Simon Property (SPG) Q1 FFO Lags Estimates, Revenues Rise

Simon Property Group, Inc. (NYSE:SPG) , a retail real estate investment trust (REIT), reported first-quarter 2017 funds from operations (FFO) of $2.74 per share, which missed the Zacks Consensus Estimate by 2 cents. However, the FFO figure came in higher than $2.63 per share reported in the prior-year quarter.

During the quarter, Simon Property posted revenues of $1.35 billion, which exceeded the Zacks Consensus Estimate of $1.32 billion. The year-ago quarter revenue figure was of $1.34 billion.

Quarter in Detail

For the U.S. Malls and Premium Outlets portfolio, occupancy was 95.6%, unchanged year over year. Base minimum rent per square feet rose 4.4% year over year to $51.87, while leasing spread for the trailing 12-months rose 13% to $8.31.Total net operating income grew 5.6% year over year.

At the end of the quarter, Simon Property had redevelopment and expansion projects in progress at 25 properties across the U.S., Canada and Europe.

Construction is also in progress in various redevelopment and expansion projects including The Galleria in Houston, La Plaza Mall, The Shops at Riverside, Woodbury Common Premium Outlets, Allen Premium Outlets and Toronto Premium Outlets.

Moreover, construction is ongoing in four other new development projects.

The company exited the quarter with cash and cash equivalents of $513.4 million compared with $560.1 million at the end of fourth-quarter 2016.

2017 Outlook

Simon Property reaffirmed FFO per share guidance at $11.45–$11.55. Currently, the Zacks Consensus Estimate for 2017 FFO is $11.56 per share.

Dividend Update

Simon Property announced a quarterly dividend of $1.75 per share. This marks a 9.4% year-over-year increase. However, sequentially, the dividend remains the same. The new dividend will be paid on May 31 to stockholders of record on May 17.

Our Viewpoint

Strong financial as well as operational performance is expected to drive the company’s growth, going forward. However, increasing consumer purchases through the Internet has emerged as a pressing concern for retail REITs.

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 GGP Inc. (NYSE:GGP) , Vornado Realty Trust (NYSE:VNO) and HCP, Inc. (NYSE:HCP) which are expected next 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.

The Best & Worst of Zacks

Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 "Strong Sells." Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>