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Simon’s Balance Sheet Takes Big Hit in Q3 — But Mall Giant Signals Optimism About Stronger Shopper Traffic and Retailer Sales

Earnings and sales at Simon Property Group fell short of Wall Street’s expectations, sending the mall behemoth’s stock down in Monday after-hours trading.

For the three months ended Sept. 30, the Indianapolis-based retail real estate owner posted net income of $145.9 million, or earnings of 48 cents per diluted share, compared with the prior year’s $544.3 million, or $1.77 per diluted share. It saw revenues of $1.06 billion, versus the previous year’s $1.42 billion. Analysts had forecasted earnings per share of 90 cents and sales of $1.08 billion.

At 5 p.m. ET, shares for Simon were down more than 6% to $74.50.

The company also announced that its portfolio net operating income for the period declined 22.4% — attributed in part to reduced revenues from agreed-upon rent abatements with some of its retail tenants and lower sales-based rents, which were partially offset by cost-reduction initiatives.

“Despite COVID-19, we are encouraged by the increases we are seeing in shopper traffic, retailer sales and tenant rent collections across our portfolio,” chairman, president and CEO David Simon said in a statement. “We continue to improve our company through innovative investment opportunities, which, when combined with our A-rated balance sheet, sets us apart and allows us to redefine the future.”

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According to the shopping center giant, occupancy was at 91.4% at the end of the quarter. Its base minimum rent per square foot was $56.13 — a year-over-year increase of 2.9%.

In mid-July, seven of Simon’s properties in California were temporarily shuttered due to government-mandated lockdowns related to the coronavirus pandemic. Six of those locations reopened at the end of August, while the seventh resumed business on Oct. 7. Currently, all of the company’s malls are open.

As of Nov. 6, Simon has collected 72% of its net billed rents for the second quarter from its United States retail portfolio. It added that it is already seeing higher collections for the third quarter at a rate of 85%.

Over the past several months, Simon has made headlines amid the COVID-19 health crisis: It has taken some of its tenants to court over rent payments, expanded its retail enterprise in partnership with Authentic Brands Group dubbed SPARC Group and signed agreements to snap up bankrupt retailers like JCPenney. At the end of the quarter, it had more than $9.7 billion of liquidity, consisting of $1.5 billion of cash on hand and $8.2 billion of available capacity under its revolving credit facilities and term loan.

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