Simon Property Group Inc.
) has cut its outlook for full-year 2014 on the
Washington Prime Group Inc.
) spin-off. The company now expects its full-year 2014 FFO (Funds
from Operations) to come in the range of $8.96 - $9.06, as against
the prior range of $9.60 - $9.70 (as of Apr 22, 2014).
This revision incorporates the adverse impact of 54 cents per share
from the spin-off of Washington Prime properties as well as 10
cents per share transaction costs associated with this spin-off.
For the second quarter, the company expects FFO per share to be
around $2.10-$2.12, reflecting the spin-off and it includes roughly
10 cents of spin-off related transaction
While the spin-off move (effective May 28) comes with an upfront
cost for Simon Property, we believe that the long-term benefits of
this decision are quite solid. Simon Property can now increase
utilization of resources for expanding its global portfolio of
larger malls, mills and premium outlets and effectively leverage on
the improving spending habits of wealthier customers with the
economy showing signs of recovery.
Riding on the growth trajectory, this retail real estate invest
trust came up with a solid operating performance during
first-quarter 2014, with FFO of $2.38 per share, 14 cents ahead of
the Zacks Consensus Estimate and 33 cents above the year-ago
The 16.1% year-over-year improvement in quarterly FFO per share was
primarily driven by an increase in revenues and occupancy rate. The
company also hiked its quarterly dividend by 4% to $1.30 per share
from $1.25 paid in the prior quarter.
Simon currently holds a Zacks Rank #3 (Hold). Investors interested
in the retail REIT industry may consider stocks like
Acadia Realty Trust
General Growth Properties, Inc
). Both the stocks sport a Zacks Rank #2 (Buy).
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.
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