Simon Property (SPG) Beats Q3 FFO & Revenues, Guides Up

Simon Property Group, Inc. (NYSE:SPG) , a retail real estate investment trust (“REIT”), reported third-quarter 2016 funds from operations (“FFO”) of $2.70 per share, up from the year-ago quarter tally of $2.54. The Zacks Consensus Estimate for the quarter was $2.68. Growth in operating income and transformative redevelopments aided the results.

Simon Property posted revenues of $1.36 billion, beating the Zacks Consensus Estimate of $1.35 billion. The year-ago quarter revenue figure was of $1.32 billion.

Quarter in Detail

For the U.S. Malls and Premium Outlets portfolio, occupancy rose 20 basis points (bps) year over year to 96.3% at the end of the third quarter. Base minimum rent per square feet rose 4.5% year over year to $50.76, while releasing spread for the trailing 12-months rose 10.9% to $6.71.

During the quarter, Simon Property completed the transformation of King of Prussia that includes completion of a 155,000 square foot expansion. At the end of the quarter, Simon Property had redevelopment and expansion projects in progress at 32 properties across the U.S. and Europe.

In September, Simon Property, as part of a consortium closed the acquisition of Aéropostale, the global trend-focused apparel and accessories brand.

The company exited the third quarter with cash and cash equivalents of $814.7 million compared with $701.1 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 $10.85–$10.87 from the earlier range of $10.77–$10.85. The Zacks Consensus Estimate for the same is currently pegged at $10.85.

Dividend Update

Concurrent with its earnings release, Simon Property declared a quarterly dividend of $1.65 per share, marking 7.4% year over year. The dividend will be paid on Nov 30 to shareholders on record as of Nov 16.

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.

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.

We now look forward to the earnings releases of Essex Property Trust Inc. (NYSE:ESS) , Apartment Investment and Management Company (NYSE:AIV) and The Macerich Company (NYSE:MAC) which are scheduled this week.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>