Simon Property's (SPG) Q3 FFO Surpass Estimates, '18 View Up

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Simon Property Group, Inc.SPG , a retail real estate investment trust (REIT), reported third-quarter 2018 funds from operations (FFO) of $3.05 per share, which surpassed the Zacks Consensus Estimate of $3.02. The FFO per share figure also came in 5.5% higher than the year-ago tally of $2.89.

Results highlight increase in base minimum rent per square foot and leasing spread per square foot at its U.S. malls and Premium Outlets. Simon Property also raised its outlook for 2018.

During the reported quarter, the company posted revenues of around $1.41 billion, lagging the Zacks Consensus Estimate of $1.42 billion. The revenue figure also compares favorably with the year-ago figure of $1.40 billion.

Inside the Headline Numbers

For the U.S. Malls and Premium Outlets portfolio, occupancy was 95.5% as of Sep 30, 2018, expanding 80 basis points (bps) from the prior-quarter tally. Retailer sales per square foot came in at $650 for the trailing 12-month period, marking growth of 4.5%. Base minimum rent per square feet rose 2.8% year over year to $53.88 as of Sep 30, 2018. Further, leasing spread per square foot for the trailing 12-month period ended Sep 30, 2018, increased 13.9% to $7.59.

Total portfolio net operating income (NOI) growth for the three-month period ended Sep 30, 2018, came in at 4.1%. Comparable-property NOI growth for the same period came in at 2.3%.

During the Jul-Sep quarter, the company started expansion projects at Paju Premium Outlets in Seoul, South Korea and Tosu Premium Outlets in Khushu, Japan.

The company exited third-quarter 2018 with cash and cash equivalents of $695.7 million compared with nearly $1.5 billion reported at the end of December 2017.

Additionally, as of Sep 30, 2018, Simon Property had more than $7 billion of liquidity. This comprised cash on hand, including available capacity under the company's revolving credit facilities, and its share of joint-venture cash.

In the first nine months of 2018, Simon Property closed on 13 mortgage loans worth nearly $3 billion, the company's share being $1.3 billion.


Simon Property raised its outlook for 2018. The company, now, projects FFO per share of $12.09-$12.13 as compared to the prior guidance of $12.05-$12.13. The Zacks Consensus Estimate for the same is currently pinned at $12.09.

Dividend Update

Simon Property announced a quarterly dividend of $2 per share, denoting an increase of 8.1% year over year. The dividend will be paid on Nov 30, to stockholders of record on Nov 16, 2018.

Our Viewpoint

Simon Property is putting in every effort to enhance the value of its assets. During the Sep-end quarter, the company continued with its development activities, unveiling Denver Premium Outlets at Thornton, CO, and phase three expansion of Shisui Premium Outlets. This is expected to contribute to the company's cash flow and revenues in the upcoming quarters.

Nonetheless, the implementation of such measures requires a decent upfront cost and therefore, may limit any robust growth in its near-term profit margins. Also, rate hike has added to its woes.

Currently, Simon Property carries a Zacks Rank #2 (Buy). 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

Simon Property Group, Inc. Price, Consensus and EPS Surprise | Simon Property Group, Inc. Quote

We now look forward to the earnings releases of other REITs like Outfront Media OUT , Vornado Realty Trust VNO and UDR Inc. UDR . All three companies are scheduled to release their quarterly figures on Oct 29.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) - a widely used metric to gauge the performance of REITs.

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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 Nasdaq, Inc.

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

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