David Simon, Chairman and CEO of Simon Property Group Inc., speaking during the Milken Institute Global Conference in Beverly Hills, California, April 30, 2018.
Dania Maxwell | Bloomberg | Getty Images
The largest mall property owner in the American Simon Property Group on Wednesday said it is considering several options where it will invest in a dealership to keep it afloat.
"I think it's very possible ̵[ads1]1; we're going to be very smart about it," Simon CEO David Simon said in a conference call after earnings when asked if he would consider investing in more of the landlord's tenants. "We're absolutely as good as the private equity guys when it comes to retail. And then I don't want to rule it out."
"We will cooperate on other distressed situations." But, he added, "we're just going to buy companies that we think have brands and have the volume worth doing."
About three years ago, Simon and mall owner General Growth Properties, now owned by Brookfield Property Partners, teamed up to rescue packaged teenage retailer Aeropostale. The two were part of a group that eventually won an auction to buy the Aeropostale brand from the bankruptcy court and salvaged the property. At that time, Simon had around 160 Aeropostale stores in the portfolio, while GGP had 77. A total shutdown would have left them with more than 200 empty stores.
Now that more than 7,000 store closure announcements have already gone through this year, with more expected to come, Simon can see other deals similar to this one. It is already a partner with Authentic Brands Group, a house for brands such as Juicy Couture and Nautica, and recently became a shareholder in e-sports supplier Allied Esports, with plans to open more playgrounds at its malls.
The next deal could be with Forever 21. Bloomberg reported last month that clothing retailer Forever 21 asked its largest landlords, including Simon, if they would consider taking a stake in the business as it explores restructuring.
Forever 21 has more than 800 stores, many in malls, globally. Forever 21 in particular is Simon's seventh largest online tenant in terms of how much rent it gives the landlord, with 99 stores across Simon's properties.
Forever 21 declined to comment. And Simon on Wednesday didn't want to talk to the Forever 21 report specifically, but the CEO said, "I would say we certainly have the opportunity to help beyond what you have to do on the leases … [to] Become an Investor in an Emergency Situation . "
One of the benefits of this, he said, would be greater insight into the company's finances in order to determine how much a renter should pay in rent.
Simon put the mall owner into "tons of money" in his Aeropostale deal.
Analysts have said that Simon has one of the best balance sheets in the industry, which means it has plenty of capital available to fund several deals like this one. It ended the last quarter with more than $ 6.8 billion in liquidity.
Simon's other top tenants, considering how much rent they contribute, include Gap Inc., Victoria's Secret owner L Brands, Justice owner Ascena Retail Group, Tommy Hilfiger owner PVH Corp., Signet Jewelers, Coach-owner Tapestry and Foot Locker.
Simon Property Group reported second quarter tax assets from operations – a calculation used by real estate investments that exclude certain costs such as depreciation – at $ 1.06 billion, or $ 2.99 per share, compared to $ 1.06 billion, or $ 2.98 per share a year ago.
Occupancy fell slightly to 94.4% from 94.7% the previous year. Total sales per square foot increased 3.5% to $ 669 from $ 646.
The property owner said it still expects to report funds from $ 12.30 to $ 12.40 per share for the year.
Simon shares were down less than 1% on Wednesday morning, after falling around 7% over the past 12 months.