Simon Property Group, Inc. (SPG), a retail real estate investment trust (REIT), reported third-quarter 2014 comparable funds from operations (FFO) of $2.25 per share, which came above the Zacks Consensus Estimate of $2.02 per share and the year-ago quarter figure of $1.97 per share.
The comparable FFO figures are arrived at after adjusting the loss on extinguishment of debt and unsecured debt redemption (third-quarter 2014) and adjustment related to WPG spin off (third-quarter 2013).
The 14.2% year-over-year improvement in quarterly FFO per share was primarily driven by a notable rise in base minimum rent and total sales per square feet as well as occupancy rates.
Total revenue during the reported quarter increased 7.7% year over year to $1.23 billion. Also, it beat the Zacks Consensus Estimate of $1.20 billion.
Quarter in Detail
For the U.S. Malls and Premium Outlets portfolio, occupancy rose 140 basis points (bps) year over year to 96.9% at the end of the third quarter. Total sales per square feet moved up by 5.9% to $613. Encouragingly, base minimum rent per square feet climbed 10.9% year over year to $46.29 and releasing spread increased 210 bps to 17.3%.
During the quarter, Simon Property started construction on two expansion projects – Livermore Premium Outlets in California and The Colonnade at Sawgrass in Florida. Also, the company initiated construction at two new Premium Outlets projects – Tucson Premium Outlets and Tampa Premium Outlets.
At the end of the third quarter, Simon Property has redevelopment and expansion projects in progress at 31 assets across the U.S., Asia and Mexico.
Simon Property exited third-quarter 2014 with cash and cash equivalents of $818 million, as compared to $1.7 billion at the end of second-quarter 2014.
2014 Outlook
Simon Property expects 2014 FFO per share outlook in the range of $8.84 – $8.88. The Zacks Consensus Estimate for the same is currently pegged at $9.01.
Dividend Update
Concurrent with its earnings release, Simon Property declared a quarterly dividend of $1.30 per share. The dividend will be paid on Nov 28, 2014 to shareholders of record as of Nov 14.
Our Viewpoint
Simon Property bounced back on growth path this earnings season, with strong quarterly results. This came on the back of its impressive financial and operational performances. With the economy showing signs of recovery, spending power of richer consumers is improving and the company seems to leverage on this trend.
Simon Property currently carries a Zacks Rank #3 (Hold).
Presently, we look forward to the results of other REITs such as Mack-Cali Realty Corp. (CLI), Prologis Inc. (PLD) and SL Green Realty Corp. (SLG) that are scheduled to report this week.
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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