Fitch Affirms Simon's Ratings - Analyst Blog


Recently, Fitch Ratings affirmed Simon Property Group Inc. 's ( SPG ) and its operating partnership, Simon Property Group L.P.'s Issuer Default Rating (IDR) at 'A-' with a "Stable" outlook.

The rating affirmation is justified by Simon's resilient cash flow from its sufficiently large, superior quality mall and premium outlet portfolio coupled with interests in other retail real estate. This, in turn, fortifies a fixed-charge coverage ratio suitable for the 'A-' rating.

In addition, Simon's ratings reflect a solid management team and accessibility to multiple sources of capital. While leverage remains high of late, it is anticipated to remain in line with the requirement for 'A-' IDR for a large capitalization retail real estate investment trust (REIT).

However, Simon's increasing development pipeline heightens its risk, though it is partly offset by sufficient liquidity coverage. As a matter of fact, Simon's keenness for large purchases leads to a deterioration in its debt metrics in the short-term.

In Conclusion

The rating affirmation of Simon at 'A-' IDR is encouraging. In fact, this plays a major role in preserving investor confidence in the stock and helps boost its creditworthiness in the market.

This largest publicly traded REIT boasts a diversified retail portfolio and its tenant roster consists of names like The Gap Inc. ( GPS ), Limited Brands Inc. ( LTD ) and Abercrombie & Fitch Co. ( ANF ). The diversification helps it endure the continuously changing retailer landscape.

Therefore, with strong fundamentals, robust growth projections, and a healthy dividend yield, Simon Property offers an enticing upside potential going forward. Moreover, Simon Property currently retains a Zacks Rank #2 (Buy). We also have a long-term Outperform recommendation on the stock.

ABERCROMBIE (ANF): Free Stock Analysis Report

GAP INC (GPS): Free Stock Analysis Report

LIMITED BRANDS (LTD): Free Stock Analysis Report

SIMON PROPERTY (SPG): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: ANF , GPS , LTD , SPG

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