Simon Property Group’s (SPG) operating partnership subsidiary, Simon Property Group, L.P., decided to raise capital through senior notes issuance. The company planned to sell 2.200% senior notes worth $600 million (due Feb 1, 2019) and 3.750% senior notes worth $600 million principal amount (Feb 1, 2024).
The two senior notes have an average coupon rate of 2.975% and a combined weighted average duration of 7.5 years. Simon Property Group, L.P plans to use the garnered amount from this offering to pay off its debt and meet other corporate needs. The public offering is expected to complete on Jan 21, 2014.
A consortium of financial institutions is assisting the subsidiary of Simon Property in this offering, acting as joint book running managers. Citigroup Global Markets Inc. of Citigroup, Inc. (C), BBVA Securities Inc., Deutsche Bank Securities Inc. of Deutsche Bank AG (DB) and Morgan Stanley & Co. LLC of Morgan Stanley (MS) were among them.
The aforementioned notes offeringis a strategic fit as it will lower debt and consequently the interest expenses. Moreover, increased financial flexibility will enable Simon Property to pursue its portfolio restructuring activity that will go a long way in enhancing its top-line growth.
Of late, Simon Property took its portfolio enhancement initiative a notch higher to increase utilization of resources for expanding its global portfolio of larger malls, mills and premium outlets. As a part of it, in Dec 2013, the company disclosed the spinoff of its strip center business and smaller enclosed malls into a publicly traded REIT.
Currently referred to as “SpinCo,” this new unit will initially enjoy an ownership or will have stake in 54 strip centers and 44 malls. With the economy showing signs of recovery, the spending capacity of the richer consumers is improving and the company seems to leverage on this trend through this move and boost its top-line growth.
Simon Property is slated to report its fourth-quarter 2013 results on Jan 31, after the closing bell. The Zacks Consensus Estimate for the fourth-quarter 2013 funds from operations (FFO) per share is currently pegged at $2.43, representing a year-over-year increase of 5.93%.
The company presently carries a Zacks Rank #3 (Hold).
Note: FFO, a widely accepted and reported measure of the performance of REITs is derived by adding depreciation, amortization and other non-cash expenses to net income.
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