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September 11, 2014
by jgobble
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$JCP News: Malls Aren’t Dead, Long Live the Mall: Simon Property CEO

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NEW YORK (TheStreet) — The American mall long has been left for dead it’s been alleged. Theasprawling retail campuses were thought to be headed toward extinction as people navigated virtual aisles on the newest gadgets from Apple , Google , Amazon a and Samsung.
But interestingly almost the complete opposite has happened at malls across theacountryadespite mass store closures from major tenants such as specialty retailersaGap , Abercrombie & Fitch , Aeropostale a andaAmerican Eagle Outfitters , and even a vital anchor partner in the beleaguered Sears . Driving the rebirth of the mall have been investments by property owners in new dining experiences (bye-bye McDonald’s , hello P.F. Chang’s), upgraded storefront appearances, and new luxury labels that range from a Louis Vuitton inside a Macy’s to a stand-alone Hugo Boss specialty shop.
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Simon Property Group coming into 2014 owned or held interests in 308 income-producing properties in the U.S. Boasting a market cap of $53.8 billion, the company is the biggest player in the market, with General Growth Partners aa distant second at a market valuation of $22.2 billion. According to Bloomberg, Simon Property’s rental income growth has accelerated for two consecutive quarters, increasinga8.7% in the second quarter. Competitors Vornado and General Growth Partner logged a rental income decline of 1.1% and an increaseaof 2.7%, respectively, in the second quarter. Amid a group consisting of General Growth Partners, Kimco Realty , and Macerich , Simon Property’s occupancy rate is more than 11 points higher, according to Bloomberg.
With Simon Property in the middle of developing several premium outlets and re-developing its traditional malls, TheStreet talked exclusively with the company’s CEO David Simon regarding the future of the mall and why specialty retailers are currently in love with opening new outlet stores.
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Brian Sozzi: Do you believe the U.S. remains "over-stored" even after thousands of post-recession closures?
David Simon: The fact is that real estate changes all of the time, whether it’s apartments, motels, hospitals, or storage units; malls are no different. The conventional thinking that we are over-stored, malls are dying, this whole thread just doesn’t meet reality. That doesn’t mean there aren’t going to be certain retail projects that no longer need to be retail because the demographic and trade area has changed, but by and large the mall business is a vibrant, healthy product type, just like apartment buildings, office buildings, etc.
It’s not something I really worry about because it’s a local equation.
Sozzi: Simon Property has been aggressive in remodeling its malls, literally from the ground floor up. Could you take us through some of the elements you are infusing into these new malls?
Simon: Generally, we are taking a number of our properties that are well positioned in a particular market and continuing to enhance the customer experience through better amenities, more merchandise mix, a better merchandise mix, mixed used elements, and creating food halls and dining pavilions. In some cases, it’s as simple as bringing the mall into the 21st century because it’s dated and needs to be refreshed, bringing in technology, Wi-Fi, loyalty programs. The ability to talk to the consumer as they walk the mall about brands and what’s being promoted isaa focus.
Sozzi: Simon Property continues to have strong occupancy rates. When in discussions with retailers for lease renewals what are some of the broad takeaways right now?
Simon: The store closures, for better or for worse, has been part of our business. In most cases, not all, if real estate is valuable the fact is that over the years we have been able to take an underperforming retailer and put in a better one. In the period from 1990 to 1997, every year Iadealt with store closures, huge ones. We didn’t have enough demand to deal with theastore closures.
The one difference, right now, right as we speak, the store closures you hear about, we think we have enough demand to deal with them. It’s nowhere near what I have seen historically,abut it’s ongoing throughout our business.
The store closures yes, maybe they are a bit more than what they were about a year ago, but we think the pipeline of demand is more than capable of dealing with whatever comes up. Primarily what I am seeing is more closures in the teen apparel category. It’s important for the retailer to change to what the teen wants. But it’s incumbent on us to find the retailers that could feed the changing tastes. Those includeanames such asaTopShop, Zara, H&M, Lululemon , Athleta, American Girl, and fast-casual restaurants. Seeing mostlyashrinkage in the teen sector, that is primarily because they just didn’t changed, they had a great run for 15 years.
Sozzi: Simon Property has a good bit of Sears and J.C. Penney locations serving as anchor tenants. Do you have concerns about these companies?
Simon: I am glad to have seen J.C. Penney turn the corner. I do believe that J.C. Penney has a business there for the moderate consumer that is concerned about fashion but has budgetary constraints. I do think there is a really good business there. And Sears has a lot of great brands that as they sort through how they want to present them to the consumer, has the ability to continue to have a customer base that will support a physical environment.
But, we are prepared for the worst. We have lots of alternatives. What’s amazing is that we have no, maybe one anchor, that is empty today. We have never had a smaller group of vacant anchors. I think there is enough demand in the locations that you can’t replace, you may box it with the Zaras of the world, a health club, entertainment uses, or you may even tear it down because that anchor wasn’t driving traffic and had no impact on the mall. If we get that space back, anything we do will be additive.
Sozzi: Many apparel retailers are focusing on opening up new stores in outlet centers. What is going on in the outlet scene? It seems hot.
Simon: Through a lot of selling and research, the retailer has realized that "you know what, it’s not brand negative," it’s brand positive having an outlet strategy. If the consumer loves the brands, they love a bargain. The ability to get the brand at a bargain is compelling, same with the tourism that comes. Then, of course, it’s a very profitable sector for them.
Sozzi: How do you believe new ship-from-store programs, whether it’s at Gap or Walmart , will impact the mall looking out into the future? Stores are essentially turning into distribution centers.
Simon: I think it’s a very positive initiative, Macy’s, Gap, Foot Locker , and a number of the ones that have a real good feel, say Nordstrom atoo, on their consumer and technology are very, very bullish about ship from store. What’s really big, also, as I talk to retailers is reserve in store. It’s all being clouded though, if it’s reserved in store is that an internet sale or brick and mortar sale? The fact of the matter is that it really reinforces the impact of their physical stores.
It’s going to be an interesting five years. The retailers are all over this, but so are the mall owners in trying to help play a role where they can to support the retailers, including having enough broadband or Wi-Fi, infrastructure-type things.
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September 3, 2014
by jgobble
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$JCP News: Jim Cramer’s ‘Mad Money’ Recap: The 2012 Stock Market All Over Again

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NEW YORK (TheStreet) — It’s time to dust off your 2012 game plan, Jim Cramer said on Mad Money Tuesday. The markets are once again divided into two groups — companies that are impacted by European events and those that aren’t.
Yes, it’s 2012 all over again, Cramer told viewers. Investors are dumping the industrial and technology stocks in favor of anything domestic, including health care, transportation, restaurants and entertainment. With the U.S. dollar continuing to strengthen, the banks and the consumer packaged goods stocks continue to slide, but names like Twitter , a stock he owns for his charitable trust, Action Alerts PLUS, GoPro , Tesla Motors and Netflix will likely be go-to names for money managers for the rest of the year.
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Cramer said he’s also still a fan of Apple , another AAP holding, and Yelp , as well as Home Depot and Macy’s .
What else is on Cramer’s buy list? He said both Kroger and Chipotle Mexican Grill are, along with health care, biotech, railroads, liquor and entertainment stocks like Walt Disney .
Focus on domestic strength, Cramer concluded, and protect your gains by avoiding anything with exposure to Europe.
Stocking Up on Vitamins
There are too many bricks and mortar stores in America, Cramer told viewers, which is why the markets have been rewarding companies making acquisitions, merging to take out their competition and preserve their growth and margins.
That’s why Cramer said he’s a big fan of a recent report suggesting GNC Holdings will acquire its rival, Vitamin Shoppe . He said these two chains are suffering at the hand of intense competition, but a combined company would indeed be a thing of beauty.
Cramer said according to his own research, a full 100% of Vitamin Shoppe locations are within five miles of a GNC location. By shutting down half of those locations, a combined company could cut costs in half and still preserve almost all their sales. Even just merging back-end operations would be a huge win for GNC.
Read More: Big Three U.S. Airlines and Labor Get First Round Win Over Norwegian Air Vitamin Shoppe shares trade at just 15.4 times earnings, Cramer noted, so even offering a 35% premium would still be a steal for GNC. Projecting $140 million in synergies, Cramer said the combined company would see a huge 40% increase in earnings. Cramer’s Fantasy Team: Quarterback
Football season is almost upon us, and that means all week Cramer is drafting his "Fantasy Stock Portfolio" for 2014. In his quarterback position this year, Cramer drafted Home Depot and Under Armour , two consistent stocks he said know how to put numbers on the board.
Home Depot just delivers and delivers, Cramer said. While its 2200 locations were hurt by weak housing, that’s no longer the case. Today’s news of a possible credit card breach will not deter this hot stock, he continued, and has created a terrific buying opportunity. Home Depot has strong leadership, a generous stock buyback program and, most important, is almost all domestic and not tied to the crisis in Ukraine.
Then there’s Under Armour, another Cramer fave and stealth technology play that also continues to deliver quarter after quarter. In fact, the company has posted 17 quarters in a row with growth over 20%. Shares do trade at a lofty 58 times earnings, but Cramer noted that’s what investors need to pay to own such a beloved brand.
Off the Charts
In the "Off The Charts" segment, Cramer went head to head with colleague Dan Fitzpatrick over the charts of Tesla Motors, Facebook and J.C. Penney . Facebook is currently an Action Alerts PLUS holding.
Fitzpatrick noted that Tesla displays a classic cup-and-handle chart formation thanks to a six-month consolidation period. He sees the stock possibly hitting between $355 and $389 a share during its next leg higher, calling the stock a raging buy.
Facebook also displays a cup-and-handle pattern after its peak in March. Fitzpatrick said here the target could be $100 a share, or 33% higher than where it trades today. Given the stock’s floor of support at its 50-day moving average, there is little downside risk, according to Fitzpatrick.
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Finally, there’s J.C. Penney. He said the stock is still heading to $15 a share and he remains a strong buyer, as is Cramer. Lightning Round
In the Lightning Round, Cramer was bullish on Verizon , Dow Chemical , MGM Resorts and Achillion Pharmaceuticals .
Cramer was bearish on AT&T , FMC Corp and Las Vegas Sands .
No Huddle Offense
In his "No Huddle Offense" segment, Cramer reminded viewers that when it comes to America’s energy revolution, it’s about a lot more than just the production companies. It’s also about those that use energy, like chemical companies; those who are working towards exporting energy, like Cheniere Energy , and, most of all, those that transport energy, like Kinder Morgan , also an Action Alerts PLUS favorite.
Cramer said the need to transport energy from where it is to where it’s needed is a huge business, as evidenced by Kinder Morgan bringing all its assets under one roof as well as the recent announcement of Plains All American building a new pipeline from the Bakken shale into Tennessee. There’s also today’s announcement Dominion Resources is spending up to $5 billion to bring natural gas from the Marcellus shale into Virginia.
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The time to own an oil pipeline stock is now, Cramer concluded. These deals will continue to be be wins for investors.
To watch replays of Cramer’s video segments, visit the Mad Money page on CNBC.
To sign up for Jim Cramer’s free Booyah! newsletter with all of his latest articles and videos please click here.
– Written by Scott Rutt in Washington, D.C.
To email Scott about this article, click here: Scott Rutt
Follow Scott on Twitter @ScottRutt or get updates on Facebook, ScottRuttDC

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