Simon Property Group Seems to be doing Well

By: Howard F. Kline Monday, February 02, 2009 12:26 PM

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Going against the grain or not yet feeling the pain, Simon Property Group, major national owner of major malls, including Laguna Hills and Mission Viejo Malls in Orange County California, reports strong 4th quarter, 2008 funds from operations. The credit the good news from strong cost cutting measures over the last year, but admit that the retail environment has been difficult and they expect it to remain that way for at least this year. With that being said, they expect their Premium Outlet NOI to increase by 5% over the next year.

In a related note, based upon a recent IRS ruling allowing REITS to pay out a portion of their dividends in stock, Simon has reported that it will pay out 90% of its 4th quarter dividend in this fashion, thus preserving a huge amount of cash. So this is where they are getting their "funds." Wonder what the "stock-in-lieu," is being valued at? Just for those of you who aren't aware, REITs or otherwise known, longhand as Real Estate Investment Trusts, are public companies that are required by law to pay out 90% or their income as dividends. This works ok in good economic times but may be pretty tough to handle in tough times like now, certainly limiting a REITs opportunities to preserve cash to survive an economic downturn. By distributing their income as stock, they get to hold onto a lot of cash. This could be a very smart strategy.

Sounds like they have been anticipating the war and they have been building the war chest to do battle over the next year or so.

Keep in mind that the above report shows an increase in available cash, not revenues, which I would expect to drop over the next 6-12 months.

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2/3/2009 10:12:13 AM Pain will be forthcoming for Simon by Sam Simon is in the best possible position to weather the 2009 retail bloodbath with so much cash in the bank, but understand that there will be a blood bath and Simon will not come out of it unscathed. Their regional malls will suffer more than their other properties. We will see major anchor tenents first file Chapert 11 and later liquidate. These merchants have a heavy presence in Simon properties. There will simply not be any other anchors strong enough to come in and tak those hundreds of thousands of square feet being lost. Smaller merchants will leave in droves to move to more suburban retail centers. Look for Simon to burn through most of their cash by year end. Reply Rating: (2) (0)

Simon is in the best possible position to weather the 2009 retail bloodbath with so much cash in the bank, but understand that there will be a blood bath and Simon will not come out of it unscathed. Their regional malls will suffer more than their other properties. We will see major anchor tenents first file Chapert 11 and later liquidate. These merchants have a heavy presence in Simon properties. There will simply not be any other anchors strong enough to come in and tak those hundreds of thousands of square feet being lost. Smaller merchants will leave in droves to move to more suburban retail centers. Look for Simon to burn through most of their cash by year end.

Rating: (2) (0)

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