On Jun 03, 2014, we issued an updated research report on
Simon Property Group, Inc.
), a retail real estate investment trust (REIT).
On Apr 22, riding on the growth trajectory, Simon Property came
up with the announcement of a solid operating performance for
first-quarter 2014, with funds from operations (FFO) of $2.38 per
share, 6.25% ahead of the Zacks Consensus Estimate and 16.1% above
the year-ago quarter figure, primarily driven by an increase in
revenues and occupancy rate. Also, the hike in its quarterly
dividend increased investors' confidence.
Recently, the company accomplished the spin off of Washington
Prime Group, and has cut its outlook for full-year 2014. While the
spin-off move comes with an upfront cost for Simon Property, we
believe that the company can now increase utilization of resources
for expanding its global portfolio of larger malls, mills and
premium outlets and effectively leverage on improving the spending
habits of wealthier customers with the economy showing signs of
Also, the company's ongoing efforts to enhance customers
shopping experience are noteworthy. Initiatives like re-launching
its brand and marketing programs as well as installing Electric
Vehicle at its shopping centers are expected to strengthen its
relationship with customers and tenants, and drive traffic.
However, Simon Property's significant redevelopment pipeline
increases its operational risks, exposing the company to rising
construction costs, entitlement delays and lease-up risks. In
addition, a rise in interest rates is anticipated in the long run,
may raise the company's interest expense and thus remains a
concern. Moreover, the upfront expense of the spin-off is
Over the last 60 days, the Zacks Consensus Estimate for 2014 and
2015 FFO per share declined by 4.4% and 2.2% to $9.17 and $10.14,
respectively. Consequently, the stock currently has a Zacks Rank #3
Stocks That Warrant a Look
Other better-ranked stocks in the retail REIT industry include
Retail Properties of America, Inc.
Rouse Properties, Inc.
Acadia Realty Trust
). All these stocks carry the same rank as Simon Property.
FFO, a widely used metric to gauge the performance of REITs,
are obtained after adding depreciation, amortization and other
non-cash expenses to net income.
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SIMON PROPERTY (SPG): Free Stock Analysis
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