Simon Property Group on Monday reported increases in leasing volumes, occupancy, shopper traffic and retail sales volumes, resulting in the highest level of Q2 real estate net operating income in its history.
The mall REIT in the period signed more than 1,400 leases, and 30% of its leasing activity was new deal volume, CFO Brian McDade told analysts. Traffic rose 5%, and total sales volumes rose about 2%.
Net operating income at its properties in North America rose 5.2% year over year to $1.3 billion, according to a Q2 earnings supplement.
“Continued leasing momentum, resilient consumer spending, and operational excellence delivered results exceeding our plan for the quarter,” McDade said.
CEO David Simon shrugged off major concerns from the stock market tumble Monday, saying that wealthier consumers haven’t slowed down. He said that lower-income consumers have been struggling for a while, but are poised to benefit as prices come down.
“They are very focused on managing their bills, and discretionary expenditures have been obviously not where we'd like to see them,” he said. “So, we're optimistic that we're going to cycle out of that for the lower-end consumer, given the inflation picture that we see now, which is relatively benign.”
That is challenging many of the brands run by Sparc Group that cater to a lower-income shopper, he said. Sparc, which runs Forever 21, Aéropostale and other brands, is an operating entity that Simon Property Group co-owns with Authentic Brands Group. Simon had also invested in Authentic itself, but sold its remaining interest in the brand-management firm during the previous quarter.
Net operating income from that portfolio, which includes J.C. Penney, Sparc and Rue Gilt Groupe, didn’t fare as well as its North America mall portfolio, plummeting 76% to $6.5 million.
