Brian Dress profiles David Simon, CEO of Simon Property Group, who transformed the family business into America's largest retail REIT. Since 1995, Simon has paid shareholders over $33 billion in dividends and outperformed peers by roughly 2% annually. SPG's shares dropped 70% in the 2020 COVID crash but rebounded, and the dividend yield now sits above 11%.
Hello, investors. My name is Brian Dress, Director of Research here at Left Brain Investment Research. When we select an investment here in Left Brain, we wanna know that the management is both competent and trustworthy. That's why part of our research process is a CEO profile, a report where we analyze both the background and the management strategy of a given CEO. I recently completed a CEO profile on Simon Property Group's David Simon, and I wanna share with you some of my findings. Simon's background is in Wall Street. In 1985, he joined First Boston out of business school in a time that he considers the M&A craze. In the last half of the 1980s, mergers and acquisitions were all the rage on Wall Street, and he gained valuable experience at both First Boston and Wasserstein Perilla. However, in 1990, he decided to return to the family business in Indiana, Melvin Simon and Associates. Simon and Associates had been a big player in shopping center leasing business for 3 decades but had fallen on hard times in the wake of the SNL crisis in a commercial real estate recession. He used his expertise and background on Wall Street to oversee an IPO in 1993, where he recapitalized the business. Uh, becoming CEO in 1995, he then used those funds, uh, to finance a number of mergers and acquisitions that took Simon Property Group from a family business to the largest United States retail REIT. In 1996, they merged with the DeBartolo Group, uh, very much increasing the profile of the business. In 2004, they acquired the Chelsea Premium Outlet business, giving Simon Property Group exposure to the lucrative outlet mall business. In 2007, SPG acquired the Mills Corporation, which gave SPG exposure to big box locations in exurban and suburban locations. When we analyze CEOs, we'd like to know what kind of returns have they provided to shareholders during their tenure. Since 1995, SPG has paid over $33 billion in dividends to its investors and actually outperformed its peers by quite a, quite a large margin, over 2% per annum, which when you consider the compounding effect creates quite a bit of a margin of difference between SPG and its peers from a shareholder perspective. Considering the crisis we're in in 2020 and how malls are facing such adversity, we thought it would make sense to go back to the global financial crisis of 2008 and analyze how Simon Property came through that time. David Simon steered his company through the global financial crisis with, with plenty of expertise, providing more— a positive return over those 4 years compared to the negative return of the overall REIT index. Simon Property Group shares sold off by more than 70% in February and March of 2020, creating quite an opportunity for investors. It's rebounded quite well in the last few weeks, but actually we think there's a lot more upside to this name. The dividend yield is up above 11% at the current prices. And while many analysts think the dividend will be cut in the next couple of quarters, the long history of dividend growth with, with SBG gives us faith that 2 years from now, Simon Property Group will be back to growing its dividends as it has for the whole tenure of David Simon. These are just some of the characteristics we look for in a strong CEO. David Simon fits our profile for a strong CEO, and we think it makes us more convicted in our idea that there's a great investment opportunity here in Simon Property Group, ticker SPG. We invite you to come join our community of left-brainers at our website, www.leftbrainir.com. Until then, happy investing. Thank you.
