Simon Property Group Earnings Call Nuggets: Changing Importance of Outlets and the REIT Industry
Changing Importance of Outlets
Christine McElroy – UBS: I was wondering if you could comment on the changing importance of the outlets for retailers and the differences in retailers profitability across different platforms, especially in light of Mickey Drexler’s comments at a forum a few weeks ago that the increasing importance of outlet sales versus full-price to the bottom line isn’t very widely discussed.
David Simon – Chairman and CEO: I don’t think anything is really changed all that significantly. Over the years it’s been a very profitable distribution channel for the retailers. I expect it to continue. There are more retailers coming into the sector because of the fact that it is profitable for a number of retailers. I also think what we’ve done that at Simon has increased the scale, the design elements, the layout for the outlet industry in total. We brought it to the front door as oppose to the back door in retailers, we brought new tenants in and I think we’ve had direct impact on bringing new retailers into that sector and helping it take it out of the – or less out of the – more in the mainstream. Mickey, I loved Mickey. Mickey makes a lot of comments for those things, some of which have been directed at me in good fun, but the fact of the matter is it’s a profitable business. We’ve had a lot to do with taking it out of kind of the back door and the front door. We’ve had a lot to do with the design and enhancing the look and feel of the product and also moving the product in better locations and bringing more tenants into it.
The REIT Industry
Ross Nussbaum – UBS: David, it’s Ross Nussbaum. I had an off topic question which pertains to your presence as the largest region in the industry and whether do you have any thoughts on the increasing number of (sea corps) that are converting to REITs and/or restructuring into opco propco’s and what kind of implications you think these trends has on the REIT industry overall?
David Simon – Chairman and CEO: Well, that’s a good question. I mean, I’m starting to get a little bit concerned, maybe too strong word, but I’m getting a little bit concerned that the basic fundamental of why companies are rich is because they are in the real estate and they are focused on growing their cash flow from their businesses as opposed to the opco propco. I think the opco propco has not worked it is financing vehicle. I am sure the investors are sophisticated to know which ones are primarily used to that vehicle. So, I am getting a little bit of concerned. I haven’t had a chance I’ve been too busy frankly to talk to NAREIT about what their whole view on this is. But the basic fundamentals of real estate investing with the seasoned management team with quality real estate that can invest and grow their business is there, it is stronger than ever, the returns, the cash flow dividend increase for number of companies has been remarkable in terms of the face of capital coming and going and then the industry – the history of results for industry has been phenomenal. I am proud of our industry. I do think though if we get a little bit – if it turns into a financing vehicle, I don’t think it’ll have a taint on the existing successful companies like ours, but I do think there should be a cautious thrown in the wind with some of those.
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