Simon Property (SPG) Lags Q2 FFO, Ups Dividend & '23 Outlook
Simon Property Group’s SPG second-quarter 2023 funds from operations (FFO) per share of $2.88 missed the Zacks Consensus Estimate of $2.91. Also, the figure declined 1% year over year.
Results reflect better-than-anticipated revenues on healthy leasing activity and a rise in the base rent per square foot and occupancy levels. However, higher operating expenses and interest expenses acted as dampeners. Shares of SPG are down more than 1.8% in the pre-market trading today.
Nevertheless, this retail behemoth raised its 2023 FFO per share outlook and quarterly dividend.
Simon Property generated revenues of $1.369 billion in the quarter, surpassing the Zacks Consensus Estimate of $1.326 billion. The reported figure increased 7% year over year.
Behind the Headlines
SPG reported revenues from lease income of $1.25 billion, 5% higher than the prior-year period’s figure. Our estimate for the same was pegged at $1.21 billion.
As of Jun 30, 2023, the occupancy for the U.S. Malls and Premium Outlets portfolio came in at 94.7%, up 80 basis points from 93.9% as of Jun 30, 2022. We projected the same to be 94.5%.
The base minimum rent per square foot for the U.S. Malls and Premium Outlets portfolio was $56.27 as of Jun 30, 2023, rising from $54.58 as of Jun 30, 2022, reflecting an increase of 3.1%. The figure also surpassed our estimate of $55.26.
Simon Property’s total operating expenses in the second¬ quarter came in at $711.7 million, increasing 9% from the prior-year quarter. The domestic property net operating income (NOI) increased 3.3% year over year, and the portfolio NOI increased 3.7%.
Moreover, quarterly interest expenses of $218.1 million marked an increase of 16.4% year over year.
Construction is underway for redevelopment and expansion projects at various properties in North America, Europe and Asia. In April, SPG unveiled a new shopping destination in Paris-Giverny, France.
Balance Sheet Position
Simon Property exited the second quarter of 2023 with $8.8 billion of liquidity. This comprised $1.4 billion of cash in hand, including its share of joint-venture cash, and $7.4 billion of available capacity under the company’s revolving credit facilities.
2023 Outlook Raised
For 2023, Simon Property now projects FFO per share in the range of $11.85-$11.95, up from the prior-guided range of $11.80-$11.95. This marks an increase of 2 cents per share at the midpoint. The Zacks Consensus Estimate for the same is currently pegged at $11.91.
Dividend Hiked
Concurrent with its second-quarter earnings release, Simon Property announced a quarterly common stock dividend of $1.90 for the third quarter of 2023, indicating a sequential hike of 2.7% and 8.6% year over year. The increased dividend will be paid out on Sep 29 to shareholders of record as of Sep 8, 2023.
Currently, SPG carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Simon Property Group, Inc. Price and EPS Surprise
Simon Property Group, Inc. price-eps-surprise | Simon Property Group, Inc. Quote
Performance of Other Retail REITs
Kimco Realty Corp. KIM reported a second-quarter 2023 FFO per share of 39 cents, in line with the Zacks Consensus Estimate. The figure was only a cent lower than the year-ago quarter’s tally.
KIM’s results reflected better-than-anticipated revenues, aided by rental rate growth and a rise in occupancy levels. Kimco revised its 2023 FFO per share outlook.
Federal Realty Investment Trust’s FRT second-quarter 2023 FFO per share of $1.67 surpassed the Zacks Consensus Estimate of $1.62. This also marked a rise of 1.2% from the year-ago quarter’s tally of $1.65.
Results reflect healthy leasing activity and occupancy levels at its properties. Federal Realty generated 4.6% comparable property operating income growth, excluding lease termination fees and COVID-19 pandemic-related prior-period rents collected for the second quarter.
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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