David Simon, chairman & CEO, is presenting for Simon Property Group at NAREIT's REIT Week.
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Below are notes from the session:
3:02: Simon: Fundamentals in the business are pretty good. We just came back from several meetings with retailers, including the ICSC. General demand is picking up. Our first quarter results were excellent. ... Our revenues increased 10.2 percent. Our spreads were up and our comparable property NOI was up more than 2 percent. Fundamentals are decent and getting better. There is still a lot of workout work to do. Retailers are still cautious, but feeling more comfortable in opening stores. ... Our balance sheet is generally in great shape and I think things are headed in the right direction.
3:04 Simon: We expect to send $2 billion to $3 billion on the existing portfolio—redeveloping, expanding, modernizing and adding … amenities. … We started that a year-plus ago. Some of our peers are talking about starting that now, but we're already well into that process. … Generally we still think we have a lot of upside in our leases, especially in our outlet portfolio. Including Mills and properties in construction, we have 99 dedicated to value-oriented retail. That's a pretty good spot to be.
3:05: What are we going to do to grow? Show me in the retail real estate world who is growing more than us? … This year first quarter was 14.2 percent FFO per share growth. This year I expect to have record earnings for the company. … Most people have growth, but are not going to get back to record earnings. They may grow off '10 or '09, but are still off their peek. … We will have the highest FFO in our company history.
3:07: (In response to question about redevelopment and potential of mixed-use.) Simon: There are unique asset intensifications available to us. For instance, Copley Place in Boston is a unique opportunity to add some retail square footage, but also potentially a residential tower. There are going to be some residential and hotel opportunities in our portfolio as we intensify the use. But I agree that the vast majority will be to further reposition assets from a retail perspective.
3:10: (In response to question about Calloway JV.) Simon: We are excited about the Canadian opportunity. I think we are off to a good start. Hopefully we can get a commitment from an anchor that is very interesting. … A lot of the very successful outlets are in the Northern part of the U.S. So it's not as if Canadians don't understand it. … I think if you can end up building 15, it's a pretty good size. It would be a good build-out considering what's out there now.
3:13: Simon: Almost every retailer goes through the evolution of store sizes. They start small, go a little bigger, biggest, then head back in the other direction. … That's a natural evolution. What we have to do is keep the center fresh, looking great, driving customer traffic and look to see that they don't reach for too much space.
3:16: Simon: Where we envision being able to communicate to our customer is that they know they're in a Simon mall. We want to communicate with them and we'll give our best retailers the ability to communicate with them. … We're going to try and do it in a coordinated fashion where they have the best that we have to offer and the best the retailers have to offer. We want to treat our best customers specially. … We've never done that. But we want to treat our best mall customers better than just any other guy that shows up.
3:24: Simon: (On question about Internet sales taxation.) We need federal legislation to change what we consider one of the most unfair taxation situations. Pure Internet retailers do not have to collect sales tax. But Gap has to collect sales tax on online sales, even in the same states. … It's not a new tax. It's just a tax that the online guys ignore and do not collect. … We are hoping that logic prevails and it levels the playing field and leave it up to the states to decide what to do. … We need Congress to act. … It's not an ideological issue. It's going to take an act of Congress and I'm going to work my tail off to make it happen. … There's no reason to treat a mom & pop shop different from an Amazon. … Why does Amazon get the benefit over the mom & pop?
3:30: Simon: (In response to a question about new concepts and weaker players.) The weaker retailers evolve. Some get better. Some get worse. There always seem to be a new class of retailers to take up the slack. … Some are going through tough times. At the same time, we're seeing some others take the market share. … Let's face it, there is a lot of retail real estate. There will be some obsolescence. … That obsolescence now comes pretty quick. I think long run, it is good, let's clean out the excess capacity and get to where we need to be.
End of session.