Simon Property (SPG) Misses on Q4 FFO, Sees Growth in 2021
Simon Property Group, Inc.’s SPG fourth-quarter 2020 funds from operations (FFO) per share of $2.17 missed the Zacks Consensus Estimate of $2.19. The reported figure also comes in 26.7% lower than the year-ago quarter’s $2.96.
Further, the company generated revenues of $1.13 billion during the quarter, lagging the Zacks Consensus Estimate of $1.14 billion. The revenue figure also comes in 24% lower than the prior-year quarter reported tally.
Results reflect the pandemic’s adverse impact on the company’s domestic and international operations, with an impact of 95 cents per share, mainly on reduced revenues, partly mitigated by cost-reduction moves.
For 2020, the company reported FFO per share of $9.11, down 24.3% from the prior year’s $12.04 and also missed the Zacks Consensus Estimate of $9.16. Total revenues of $4.6 billion jumped 19.9% year on year. Full-year portfolio net operating income (NOI) slid 17.1% year on year on lower revenues from tenant rent abatements, elevated uncollectible rents, lesser sales-based rents, coupled with a decline in ancillary property income, though cost-reduction efforts provided some support.
However, as of Feb 5, 2021, Simon Property’s rent collections from U.S. retail portfolio amounted to 90% of its net billed rents for the second, third and fourth quarters, combined.
The company’s 2021 guidance also looks encouraging. David Simon, chairman, chief executive officer and president, noted, "We feel confident we have turned the corner, and we expect growth in earnings and cash flow in 2021."
Remarkably, during the fourth quarter, Simon Property accomplished its acquisition of an 80% ownership interest in The Taubman Realty Group (TRG). Particularly, the retail REIT, through its operating partnership, acquired all of Taubman Centers Inc.’s (TCO) common stock for $43 per share in cash, with the Taubman family selling roughly one-third of its ownership stake at the transaction price and remains a 20% partner in TRG.
Inside the Headline Numbers
For the U.S. Malls and Premium Outlets portfolio, occupancy was 91.3% as of Dec 31, 2020, shrinking 380 basis points, year on year. Base minimum rent per square feet was $55.80 as of Dec 31, 2020, up 2.2% year on year. Portfolio NOI for the reported quarter fell 23.9% year on year.
Balance Sheet Position
Simon Property exited 2020 with more than $8.2 billion of liquidity. This comprised $1.5 billion of cash on hand, including its share of joint-venture cash, as well as $6.7 billion of available capacity under its revolving credit facilities, net of $623 million outstanding under its U.S. commercial paper program.
During the reported quarter, the REIT accomplished a public offering of 22,137,500 shares of its common stock, reaping net proceeds of $1.56 billion.
Simon Property projects 2021 FFO per share at $9.50-$9.75, up from the prior year’s $9.11. The guided range is also above the Zacks Consensus Estimate of $9.49.
Notably, while issuing the guidance, the company assumes no further government mandated shutdowns of its domestic retail properties.
Simon Property paid a fourth-quarter common stock cash dividend of $1.30 per share on Jan 22. The company’s board of directors noted that it will announce a common stock dividend for first-quarter 2021 on or before Mar 31, 2021.
Currently, Simon Property carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Simon Property Group, Inc. Price, Consensus and EPS Surprise
We now look forward to the earnings releases of other retail REITs, including Kimco Realty Corp. KIM, Federal Realty Investment Trust FRT and Regency Centers Corporation REG, slated to release results on Feb 11.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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