Simon Property Group Reports Q4 Ahead of Expectations, Though Retailer Investments Slow 2022 Growth

While fourth-quarter results were slightly ahead of our expectations for no-moat Simon Property Group, we don’t anticipate changing our $154 fair value estimate given 2022 guidance came in below our estimates. Occupancy improved 60 basis points sequentially to 93.4% in the fourth quarter, which continues the company’s recovery from the pandemic lows. Sales growth across Simon’s tenants was strong in the quarter, up 34% over the fourth quarter of 2020 and up 8% over the fourth quarter of 2019. Comparable property net operating income was up 22.4% thanks to tenants repaying owed rent, while total company net operating income was up 46.8% given the company’s acquisition of Taubman and various investments in retailers. As a result, fourth-quarter funds from operations came in at $3.09 for Simon, 10 cents above our $2.99 estimate for the quarter and 92 cents above the $2.17 figure the company reported in the fourth quarter of 2020.