Keeping its winning streak alive, retail real estate
investment trust (REIT) -
Simon Property Group, Inc.
) - came up with a solid operating performance during the fourth
quarter 2013, with funds from operations (FFO) of $2.47 per
share, 4 cents ahead of the Zacks Consensus Estimate and 18 cents
above the year-go quarter figure.
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The 7.9% year-over-year improvement in Simon Property's quarterly
FFO per share was primarily driven by an increase in revenues and
occupancy rate. The company also hiked its quarterly dividend
payout by 4.17%.
Total revenue during the reported quarter increased 5.3% year
over year to $1.42 billion and also exceeded the Zacks Consensus
Estimate of $1.37 billion. The increase in revenues was
attributable to a rise in minimum rent, overage rental and tenant
For full year 2013, Simon Property reported FFO per share of
$8.85 per share on revenues of $5.17 billion. Results were higher
than the prior-year FFO per share of $7.98 on revenues of $4.88
Quarter in Detail
During the reported quarter, minimum rental revenues climbed 5.1%
year over year to $850.1 million, while overage rental revenues
rose 4.2% year over year to $89.0 million. Moreover, revenues
from tenant reimbursements increased 6.1% year over year to
$383.1 million. However, the results were partly dwarfed by a
10.2% decrease in management fees and other revenues.
For the U.S. Malls and Premium Outlets portfolio, occupancy rose
80 basis points (bps) year over year to 96.1% at the end of the
fourth quarter. Total sales per square feet moved north by 2.5%
to $582. Encouragingly, base minimum rent per square feet climbed
4.0% year over year to $42.34 and releasing spread increased 600
bps to 16.8%.
During the quarter, Simon Property closed the buyout of the
ownership stake in four existing McArthurGlen Designer Outlets.
In addition, the company owns an interest in the Ashford Designer
Outlet in Kent, UK and Vancouver Designer Outlet (under
construction), as well as a 50% ownership in McArthurGlen's
management and development company.
On the other hand, Simon Property accomplished the sale of two
community/lifestyle centers and two outlets during the quarter.
The company also opened major redevelopments and expansions at a
number of its properties.
Simon Property exited the year 2013 with cash and cash
equivalents of $1.7 billion, up from $1.2 billion at the end of
the prior year.
Concurrent with its earnings release, Simon Property increased
the quarterly dividend by nearly 4.17% to $1.25 per share from
$1.20 paid in the prior quarter. The dividend will be paid on Feb
28, 2014 to shareholders of record as of Feb 14.
Simon Property provided the guidance for full-year 2014. The
company expects FFO per share in the range of $9.50 - $9.60. This
is ahead of the current Zacks Consensus Estimate of $9.48 per
share for 2014.
Simon Property came up with its plan to spin off its entire strip
center business and 44 smaller enclosed malls into a publicly
traded REIT. A Form 10 has already been filed in December and the
company anticipates this transaction to be effective in the
second quarter of 2014.
We are encouraged by Simon Property's strong quarterly results,
which came on the back of its robust financial and operational
performances. Moreover, we believe that the spin-off decision is
a strategic fit as it would help Simon Property increase
utilization of resources for expanding its global portfolio of
larger malls, mills and premium outlets. With the economy showing
signs of recovery, spending of the richer consumers is improving
and the company seems to leverage on this trend.
Further, Simon Property along with
The Macerich Co.
) and Westfield Group partnered with same-day delivery company
Deliv in recent times. The move follows a similar same-day
delivery deal announced by
General Growth Properties, Inc.
). These mall operators are leveraging on their nationwide real
estate properties - mall and retail outlets - and using them as
Nevertheless, the broader industry concerns restrain us from
becoming extremely positive on the stock and it currently carries
a Zacks Rank #3 (Hold). We now look forward to the results of
Kimco Realty Corp.
), which is scheduled to report next week.
FFO, a widely used metric to gauge the performance of REITs,
are obtained after adding depreciation and amortization and other
non-cash expenses to net income.