Simon Property Shares Surge After Biggest U.S. Mall Owner Vows Q2 Dividend

Simon Property, the biggest U.S. mall operator, plans to have at least half of its 200 retail properties up-and-running by next week as coronavirus lockdown restrictions ease.

Simon Property Group  (SPG) - Get Report shares spiked higher Tuesday after the biggest U.S. shopping mall operator said more than half of its outlets will be open by next week and vowed to continue paying dividends.

Simon, the owner of retail shopping malls in 37 U.S. states, posted a 20% decline in quarterly profits, and scrapped its full-year profit guidance, after being forced to close more than 200 of its properties during the start of the coronavirus pandemic in March. Around 77 have been re-opened in states that have eased lockdown restrictions, the company said, and a least half will be up-and-running by next week. 

The also group said that, even with some of its key retail tenants unable to pay monthly rent amid the lockdown, it would still commit to a quarterly dividend, paid in cash, and fully expects its tenants to honor their lease commitments. The group did not, however, disclose rent collection data for April and May.

"The Board will declare a second quarter dividend before the end of June and that dividend will be paid in cash," CEO David Simon told investors on a conference call late Monday. "We expect to pay out at least 100% of our taxable income in 2020 in cash."

"As a point of reference, there have been over 175 public companies who have either suspended or reduced their common stock dividend by 50% or more," he added. "We will not be one of those companies."

Simon shares were marked 8.76% higher in pre-market trading Tuesday to indicate an opening bell price of $59.80 each, a move that would still leave the stock nursing a year-to-date decline of around 60%.

"Reopening properties is a first and necessary step, and to that end Simon has 77 US assets and 12 Designer and Premium Outlets open,' said BMO Capital Markets analyst R. Jeremy Metz, who carries a market perform rating with a $65 price target on the stock. 

"Tenants and consumers must follow, the latter the real lynch pin. That said, it’s not just consumers returning, but also tenant operating capacity levels, consumer confidence, and consumption/ spending levels," he added. "Simon may be better positioned than most; however, there will be tenant fallout and rents are ultimately a function of sales, and these are where the real risks lie."