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Simon Property's (SPG) Q4 FFO & Revenues Miss Estimates

Zacks Equity Research

Simon Property Group, Inc. SPG, a retail real estate investment trust (REIT), reported fourth-quarter 2018 funds from operations (FFO) of $3.23 per share, which missed the Zacks Consensus Estimate by a whisker. The FFO per share figure, however, came in 3.5% higher than the year-ago tally.

Results highlight increased occupancy and leasing spread per square foot at the company’s U.S. malls and Premium Outlets. Simon Property also provided its outlook for 2019.

During the reported quarter, the company posted revenues of $1.46 billion, lagging the Zacks Consensus Estimate. However, the revenue figure compares favorably with the year-ago tally of $1.43 billion.

For full-year 2018, FFO per share came in at $12.13, in line with the Zacks Consensus Estimate. The figure also improved 8.2% year over year. Revenues for full-year 2018 improved around 2% year over year to $5.6 billion. However, revenues lagged the Zacks Consensus Estimate of $5.73 billion.

Inside the Headline Numbers

For the U.S. Malls and Premium Outlets portfolio, occupancy was 95.9% as of Dec 31, 2018, expanding 40 basis points (bps) from the prior-quarter tally. Retailer sales per square foot came in at $661 for the trailing 12-month period, marking growth of 5.3%. Base minimum rent per square feet was $54.18 as of Dec 31, 2018. Further, leasing spread per square foot for the trailing 12-month period ended Dec 31, 2018, increased 14.3% to $7.75.

Total portfolio net operating income (NOI) growth for the 12-month period ended Dec 31, 2018, came in at 3.7%. Comparable-property NOI growth for the same period came in at 2.3%.

During the Oct-Dec quarter, the company started redevelopment projects at Broadway Square, Cape Cod Mall, Midland Park Mall, Ocean County Mall and Phipps Plaza.

The company exited fourth-quarter 2018 with cash and cash equivalents of $514.3 million compared with nearly $1.5 billion reported at the end of December 2017.

Additionally, as of Dec 31, 2018, Simon Property had more than $7.5 billion of liquidity. This comprised cash on hand, including available capacity under the company’s revolving credit facilities, and its share of joint-venture cash.

During 2018, Simon Property closed on 22 mortgage loans worth nearly $3.2 billion, the company’s share being $1.3 billion. 

Outlook

Simon Property projects 2019 FFO per share of $12.3-$12.4. The Zacks Consensus Estimate for the same is currently pinned at $12.52.

Dividend Update

Simon Property announced a quarterly dividend of $2.05 per share, denoting an increase of 5.1% year over year. The dividend will be paid on Feb 28, to stockholders of record as of Feb 14, 2019.

Our Viewpoint

Simon Property is putting in every effort to enhance the value of its assets. During the year 2018, it unveiled two new shopping properties, completed overhaul at five properties and initiated construction at various redevelopment projects. This is expected to contribute to the company’s cash flow and revenues in the upcoming quarters.  

Nonetheless, the implementation of such measures requires a decent upfront cost and therefore, may limit any robust growth in its near-term profit margins. Also, rising interest rates may inflate cost of financing these projects.

Simon Property Group, Inc. Price, Consensus and EPS Surprise


Simon Property Group, Inc. Price, Consensus and EPS Surprise | Simon Property Group, Inc. Quote

 

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.

Performance of Other REITs

Kimco Realty Corp.’s KIM fourth-quarter 2018 FFO as adjusted were 35 cents per share, in line with the Zacks Consensus Estimate. However, the reported tally was lower than the year-ago figure of 39 cents.

SL Green Realty Corp. SLG reported fourth-quarter 2018 FFO of $1.61 per share, missing the Zacks Consensus Estimate of $1.72. This tally was net of $14.9 million, related to early repayment of loan at One Madison Avenue. Nonetheless, results compared favorably with the year-ago figure of $1.60.

Boston Properties Inc.’s BXP fourth-quarter 2018 FFO per share of $1.59 missed the Zacks Consensus Estimate of $1.68. The figure, however, came in 7% higher than the prior-year tally.

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