Simon Property (SPG) Tops Q3 FFO Estimates, Raises 2023 Outlook
Shares of Simon Property Group, Inc. SPG increased more than 1% in the pre-market trading on the NYSE on Tuesday as the retail REIT came up with better-than-expected third-quarter 2023 funds from operations (FFO) per share on higher revenues and raised outlook after the market closed yesterday.
Simon Property’s third-quarter 2023 FFO per share of $3.20 surpassed the Zacks Consensus Estimate of $2.98. Also, the figure increased 9.2% 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 property operating expenses and interest expenses partly offset the upsides. However, this retail behemoth raised its 2023 FFO per share outlook.
Simon Property generated revenues of $1.41 billion in the quarter, surpassing the Zacks Consensus Estimate of $1.37 billion. The reported figure increased 7.2% year over year.
Behind the Headlines
SPG reported revenues from lease income of nearly $1.3 billion, 6.9% higher than the prior-year period’s figure. Our estimate was pegged at $1.22 billion.
As of Sep 30, 2023, the occupancy for the U.S. Malls and Premium Outlets portfolio came in at 95.2%, up 70 basis points from 94.5% as of Sep 30, 2022. We projected the same to be 94.9%.
The base minimum rent per square foot for the U.S. Malls and Premium Outlets portfolio was $56.41 as of Sep 30, 2023, rising from $54.80 as of Sep 30, 2022, reflecting an increase of 2.9%. Our estimate was pegged at $56.42.
Simon Property’s property operating expenses in the third¬ quarter came in at $136.5 million, increasing 13% from the prior-year quarter. The domestic property net operating income (NOI) increased 4.2% year over year, and the portfolio NOI ascended 4.3%.
Moreover, quarterly interest expenses of $212.2 million marked an increase of 13% year over year. Our estimate was pegged at $201.5 billion.
In the quarter, construction started for Jakarta Premium Outlets, which is set to become the first Premium Outlet Center in Indonesia. This upscale outlet, spanning 300,000 square feet, is scheduled to welcome its first customers in February 2025. Simon has a 50% ownership stake in this endeavor. Moreover, construction is underway for redevelopment and expansion projects at various properties in North America and Asia.
Balance Sheet Position
Simon Property exited the third 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.
During the third quarter, SPG repurchased 1.27 million shares of its common stock.
2023 Outlook Raised
For 2023, Simon Property now projects FFO per share in the range of $12.15-$12.25, up from the prior-guided range of $11.85-$11.95. This marks an increase of 30 cents per share at the midpoint. The Zacks Consensus Estimate is currently pegged at $11.91.
Dividend Update
Concurrent with its third-quarter earnings release, Simon Property announced a quarterly common stock dividend of $1.90 for the fourth quarter of 2023. The increased dividend will be paid out on Dec 29 to shareholders of record as of Dec 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, Consensus and EPS Surprise
Simon Property Group, Inc. price-consensus-eps-surprise-chart | Simon Property Group, Inc. Quote
Performance of Another Retail REIT
Kimco Realty Corp. KIM reported a third-quarter 2023 FFO per share of 40 cents, ahead of the Zacks Consensus Estimate of 39 cents. The figure was only a cent lower than the year-ago quarter’s tally. Results reflected better-than-anticipated revenues, aided by rental rate growth and healthy occupancy levels. Kimco raised its 2023 FFO per share outlook and also announced a hike in its quarterly dividend.
Upcoming Earnings Releases
We now look forward to the earnings releases of other retail REITs like Regency Centers Corporation REG and Federal Realty Investment Trust FRT, which are slated to report on Nov 2.
The Zacks Consensus Estimate for Regency Centers’ third-quarter 2023 FFO per share is pegged at $1.01, implying a year-over-year increase of 7.45%. REG currently carries a Zacks Rank #3.
The Zacks Consensus Estimate for Federal Realty’s third-quarter 2023 FFO per share is pegged at $1.62, suggesting a year-over-year increase of 1.9%. FRT currently carries a Zacks Rank #3.
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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