Under Simon, Roosevelt Field Can Survive Mall Closures: Experts

GARDEN CITY, NY — Despite grim forecasts for American shopping centers, some analysts believe Simon Property Group-owned malls such as Roosevelt Field on Long Island can weather the trend toward e-commerce competitors.

According to a Coresight Research report from August 2020, 25 percent of malls in the United States may close permanently within the next five years, a prospect exacerbated by the COVID-19 pandemic and related shutdowns that sparked a surge in online shopping.

Of the approximately 1,100 malls remaining in the U.S., roughly 250, including Roosevelt Field, are classified as A-rated, based on sales generated per square foot. Analysts believe Class-A malls are more likely to survive than their lower-rated counterparts, CNBC reported in a profile on malls in March.

"You will see more malls close, you'll see more shopping centers close, but what you'll see is the winners continue to emerge," Alexander Goldfarb, a senior research analyst at Piper Sandler, told CNBC.

Simon, the largest mall landlord in the nation, owns or has interest in 196 shopping centers in North America and a collective 36 malls in Europe and Asia. On Long Island, Simon owns Roosevelt Field in Garden City, Walt Whitman Shops in Huntington Station and Smith Haven Mall in Lake Grove. Roosevelt Field is typically listed among the top ten "largest," "best" and "most desirable" malls in the nation.

"We definitely are the dominant shopping and dining destination for Long Island," said Nancy Gilbert, Simon's marketing director at Roosevelt Field.

Amid the pandemic in 2020, Simon took a fourth-quarter hit in revenue, which dropped 24 percent to $1.1 billion over the prior year. Less than 12 months later, the real estate trust reported income in the 2021 third quarter was $679.9 million, up from $145.9 million over the same quarter last year.

"We have unequivocally proven with our results year to date that we've overcome the arbitrary shutdown of our business due to the pandemic and our cash flow has bounced back dramatically, which many have doubted," Simon CEO David Simon said during a Nov. 1 earnings call about his corporation's Q3 2021 results.

During the pandemic, rival mall corporations filed for bankruptcy, primarily due to tenants that either failed to pay rent or delayed rental payments. In June 2020, Simon sued Gap for $65.9 million for unpaid rents and other charges. The suit was settled in December that year.

Simon's Q3 2021 earnings included a $111.9 million after-tax gain related to the company's acquisitions of Forever 21 and Brooks Brothers. In 2020, Simon went on the offensive, buying both bankrupt retailers and also acquiring JCPenny from Chapter 11. All of these acquisitions involved partnering with other parties.

Simon also acquired a partial ownership interest in Taubman Centers, a rival high-end mall owner, adding 26 malls to its portfolio that includes mixed-use properties. During 2020, Simon was reportedly talking with Amazon about turning shuttered stores at its shopping centers into warehouse fulfillment centers, but nothing materialized from those discussions.

"This strong comeback is largely thanks to the company's aggressive expansion efforts during the downturn of the pandemic and the return of in-store shopping," Simon said in a statement about Q3 2021 earnings.

Still, Simon had to close some malls and has ongoing concerns. The corporation let a mall in Georgia and in Alabama go into foreclosure this year. And occupancy rates remain below pre-pandemic levels. Occupancy was 94.7 percent in Q3 2019 but fell to 91.3 percent by Q4 2020. That rate rose to just 92.8 in the third quarter of this year.

But while several Long Island malls have vacancy rates in the double digits, including two at more than 30 percent, Simon revealed a five-percent vacancy rate at Roosevelt Field in its annual report in December 2020. The company has not yet disclosed its vacancy rates for 2021.

The space formerly occupied by Bloomingdale's Furniture Gallery at the northside of Roosevelt Field remains a prominent vacancy. The store was consolidated into the mall's Bloomingdale's department store in 2019, and Century 21 was slated to open a store in the vacant space in 2021. But the chain filed for bankruptcy in 2020.

Meanwhile, even when analysts say retail remains a risky asset class within commercial real estate, some believe Simon and malls such as Roosevelt Field will continue to fare well.

"The thing about Simon is," Goldfarb said, "they've been really focused on maintaining [their high profile and competitive edge], and that's both been through a combination of culling the lower productive centers, as well as making sure that they keep investing in their top centers to ensure that those centers remain dominant in their respective trade areas."
Simon declined to comment further for this story.

* This is the final story in a four-part series on Roosevelt Field and Simon Property Group.

• Online-Only Retailers Get Physical At Roosevelt Field Mall
• Roosevelt Field Adds Restaurants To Attract Shoppers
• Merchant Mix Is King At Roosevelt Field Mall