Simon Property Group Earnings: Occupancy Reaches High Point While NOI Growth Remains Solid

Simon Property Group reported fourth-quarter results were relatively in line with our expectations, leading us to reaffirm our $175 fair value estimate for the no-moat company. Occupancy sequentially increased 30 basis points to 96.5%, which is the highest single quarter the company has reported since the fourth quarter of 2016 and the third-highest single quarter the company has reported in at least the past two decades. Minimum rent increased 2.5% year over year, and property net operating income rose 4.5% in the fourth quarter. However, while the company reported the highest NOI from retail investments and other sources for the year in the fourth quarter at $200 million; that was below the $236 million figure the company reported from those sources in the fourth quarter of 2023. As a result, total company NOI grew 1.8% in the fourth quarter. Simon reported funds from operations of $3.68 per share in the quarter. However, that includes a 20-cent adjustment for a gain on sale and 13 cents of other noncash adjustments. Removing those, Simon reported a real estate FFO of $3.35 that was relatively in line with our $3.42 estimate.