Simon Property's results miss due to unpaid rents, retail bankruptcies

(Reuters) - America's largest mall operator Simon Property Group Inc SPG.N on Monday missed quarterly estimates for earnings and lease income, as retailers ravaged by the COVID-19 pandemic shut stores, paid lower rents or delayed payments.

FILE PHOTO: Shoppers ascend and descend escalators at the King of Prussia Mall, owned by Simon Property Group, United State's largest retail shopping space, in King of Prussia, Pennsylvania, U.S., December 8, 2018. Picture taken December 8, 2018. REUTERS/Mark Makela

The company’s shares, which closed up nearly 30% following the success of drugmaker Pfizer Inc’s COVID-19 vaccine raising hopes that shoppers could return to malls, were down about 5% after the closing bell.

Simon’s properties, that include malls and lifestyle centers in the United States, were forced to close during pandemic-led lockdowns and the company was left behind with months of unpaid rents and bankruptcy of some of its biggest tenants.

“We still have some unresolved amounts with certain larger national tenants who unfortunately are refusing to pay their contractual rent even though they are open and operating,” Chief Executive Officer David Simon told analysts.

The company sued some retailers, including Gap Inc GPS.N, earlier this year for having failed to pay rents.

Simon said the leasing environment was improving, with the mall operator signing long-term and pop-up lease deals with leading brands, including names like Prada, Ferrari and UGG.

For the third quarter, however, mall and premium outlet occupancy was 91.4%, down from 92.9% recorded in the previous quarter, largely due to bankruptcies of some of its biggest tenants.

Consumers wearing masks and following safety protocols were beginning to return to malls, Simon said, but warned that there were no guarantees the trend would continue as coronavirus cases hit new records in the U.S.

Lease income fell about 24% to $993.8 million, compared with the estimate of $1.08 billion, according to IBES data from Refinitiv.

Funds from operations was at $2.05 per share, well below the estimate of $2.28.

Reporting by Nivedita Balu in Bengaluru; Editing by Shailesh Kuber