Simon Property Group Earnings Call Nuggets: Copley Place & Houston Galleria, European Opportunity

Simon Property Group Inc (NYSE:SPG) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

Copley Place & Houston Galleria

Craig Schmidt – Bank of America Merrill Lynch: Thanks for that reporting on Wednesday afternoon. I look at the supplemental and it says the openings projected for 2015 and beyond and list the Lima and Roosevelt Field, but it doesn’t list Copley Place and Houston Galleria, is this just because those projects are starting late or is there change in plan for those assets?

David Simon – Chairman and CEO: No change at all. We are – we actually – once they are formally approved with on our internal process, they go onto schedule. Copley we’re actually going through just a little bit more permitting approvals which we expect to have by the end of the year, and then the Galleria, we have an announcement coming shortly. Stay tuned. We approve it internally. They will both be on our list at no real change of plans on either one.

Craig Schmidt – Bank of America Merrill Lynch: And I also noticed in the anchor section, you are adding Wegmans to the Montgomery Mall. May you be out of the supermarket to other centers and was there any change that you made in terms of parking or access to make Wegmans work with the rest of the mall.

Richard S. Sokolov – President and COO: The Wegmans is being built on the side of the former Boscov’s which we demolished and the land was suitable to be able to have all their parking accommodated. We are putting several outside uses in Montgomery just to be accommodative to that, so we’re having some uses we think will work well with the supermarket and we’re also adding a Fairway Market at Nanuet. So these types of high profile, high volume users are we think very additive to the properties.

David Simon – Chairman and CEO: Rick I remember you used ask about Nanuet all the time, so now…

Craig Schmidt – Bank of America Merrill Lynch: It’s happening.

David Simon – Chairman and CEO: It’s opening in October. And we’re basically virtually – at least not everybody will open by this year, but by spring of next year the all 100% will be opened.

Craig Schmidt – Bank of America Merrill Lynch: I was actually by that site a couple of weeks ago. It looks like it’s pretty transformative.

David Simon – Chairman and CEO: Yeah, it should be. We’re excited about it.

Craig Schmidt – Bank of America Merrill Lynch: And one last thing. Are you able to give a cap rate on the Laguna Hills Mall that you sold in May?

David Simon – Chairman and CEO: Well, I’ll let you do the math. The NOI, if I remember correctly, was around $6.5 million or something in that range.

 

European Opportunity

Quentin Velleley – Citi: Just on McArthurGlen acquisition, can you just talk broadly about the opportunity in Europe with outlets and how involved, Simons and your management will be with the management and growth of that business?

David Simon – Chairman and CEO: Well, I think there is a significant opportunity both within their existing portfolio and the ability to add extensions to them, as well as continue to upgrade the tenant offerings and add to the footfall of those centers through tourism efforts and alike. In addition, McArthurGlen does have a significant pipeline of additional opportunities in terms of new developed. So, when you couple those as well as we do think there will be acquisition opportunities within their portfolio and others, we think it’s going to end up being a significant platform for our growth over the next several years. It’s a complicated deal not only because it’s in Europe and you are in different countries but also the ownership of the assets are owned not by just one individual but by various partners and funds. So, I think over time, as we solidify the platform, bring our expertise to the table along with their assets and their people, it should be a very good deal for us. So, we’re excited about it. The sales productivity of these centers is very high, and there is not a lot of them. They are very well accepted and there is not that many players in Europe that do it at such a high level. So, we think ultimately it’s going to be a good transaction for us…

Quentin Velleley – Citi: I think you still own a stake in Value Retail, the other outlet developer and owner in Europe. Are you now a seller of that stake?

David Simon – Chairman and CEO: Do you have an offer for me?

Quentin Velleley – Citi: I don’t have the money.

David Simon – Chairman and CEO: No. We are happy with that stake, but we are always interested in whatever we can do to benefit our shareholders. But that investment has been good for us. We anticipate continuing in it. As you might know, I mean, that was a kind of an investment that the former Chelsea made. We’ve added to it over the years. We’ve got a significant embedded gain compared to our book value of it and they do a very good job in terms of operating their centers as well. So we think we’re a long-term owner of it, but I never rule anything out.

Quentin Velleley – Citi: So just lastly, there’s been a lot of media speculation on the colonial investment management platform in Australia. I know you guys are constantly looking at the global opportunities. Is the Australian mall industry one that interests you?

David Simon – Chairman and CEO: Well, maybe. We haven’t ruled that out, but we’ll look at anything. I mean, Westfield does such a good job. We’ve also been a little bit reluctant to enter that market. On the other hand, it’s an interesting market. It’s very stable. We like the people there, and so the malls there do very well. So, I wouldn’t rule anything out. Just like we’ve monitored Brazil for years, haven’t found the right transaction, we wouldn’t rule any one particular place out. The one place we continue to be the most concerned about and as we look internationally is China just this because it’s a tough place to figure out who is on first. Australia to some extent has a lot of benefits that it’s very transparent market.