As the owner of enclosed shopping malls and premium outlet malls, Simon was battered by the coronavirus pandemic and related economic shutdown. In March 2020, the company closed all of its U.S.-based properties. To preserve cash, The SPG dividend was reduced from an $8.40 annual rate to $6.00 paid in 2020.
In reaction to the coronavirus pandemic, Simon Property Group became aggressive to ensure it would survive and thrive in the post-covid world. Here is a list of moves and acquisitions made in 2020:
• As of May 11, Simon had reopened 77 properties. By the end of June, 199 of the company’s 204 U.S. properties had reopened.
• In February 2020, Simon put together the acquisition of fast fashion retailer Forever 21. Simon and Authentic Brands Group each own 37.5%, and Brookfield Property Partners (BPY) owns the balance. Buying name-brand retailers out of bankruptcy will allow Simon to keep stores occupied and help manage the brands back to profitability.
• Simon Property Group's purchase of Taubman Centers closed in the final week of 2020. Taubman owns 26 super-regional shopping centers in the U.S. and Asia. Before the pandemic, Taubman had generated roughly $3.60 per share in annual funds from operations.
Overall, I expect Simon Property Group to be a leading beneficiary of a reopening economy, with vaccinated shoppers ready to hit the malls again.
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During 2020, Simon focused on strengthening its retailer relationships, including taking equity stakes in several that faced bankruptcies. As in-person shopping results, Simon will benefit from both full occupancy rental payments and share in some tenants' profits.
For full-year 2020, SPG will report an FFO of about $9.00 per share. This amount will be down 25% from 2019, but that puts the company in a great position to grow the dividend as the FFO returns to normalized levels.
As we advance, I expect SPG to return to its status as one of those excellent dividend growth companies, with a 6% yield and double-digit annual dividend growth. In a few years, buying SPG for $80 per share will look like the post-pandemic deal of the decade.