Simon Reports Continued Property Net Operating Income Growth in Q2 and Increases Dividend Again

Second-quarter results for no-moat Simon Property Group were in line with our expectations, leading us to reaffirm our $160 fair value estimate. Occupancy improved 60 basis points sequentially to 93.9%, ahead of our estimate of 92.9% occupancy in the quarter. Domestic property same-store net operating income grew 3.6% year over year, better than our estimate of 2.5%, and total portfolio NOI, which includes international properties, grew an even higher 4.6%. However, total NOI fell 1.9% as the company recorded less income from its retailer investments and a lower level of lease termination income compared with a year ago. While the $116.5 million in NOI the company recorded in retailer investments is lower than the $195.8 million in the second quarter of 2021, we view it as a positive, given that it has rebounded from just $47.4 million in the first quarter of 2022. Simon reported comparable funds from operations of $2.96 per share in the second quarter, relatively in line with our $2.93 estimate and the $2.92 figure the company recorded in the second quarter of 2021 after removing a $0.32 noncash gain related to a deferred tax liability reversal.