Simon Property Group, Inc.’s (SPG) operating arm – Simon Property Group, L.P. – disclosed the initiation of a global unsecured commercial paper note program. Notably, the company is the first real estate investment trust (REIT) in the U.S. to establish such a program.
Simon Property plans to use the reaped proceeds from the initiative for meeting general corporate needs. As per the terms of this program, the company may issue these notes from time to time in other currencies apart from the U.S. Dollar, such as the Euro. The company can issue these notes up to a maximum aggregate outstanding amount of $500 million or the foreign currency equivalent.
We expect this strategic move to improve the company’s liquidity position. Moreover, with Simon Property's significant international presence, the multi-currency borrowing feature can help it to hedge the currency fluctuation risk to some extent. As a matter of fact, Simon Property has a strong balance sheet, with increasing cash level on a year-over-year basis. As of Jun 30, 2014, the company’s cash and cash equivalents stood at $1.7 billion, up from $1.0 billion as of Mar 31, 2014.
Simon Property is scheduled to report the third-quarter 2014 results on Oct 22, before the opening bell. The Zacks Consensus Estimate for funds from operations (FFO) for the quarter is currently pegged at $2.06 per share.
Simon Property currently carries a Zacks Rank #3 (Hold). Investors interested in retail REIT may consider stocks like General Growth Properties, Inc (GGP), The Macerich Company (MAC) and Regency Centers Corporation (REG). All these stocks currently has a Zacks Rank #2 (Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation and amortization and other non-cash expenses to net income.
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