Simon’s total revenues reached $1.28 billion, a 2.4% increase compared to last year. However, its recovery momentum was strong last year, and the company has continued to improve since, as was the case in its most recent Q2 results. Another Rock-Solid Quarter for Simon Property Groupĭespite Simon being one of the highest quality retail REITs out there, the company was impacted notably during the pandemic. This is evident by the fact that Simon currently features a base minimum rent of $54.1 per square foot, on average, which is incredibly high for retail space. Hence, Simon is not troubled with low-grade retailers whose financials can be easily impacted during a market downturn and which, in turn, would result in lower rent collections. This means that the company attracts high-quality tenants that cater to the high-end consumer, which has increased purchasing power. Moreover, Simon’s aspiration is for its properties to be the prime destination for high-end retailers and their customers. Simon also owns an 80% non-controlling interest in the formerly publicly traded Taubman Realty Group, which it bought out in 2020.įurther, the company’s international exposure boosts its geographical diversification, with Simon owning a 22.4% equity stake in Klépierre SA ( PARIS: KLPEF), a French publicly-traded REIT that has, in turn, an interest in shopping centers located across 14 European countries. They comprised 69 Premium Outlets, 94 malls, 14 Mills, six lifestyle centers, and 15 other retail properties located in 37 states and Puerto Rico. Specifically, Simon owned or held an interest in 198 income-producing properties, according to its latest filings. Accordingly, Simon’s operations are exceptionally diversified. However, Simon Property Group features multiple qualities that differentiate it from its peers.įirstly, with a market capitalization of around $32.6 billion, Simon is the second most valuable retail REIT in the U.S., only behind Realty Income ( NYSE: O). With foot traffic in retail locations remaining rather soft despite the pandemic fading away and their growth prospects lacking meaningful catalysts, it makes sense retail REITs are not particularly popular these days. Investors are usually skeptical when it comes to retail REITs, and for a good reason. With the market becoming more unpredictable by the day due to the current highly speculative macroeconomic and geopolitical landscapes, sizable dividend yields can reduce uncertainty and increase the overall predictability of a stock’s investment case. With the dividend appearing relatively well-covered and the stock’s valuation being rather cheap, in my view, I am bullish on the stock. Shares of the company have declined considerably year-to-date, pushing the stock’s dividend yield to a sizable 7%. Simon reported comparable funds from operations, or FFO, of $2.74 per share, which was below our estimate of $2.95 due to lower retail investment income in the quarter.One company that income-oriented investors have historically appreciated for its hefty dividends and overall qualities is Simon Property Group ( NYSE: SPG). While the loss is larger than we forecast, management says that its retail investments face significant seasonality and that a first-quarter loss was already accounted for in management’s 2023 guidance. However, Simon’s various retail investments produced a $54.6 million NOI loss in the first quarter, which marks the first quarter where Simon has lost money on its investments over the past several years. Minimum rent grew 3.1% year over year, leading to portfolio net operating income growth of 3.9% that was in line with our estimate. Occupancy declined 50 basis points sequentially due to typical mall seasonality but was up 110 basis points year over year. Simon Property Group reported mixed first-quarter results compared with our estimates, though we don’t see anything in the quarter that would change our $150 fair value estimate for the no-moat company.
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