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Simon Property (SPG) Boosts Tenant Base With Hermes Lease

Amid the recovery in the retail real estate industry and an improving leasing environment, Simon Property Group SPG announced that it signed a lease with Hermes for a new 7,000-square-feet (sq-ft) boutique at the former’s Phipps Plaza in Atlanta.

The move is part of the retail REIT behemoth’s strategy to boost its tenant mix and increase shoppers’ footfall at its properties.

The new Hermes store is set to open at the end of second-quarter 2024.
Per Vicki Hanor, senior vice president of Luxury Leasing at SPG, “Hermes is synonymous with artisanal craftmanship and rich heritage. The addition of Hermes at Phipps Plaza is another exciting step in the luxury evolution our consumers expect in Atlanta.”

The retail REIT’s properties at premium locations have been benefiting from the improving leasing environment and the rebound in mall traffic. In the six months ended Jun 30, 2022, it signed 673 leases and 814 lease renewals (excluding mall anchors and majors, new development, redevelopment and leases with terms of a year or less) with a fixed minimum rent across its U.S. Malls and Premium Outlets portfolio.

Simon Property has been focusing on adopting an omni-channel strategy and successful tie-ups with premium retailers. The company capitalized on purchasing recognized retail brands in bankruptcy. With the brands generating a decent amount from digital sales, investments in them seem strategic for Simon Property.

The retailer sales per square foot for SPG’s malls and outlets touched a record-high in the second quarter. With the improving economy and healthy consumer confidence, the trend is expected to continue in the upcoming period.

In order to enhance its portfolio, Simon Property has been focusing on premium acquisitions and transformative redevelopments. It has invested billions in transforming its properties.

In June 2022, the company acquired an additional interest in Gloucester Premium Outlets from a joint venture partner for $14 million in cash consideration, including a pro-rata share of working capital, resulting in the consolidation of the property.

In December 2020, Simon Property completed the acquisition of Taubman Centers, Inc., adding several premier retail assets to its portfolio.

The Zacks Rank #3 (Hold) stock has gained 10.9% quarter to date compared with its industry’s growth of 3.5%.


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Stocks to Consider

Some better-ranked stocks in the retail REIT sector are STORE Capital STOR, Kite Realty Group Trust KRG and Tanger Factory Outlet Centers SKT, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for STORE Capital’s 2022 FFO per share has moved nearly 1% upward in the past month to $2.27.

The Zacks Consensus Estimate for Kite Realty’s 2022 FFO per share has moved 1.1% upward in the past month to $1.84.

The Zacks Consensus Estimate for Tanger Factory Outlet Centers’ ongoing year’s FFO per share has been raised marginally upward over the past month to $1.76.

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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