Simon Reports Occupancy Levels in Fourth Quarter That Are Near Prepandemic Levels

Fourth-quarter results for Simon Property Group were slightly better than we anticipated, which gives us confidence in our $154 fair value estimate for the no-moat company. Occupancy improved 40 basis points sequentially and 150 basis points year over year to 94.9%, which is only 40 basis points below the 95.3% occupancy figure the company reported in the fourth quarter of 2019. Minimum rent grew 2.3% year over year in the fourth quarter. As a result, portfolio net operating income, or NOI, grew 6.3% in the fourth quarter, which was slightly better than our estimate of 4.5% growth. While total company NOI fell 1.7%, it includes less lease termination income, which is a sign that the portfolio’s tenants are healthier today compared with a year ago, and less retail investment income, though the $125 million reported this quarter was in line with our expectations. Simon reported comparable funds from operations, or FFO, of $3.15 per share in the fourth quarter, which is nine cents higher than our $3.06 estimate and four cents higher than the $3.11 figure reported in the fourth quarter of 2021.