Simon Property (SPG) Beats Q1 FFO Estimates, Revenues Up

Simon Property Group, Inc. SPG, a retail real estate investment trust (“REIT”), reported first-quarter 2016 funds from operations (“FFO”) of $2.63 per share, up from $2.28 per share in the year-ago quarter. The Zacks Consensus Estimate for the quarter was $2.54. Growth in operating income and new developments & expansions aided the results.

Total revenue in the quarter increased 9.9% year over year to $1.34 billion. Further, the figure surpassed the Zacks Consensus Estimate of $1.26 billion.

Quarter in Detail

For the U.S. Malls and Premium Outlets portfolio, occupancy fell 20 basis points (bps) year over year to 96.6% at the end of the first quarter. Total sales per square foot moved down to $613 from $621. Base minimum rent per square feet rose 4.4% year over year to $49.70, while releasing spread decreased 140 bps to 17.5%.

During the quarter, Simon Property completed transformation of Roosevelt Field in Garden City, New York and added the first Neiman Marcus store in Long Island. The REIT has also begun construction work on a new project, the Premium Outlet Collection – Edmonton International Airport.

Simon Property is carrying out construction activities in six new development projects, three of which are slated to open in 2016 and the rest in 2017.

At the end of the first quarter, Simon Property had redevelopment and expansion projects in progress at 33 properties across the U.S. and Europe.

The company exited first-quarter 2016 with cash and cash equivalents of $759.3 million compared with $818.8 million at the end of fourth-quarter 2015.

2016 Outlook

Simon Property raised its 2016 FFO per share guidance. It expects it to be in the range of $10.72–$10.82, from the earlier range of $10.70–$10.80. The Zacks Consensus Estimate for the same is currently pegged at $10.83.

Dividend Update

Concurrent with its earnings release, Simon Property declared a quarterly dividend of $1.60 per share. The dividend will be paid on May 31, 2016 to shareholders of record as of May 17.

Our Viewpoint

Strong financial as well as operational performance is expected to drive the company’s growth, going forward. The gradually recovering U.S economy and improvement in the spending power of the customers will further aid the company’s development.

Simon Property currently carries a Zacks Rank #3 (Hold).

We now look forward to other REITs that are scheduled to release first-quarter 2016 results next week. These include General Growth Properties, Inc GGP, Taubman Centers, Inc. TCO and Vornado Realty Trust VNO.

Note: Funds from operations, a widely accepted and reported measure of REITs performance, are derived by adding depreciation, amortization and other non-cash expenses to net income.

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