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Still-Profitable Simon Property Collected 73% Of Rents In July

Things are looking up for shopping mall operator Simon Property Group, which has remained profitable despite sharp decreases in income this year. The vast majority of tenants are back open, and rent collection is rising steadily, the company reported on its second-quarter earnings call Monday.

Simon Property Group Chairman David Simon

Simon's total portfolio net operating income fell from $1.5B in the second quarter of 2019 to $1.2B this year, a 21% decline. This sharp year-over-year drop is attributed in part to $215M in domestic rent abatements granted and higher provisions made for credit losses, Simon Chairman and CEO David Simon said during Monday's call. 

The firm also recorded a loss of about $145M on lower sales-based rents and short-term leasing, and another $60M from having to close the company's international outlets portfolio during the shutdown, Simon noted during Monday's earnings call. In the second quarter alone, the mall operator lost 10,500 shopping days within its U.S. property portfolio, Simon said.

But the mall operator has remained profitable overall through the pandemic, though profits were down substantially from $495.3M, or $1.60 per share, in Q2 2019 to $254.2M, or 83 cents per share, in the most recent quarter.

Simon mall sites began reopening their doors in May, with the remaining properties coming back online in early July. Now every Simon property is operating, except for seven locations in California that are following local shutdown orders, Simon said.

Roughly 91% of Simon's tenants are open, and rent payments collected within Simon's U.S. retail portfolio have been improving, with 73% of contractual rent billed for July collected, up from 69% in June and 51% for April and May combined, Simon noted in its latest earnings release.

None of the firm's rent payment percentages have been adjusted to include rent abatements offered by the mall operator to keep retailers, restaurants and other tenants afloat during the pandemic-related shutdowns.  

Simon refused to comment on rumors the company is considering a play with Amazon in which the e-commerce giant would take over struggling big-box retail spaces, turning vacated Simon mall department stores into e-commerce distribution centers.  

The rumors emerged after the Wall Street Journal reported the REIT was in talks with Amazon about the e-commerce giant nabbing spaces vacated by struggling mall retail tenants like J.C. Penney Co. and Sears. 

Though he refused to discuss the rumors, Simon did allude to malls possibly having a stronger e-commerce footprint in the future. 

"Generally, the important thing going on that we're seeing is that more and more retailers are distributing e-commerce orders from their stores. So, they are fulfilling [orders] from their stores, and they are also [relying] on curbside pickup and all sorts of fulfillment options that are available," Simon said. "That is a good trend long-term for us, but beyond that, I don’t want to get into logistics or any kind of speculation really around Penney’s or Amazon.”

The company finished the second quarter with $8.5B in total liquidity, including $3.6B in cash and $4.9B from revolving credit facilities.