Many investors are reluctant to go anywhere near brick-and-mortar retail, especially malls. And it's not surprising: After all, many mall-based retailers were struggling before the pandemic hit. However, Simon Property Group (SPG +0.81%) is in a class by itself, as Fool.com contributor Matt Frankel, CFP, explains in this Fool Live video clip, recorded on June 23.
Matt Frankel: This is called Simon Property Group, ticker symbol is SPG. They are the largest mall real estate investment trust in the world. They own some of the most valuable malls in the world. Some of their properties are estimated to be worth over $4 billion for like a single property. I'll show you a picture of one of them in a minute. But many mall investors are worried. Mall real estate has been struggling way before the pandemic. This is not a pandemic fueled issue. When you think of all the mall-based retailers that have gone bankrupt in the past, in the years preceding the COVID pandemic. I'm talking about companies like RadioShack. Sears, I don't think officially go bankrupt or before the pandemic or till the pandemic happen. But we knew it was about to happen. I haven't been to Sears since I think '04 and I don't think anyone else here has, either.
Mall real estate has been really struggling for years. Three major mall REITs have already declared bankruptcy this year. The pandemic really just kind of pushed them over the limit. Everyone knows that mall that has three vacant anchor spaces, for example -- that's not a sustainable way to do business. A lot of people were really scared about Simon, especially at the beginning of the pandemic, their stock lost something like 80% of its value at one point. It's since rebounded, but it's still trying to get a fraction of its pre-pandemic high. I want to say it's about 50% below its all-time high still. Big reason to that is a lot of people are worried about the future of malls, I think the people aren't going to go to malls, not because of the pandemic, but because e-commerce is really taken a lot of share from brick-and-mortar retailers.
But what people are missing about Simon's malls, and this is actually a Simon property: They aren't malls, they're built to be kind of destinations. This is The Forum Shops in Las Vegas, t's a big mall attached to Caesars (CZR +1.59%) Palace, which a lot of people don't realize is a Simon Property. A lot of people think that's part of Caesars. These are built to be, like you said, the high-end retailers that you can't find that your local malls, really attract a lot of people, especially in Las Vegas where I just want a few thousand dollars might as well go shop at Gucci. That's really the only reason I would ever go there in Vegas. But that's just me, I don't disrespect to anyone who goes there regularly.
So Simon prioritizes non-retail elements, which is what I really mean about destinations. Simon has a partnership with Marriott (MAR +0.37%), for example, to have hotels in several of its malls. Not just on property, but attached to the mall itself. You come down the elevator and go to the mall and go to the food court, get your food or whatever like that. Office space. A lot of Simon's properties have co-working space. It's like the one I'm in right now. I'm not in a Simon mall, but I usually could be at a co-working space. Entertainment venues. The Simon mall in Maryland that I go to pretty often because we have family there has a Medieval Times in the mall. They have a casino attached to the mall. There's a Dave & Buster's (PLAY 4.45%) in the mall. Entertainment venues like that. Unique dining establishment, not just the typical mall food court. The Simon Mall in North Carolina. Brian may have been to, Concord Mills, that has a Bonefish Grill attached to the mall. Things that you'd normally wouldn't find an a shopping mall.
They also have and this is not part of a non-retail elements, but they do a great job of actively pursuing these e-commerce retailers and providing them with exclusive physical locations. Untuckit is a big example, the shirts are meant to be worn untucked. They have physical locations in Simon malls, really unique retail options. These things provide a built-in source of foot traffic for the properties. Simon's base rent per square foot actually went up during the pandemic. Because so many people want to be inside its malls. The malls are always packed, they're always busy, they're big destinations. We went there earlier this year to the one in North Carolina, and it was a two-hour wait for a table at the Bonefish Grill there. That was during COVID. These are big draws of consumer.
Simon has over $8 billion of liquidity, which is what really separates it from the three mall REITs that went bankrupt, is that it has the financial flexibility to keep its malls as the best destinations in a given area. Not only do Simon prioritizes stuff, it has the money to really do it better than the competition. Simon is not just malls, they're destinations. That's what people are really missing. This is not just a mall read. These are destinations people are going to be going to for years to come. So I'm worried about e-commerce with a lot of retail, but not with Simon.
