SPG - Simon Property Group

[Gregmal]

https://www.cnbc.com/2020/10/15/why-the-biggest-us-mall-owner-simon-could-be-a-buy-during-the-pandemic.html

 

Nothing groundbreaking here, but sums up Simon's desperation.

[glorysk87]

https://www.cnbc.com/2020/10/15/why-the-biggest-us-mall-owner-simon-could-be-a-buy-during-the-pandemic.html

 

Nothing groundbreaking here, but sums up Simon's desperation.

 

You see desperation, I see opportunism

[Gregmal]

https://seekingalpha.com/article/4387421-simon-property-groups-spg-ceo-david-simon-on-q3-2020-results-earnings-call-transcript

 

85% collections for Q3 and 600 leases representing over 2M sq ft signed.

 

Only short term risk that represents a real long term problem on my radar is widespread lockdowns/government shutting down businesses destroying much of holiday shopping traffic. Would probably wipe out a few more retailers if that occurred since many are very heavily dependent on Q4.

[Gregmal]

Strong armed almost $10 a share out of TCO. Deal getting done at $43.

[Cardboard]

Looking good brother. You should have a pleasant Monday morning with this and the way futures are pointing.

 

There has been way too much of: "I can see 30 years forward." This stupidly combined with momo trade and Covid and has led to massive market dislocation and this has been a clear victim.

 

Cardboard

[Gregmal]

Yup. Covid was an opportunity for some, and a distraction for others. But generally speaking, the entire RE universe was one of the fattest pitches down the middle Ive ever seen. I mean did people think we'd never get a vaccine? That peoples behaviors had been long term impacted when most folks have already returned to behaving as normal even during the height of the case number hysteria? Last Memorial Day and then July 4 was really the thesis clincher for me. Most people just didnt let the media narrative effect them. This was a huge positive read through for RE/travel/entertainment names and made the investment very binary. All you had to do was be willing to wait 12-18 months. The opportunity is not gone, but it won't last forever.

[bearprowler6]

Yup. Covid was an opportunity for some, and a distraction for others. But generally speaking, the entire RE universe was one of the fattest pitches down the middle Ive ever seen. I mean did people think we'd never get a vaccine? That peoples behaviors had been long term impacted when most folks have already returned to behaving as normal even during the height of the case number hysteria? Last Memorial Day and then July 4 was really the thesis clincher for me. Most people just didnt let the media narrative effect them. This was a huge positive read through for RE/travel/entertainment names and made the investment very binary. All you had to do was be willing to wait 12-18 months. The opportunity is not gone, but it won't last forever.

 

Gregmal....congrats on your thinking (and action) on SPG. I did not follow you on SPG but did double up on my (and more importantly my wife's) BPY holdings near the bottom in March/April for much the same reasons and have benefited from the rebound to date and expect more to come. One question for you now that the Taubman deal has been repriced---does the repricing/lower values perhaps extend to the values we should apply to other malls owners? That is...if Taubman had to accept a lower price does that perhaps mean that other major mall owners (SPG, BPY) need to be repriced lower as well. Or is it simply a case of Taubman not being able to wait another 12 months to fully benefit from the rebound whereas SPG and hopefully BPY can?

[Gregmal]

I think the repricing lower is really just indicative of the fact that the public market comps dictate it. So essentially what you are describing, IMO, had already occurred everywhere but possibly with TCO because of the merger agreement. Overall, though, I think what you've seen play out everywhere else also plays out in the malls/shopping centers. First reaction is sell them all. Then you kind of get a broad scale rebound. But the real fundamental change over the longer haul is that the best companies/locations get stronger as the weaker fail. This has already played out within the pricing you see on a lot of the net lease retail assets. The narrative shouted from the roof tops is that of "Retail is dead". But top locations and good tenants have been trading hands at all time high valuations. 4 cap rates arent uncommon which is pretty astounding given the narrative. But run of the mill stuff is still also basically trading at pre covid. The garbage is priced as such.  So buyer beware and an extended level of due diligence is obviously necessary, but as always good tenants/good location will be ok. SPG and BPY have tremendous leverage within their own universes....If you are Louis Vuitton or Hermes....I mean you have 1) long standing relationships with these landlords, and 2) a need to stay within a certain universe to protect your brand. As the premium retail space becomes more pronounced from run of the mill, I think if anything this increases demand and value of the network effect. With a 10 year treasury where it is, the spread is just way to large with many of these income producing assets. If they are insulated as many of them are, they will either give you back your cash quite quickly, or rerate accordingly. One of the most important takeaways from the past Q here, was that they signed over 600 leases representing 2M sq/ft...