’s still going to be a while for the shops to open. And with all the action, we’re going to see some of that in 2022. But you know, we’re going to see a huge amount of great new stores around 2023.”

That makes 2022 another building year – but one that comes after a strong rebound.

The real estate giant’s fourth-quarter net income rose 85% to $503.2 million, or $1.53 a diluted share, from $271.5 million, or 86 cents, recorded a year ago in the first retail sale Coronavirus Christmas.

And Simon’s money from operations – the standard financial measure for homeowners – rose 47% to $1.2 billion from $786.6 million a year earlier.

The company’s occupancy rate at department stores and high-end stores in the US rose to 93.4% as of December 31, up from 91.3% a year earlier.

Retail sales at Simon’s properties grew 34% in the fourth quarter from a year earlier and up 8% from the final quarter of 2019.

For the full year, the company’s net income was $6.84 per share and included 50 cents of special interest. Simon forecasts profits will fall this year, between $5.90 and $6.10.

Investors wanted something more and sent the company’s shares down 3.3% to $144.05 in after-hours trading on Monday.

Simon has repeatedly been questioned about his company’s move from homeowner to retailer, but on the call he reiterated – and with additional evidence – that the move was an act. good motion.

“Given our level of cash investment, if you look at it on a private equity basis, we’ve made 20 times our investments and they’re continuing to grow,” he said. . “Ultimately, we’ll see if we need to monetize these or highlight value, but it’s embedded here… but honestly, the outside market is probably pricing it in. more than what is now.”

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