Dj Simon Property Group Inc. Stock Outperforms Competitors On Strong Trading Day

Shares of Simon Property SPG have rallied 16.9% over the past three months, outperforming the industry's 7.1% growth.

The retail real estate investment trust’s (REIT) portfolio of premium retail assets in the United States and abroad, the adoption of omnichannel retailing, a focus on strategic acquisitions and mixed-use developments and solid balance sheet strength have enabled it to ride the growth curve so far.

In early November, SPG reported third-quarter funds from operations (FFO) per share of $2.84, missing the Zacks Consensus Estimate of $3. The figure decreased from $3.20 reported in the year-ago period.

Factors Behind SPG Stock’s Price Surge: Will the Trend Last?

Simon Property enjoys wide exposure to retail assets across the United States. The company’s international presence fosters sustainable long-term growth compared to its domestically-focused peers. In an improving leasing environment, the retail REIT is poised to benefit from its superior assets at premium locations. As of Sept. 30, 2024, the ending occupancy for the U.S. Malls and Premium Outlets portfolio came in at 96.2%, up 100 basis points from 95.2% as of Sept. 30, 2023.

Simon Property’s adoption of an omni-channel strategy and successful tie-ups with premium retailers have paid off well. Its online retail platform, coupled with an omnichannel strategy, is likely to be accretive for its long-term growth. The company is also focused on tapping its growth opportunities by assisting digital brands in enhancing their brick-and-mortar presence.

Simon Property has been restructuring its portfolio, aiming at premium acquisitions and transformative redevelopments. In September 2024, it concluded the expansion and renovation of Busan Premium Outlets in South Korea. This move, along with past restructuring initiatives, is likely to bolster the company’s growth in the upcoming period. Its efforts to explore the mixed-use development option, which has gained immense popularity in recent years, have enabled it to tap the growth opportunities in areas where people prefer to live, work and play.

SPG is making efforts to bolster its financial flexibility. This enabled the company to exit the third quarter of 2024 with $11.1 billion of liquidity. As of Sept. 30, 2024, Simon Property’s total secured debt to total assets was 17%, while the fixed-charge coverage ratio was 4.3, ahead of the required level. With solid balance sheet strength and available capital resources, it remains well-poised to tide over any mayhem and bank on growth opportunities.

Solid dividend payouts are arguably the biggest enticements for REIT shareholders, and Simon Property remains committed to that. Concurrent with its third-quarter earnings release, the company announced a hike in its dividend to $2.10 from $2.05 paid out earlier. This marked a hike of 2.4% from the prior dividend payment and a year-over-year increase of 10.5%. This retail REIT has increased its dividend 12 times in the last five years. Such disbursements highlight its operational strength and commitment to rewarding shareholders handsomely.

Key Risks for SPG

Higher e-commerce adoption and limited consumers’ willingness to spend amid macroeconomic uncertainty raise concerns for Simon Property.

Simon Property currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Crown Castle Inc. CCI and SL Green Realty SLG,each carrying a Zacks Rank #2 (Buy) at present.

The Zacks Consensus Estimate for Crown Castle Inc.’s ongoing year’s FFO per share has increased marginally over the past month to $6.98.

The Zacks Consensus Estimate for SL Green Realty’s 2024 FFO per share has moved marginally northward in the past two months to $7.61.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.

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Macerich MAC reported funds from operations (FFO) per share, excluding financing expenses in connection with Chandler Freehold, accrued default interest expense and loss on non-real estate investments of 38 cents, which missed the Zacks Consensus Estimate of 40 cents. The figure decreased 15.6% from the year-ago quarter’s 45 cents.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Results reflected higher interest expenses on a year-over-year basis. However, this retail REIT experienced an increase in same-center net operating income (NOI), including lease termination income, from the prior-year period, backed by a higher base rent re-leasing spread.

Quarterly revenues of $220.2 million were higher than the year-ago quarter’s $218.2 million. The figure surpassed the Zacks Consensus Estimate of $219.7 million.

Behind MAC’s Headlines

Same-center NOI, including lease termination income, increased 1.9% year over year to $180.8 million.

The portfolio tenant sales per square foot for spaces less than 10,000 square feet for the trailing 12 months ended Sept. 30, 2024, came in at $834 compared with $847 for the same period ended Sept. 30, 2023.

During the reported quarter, Macerich signed leases encompassing 0.83 million square feet. On a comparable center basis, it reflected a 16% year-over-year increase in leased square footage.

As of Sept. 30, 2024, portfolio occupancy was 93.7%, up 40 basis points from 93.3% reported in the prior quarter. Our expectation for the portfolio occupancy was 93.8%.

For the 12 months ended Sept. 30, 2024, base rent re-leasing spreads were 11.9% more than the expiring base rent.

During the reported quarter, interest expenses increased by 7% to $57.1 million.

MAC’s Balance Sheet

As of Nov. 6, 2024, Macerich had around $667 million of liquidity. This included $505 million of available capacity on its $650 million revolving line of credit.

As of Sept. 30, 2024, the company had a total net debt of $6.19 billion and net debt to adjusted EBITDAre of 8.23X.

MAC’s Dividend Update

On Oct. 31, 2024, MAC announced a quarterly cash dividend of 17 cents per share of common stock. The dividend is payable on Dec. 2, 2024 to stockholders of record at the close of business on Nov. 12, 2024

Currently, Macerich carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Macerich Company (The) Price, Consensus and EPS Surprise

Macerich Company (The) price-consensus-eps-surprise-chart | Macerich Company (The) Quote

Performance of Other Retail REITs

Simon Property Group, Inc. SPG reported a third-quarter FFO per share of $2.84, missing the Zacks Consensus Estimate of $3. However, the figure decreased from $3.20 reported in the year-ago period.

SPG’s results reflected higher interest expenses on a year-over-year basis. However, an increase in revenues, backed by a rise in the base minimum rent per square foot and occupancy levels, supported the results to some extent.

Regency Centers Corporation REG reported a third-quarter 2024 NAREIT FFO per share of $1.07, outpacing the Zacks Consensus Estimate of $1.04. The figure increased 4.9% from the prior-year quarter.

Results reflected healthy leasing activity and a year-over-year improvement in the same property's NOI and base rents. REG raised its 2024 outlook.

Note: Anything related to earnings presented in this write-up represents FFO, a widely used metric to gauge the performance of REITs.

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