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Simon Property Group Inc SPG

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Simon's Mall Fundamentals Ahead of Expectations in First Quarter; Acquires Retailer Eddie Bauer

Kevin Brown Equity Analyst

Analyst Note

| Kevin Brown |

While mall fundamentals continue to struggle compared with prepandemic levels, no-moat Simon Property Group reported first-quarter results that were ahead of our estimates, leading us to reaffirm our $149 fair value estimate. Occupancy did see a 60-basis-point drop sequentially to 90.9% in the first quarter, though that is better than the typical 100-basis-point drop caused by seasonality in most years and definitely better than our estimate of a 200-basis-point decline. However, re-leasing spreads did fall 13.6% compared with prior rent, worse than our estimate of a 9.7% decline, leading to rent growth of just 0.6%. Still, Simon reported comparable property net operating income decline of just 8.4%, significantly better than our estimate of a 16.4% decline. Combined with fewer rent abatements in the quarter, Simon reported funds from operations of $2.48 in the first quarter, and while that is 30 cents below the same period in 2020 it is 28 cents ahead of our first-quarter estimate and 31 cents ahead of the figure reported in the fourth quarter of 2020. The strong quarter led to management raising 2021 FFO guidance to a range of $9.70 to $9.80, an increase of 13 cents at the midpoint.

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Company Profile

Business Description

Simon Property Group is the second- largest real estate investment trust in the United States. Its portfolio includes an interest in 207 properties: 106 traditional malls, 69 premium outlets, 14 Mills centers (a combination of a traditional mall, outlet center, and big-box retailers), four lifestyle centers, and 14 other retail properties. Simon's portfolio averaged $693 in sales per square foot over the past 12 months. The company also owns a 21% interest in Klepierre, a European retail company with investments in shopping centers in 16 countries, and joint venture interests in 29 premium outlets across 11 countries.

225 West Washington Street
Indianapolis, IN, 46204
T +1 317 636-1600
Sector Real Estate
Industry REIT - Retail
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type Hard Assets
Employees 3,300