America’s largest mall operator is especially optimistic about Florida

The largest owner of US malls thinks more shoppers will point toward Florida.
The largest owner of US malls thinks more shoppers will point toward Florida.
Image: REUTERS/Mark Makela
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Last year was a disastrous one for US mall operators. But despite the continued cloud of the Covid-19 pandemic hanging over retailing, Simon Property Group, the country’s biggest mall owner,  is optimistic about 2021, especially for its properties Florida.

Simon operates more than 200 properties in 38 states, all of which had to shutter operations in late March due to the pandemic. Social distancing measures and the rising popularity of e-commerce have continued to hurt foot traffic and sales at many malls and outlet centers, even during the holidays

On Feb. 8, Simon reported weaker year-over-year profits for its latest quarter ending on Dec. 31, with revenues falling by about 24%. With many retail and restaurant tenants struggling to stay open, Simon granted more than $750 million in rent deferrals or reductions for the quarter. Its occupancy rate also dropped to 91.3%, compared to 95.1% during the same period a year ago.

Despite all of this, Simon CEO David Simon expressed optimism about this year during a call with analysts and investors. The company collected 90% of its net billed rents from its US properties for the last three fiscal quarters and at the end of last year, Simon acquired a majority stake in The Taubman Group, the owner of 27 high-end shopping centers. Simon specifically singled out the state of Florida for its energy, its “vibrant economy”, and increased domestic traffic to the 22 Simon properties in Florida.  ”We feel confident we’ve turned the corner,” Simon said, noting that South Florida was one of the hottest markets for mixed-used redevelopment for “entertainment-oriented retailers”. “The healthy retailers that believe in their business—believe in their plans—are making deals.”

A bleak situation for retailers

Simon’s positive outlook is far from the norm in the US commercial real estate and the retail industry. Dozens of companies filed for bankruptcy last year while other retailers announced the closure of more than 12,000 stores. Landlord concerns about additional tenant evictions, empty stores, and reduced foot traffic have prompted billions of commercial rent relief. These include concessions on lease payments, longer payment terms, changes to lease timelines, permanently lowered rents, and even forgiveness on past-due payments, according to the Wall Street Journal.

While overall retail sales in the US have risen to levels higher than before the pandemic, it’s largely due to increased consumer purchases of sporting goods, hobbies, home renovation and gardening supplies, personal care, and to online shopping. Several retail categories that make up core tenants of malls and shopping outlets—like clothing and department stores—are still recording sales levels much lower than prior to the pandemic, according to the most recent advanced estimates from the US Census Bureau.

Growing health concerns

Simon’s optimism about Florida is also in contrast to the state’s current Covid-19 situation. In addition to a rising number of new deaths from Covid-19 and nearly 1.8 million cases (15th highest for per capita hospitalizations in the country), there are also 201 cases of the fast-spreading UK strain of the virus, the most of any state according to the US Centers for Disease Control and Prevention. Many Floridians also can’t afford to shop at Simon’s properties right now. In December, the state unemployment rate was 6.1%, more than twice as high as before the pandemic.

Simon’s optimism may be due to Florida’s more relaxed approach to coronavirus-related restrictions. In September, governor Ron DeSantis issued an executive order that moved Florida to Phase 3 of its reopening plan. This allowed all businesses to reopen, no longer restricted occupancy at restaurants and bars, and suspended fines and other penalties for people who did not social distance or follow mask mandates.

The state’s budget proposal for fiscal 2021-2022 also included $65 million in tax relief for two sales-tax holidays. Prior to the pandemic, these tax holidays significantly increased Florida’s retail sales and made back-to-school the second-highest sales period after Black Friday, according to Florida Tax Watch, a research institute and government watchdog organization.