On Mar 14, 2014, we issued an updated research report on
Simon Property Group, Inc.
), a retail real estate investment trust (REIT).
On Jan 31, continuing its ride on the growth trajectory, Simon
Property came up with a solid operating performance during
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-ago quarter figure. The improvement was
primarily driven by an increase in revenues and occupancy rate.
The company also hiked its quarterly dividend payout by
Going forward, we believe that the company's spin-off decision
bodes well as it would help increased utilization of resources
for expanding its global portfolio of larger malls, mills and
premium outlets. With the economy showing signs of recovery,
spending power of richer consumers is improving and the company
seems to gain leverage from this trend. Moreover, Simon
Property's same-day delivery deal with Deliv promises solid
prospects. Through this deal, the company would leverage its
nationwide real estate properties - mall and retail outlets - and
use them as distribution centers.
However, Simon Property's significant development and
redevelopment pipeline increases its operational risks, exposing
the company to rising construction costs, entitlement delays and
lease-up risks. Moreover, with a gradual reduction in the Fed's
support, interest rates are expected to increase, which may in
turn hurt the rate-sensitive business of the company in the long
Over the last 30 days, the Zacks Consensus Estimate for 2014
FFO per share moved north by 2 cents to $9.57. Also, it climbed 4
cents to $10.34 for 2015 FFO per share. Consequently, the stock
currently has a Zacks Rank #2 (Buy).
Stocks That Warrant a Look
Other better-ranked stocks in the retail REIT industry include
General Growth Properties, Inc
Federal Realty Investment Trust
National Retail Properties, Inc.
). 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.
FED RLTY INV (FRT): Free Stock Analysis
GENL GRWTH PPTY (GGP): Free Stock Analysis
NATL RETAIL PPT (NNN): Free Stock Analysis
SIMON PROPERTY (SPG): Free Stock Analysis
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