Simon Property Group Earnings: Company Beats Estimates on Higher NOI Growth and Gains on Sale

Simon Property Group’s fourth-quarter results beat our estimates, giving us confidence in our $151 fair value estimate for the no-moat company. Occupancy sequentially increased 60 basis points to 95.8%, slightly better than our estimate of a 40-basis-point sequential gain. Minimum rents increased 3.1% year over year, also slightly better than our estimate of 2.0% growth. Simon reported same-store net operating income growth of 7.3% for the fourth quarter, which beat our estimate of 3.1% growth. The company reported funds from operations, or FFO, of $3.69 per share in the quarter, well above our estimate of $3.29. However, Simon reported a $117.4 million gain on the sale of a partial ownership interest in the Authentic Brands Group investment, resulting in a one-time gain of $0.31 per share. Excluding that one-time gain, Simon would have reported $3.38 per share, which is still slightly better than our estimate.