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SPG's 1st Premium Outlets in Canada

Zacks Equity Research

Recently, Simon Property Group, Inc. (SPG) opened its first Premium Outlet Centre in Toronto, Canada. The move is in consistence with this retail real estate investment trust’s (:REIT) strategy of expanding its Premium Outlets portfolio in upscale locations across the globe.

The new outlet shopping centre – Toronto Premium Outlets – is opened in a 50/50 partnership with Calloway Real Estate Investment Trust, which is one of the largest REITs of Canada. This outlet is located in the Town of Halton Hills and serves the Greater Toronto area.

The first phase of this property, spanning 358,000 square feet, boasts 90 outlet stores. This comprises industry-leading brands, of which some are opening their debut outlet stores in Canada such as Columbia Sportswear Co. (COLM), Polo Ralph Lauren of Ralph Lauren Corp. (RL), Restoration Hardware (RH) and Ted Baker London.

We expect the above-mentioned property to enhance Simon Property’s top-line growth prospects going forward, given the strategic positioning of the Premium Outlets center in one of Canada’s highly productive areas.

Notably, Simon Property has been active in capitalizing on growth opportunities in top markets worldwide, with special focus on enhancing its Premium Outlets portfolio. Currently, the company has 79 Premium Outlet Centers, which include 64 in the U.S and 15 abroad.

On Jul 29, 2013, Simon Property reported second-quarter 2013 funds from operations (:FFO) per share of $2.11, beating the Zacks Consensus Estimate by 4 cents and the year-ago quarter figure by 22 cents. The 11.6% year-over-year rise was primarily driven by increases in overage revenues and occupancy. Moreover, the company’s strong fundamentals prompted management to raise its FFO growth outlook for the second time in the year.

Consequently, Simon Property currently carries a Zacks Rank #2 (Buy). 

Note: 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.

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