Simon Property Group, Inc. (SPG) a retail real estate investment trust (“REIT”), reported fourth-quarter 2014 comparable funds from operations (“FFO”) of $2.47 per share, which came in line with the Zacks Consensus Estimate. The bottom line comfortably beat the prior-year quarter figure of $2.20 per share.
The comparable FFO figures are arrived at after adjusting the loss on extinguishment of debt, and spin-off transaction expenses and adjustment related to WPG properties.
The year-over-year improvement in quarterly FFO per share was primarily driven by growth in comparable net operating income (“NOI”) as well as occupancy rates.
Total revenue in the quarter increased 3.7% year over year to $1.30 billion. However, it missed the Zacks Consensus Estimate of $1.35 billion.
For the year 2014, Simon Property reported comparable FFO of $8.95 per share, which surpassed both the Zacks Consensus Estimate of $8.91 per share and the year-ago quarter figure of $7.86 per share.
Total revenue in 2014 increased 7.2% year over year to $4.87 billion. However, it missed the Zacks Consensus Estimate of $5.06 billion.
Quarter in Detail
For the U.S. Malls and Premium Outlets portfolio, occupancy rose 100 basis points (bps) year over year to 97.1% at the end of the fourth quarter. Total sales per square feet moved up 6.4% to $619. Encouragingly, base minimum rent per square feet rose 11% year over year to $47.01 and releasing spread decreased 20 bps to 16.6%.
Premium Outlets Montreal was opened during the quarter, where Simon Property owns 50% interest. Also, Simon Property started construction on projects at Phipps Plaza. This apart, construction activities are going on at projects including Roosevelt Field Mall, Del Amo Fashion Center, King of Prussia Mall, Woodbury Common Premium Outlets, Las Vegas North Premium Outlets, Livermore Premium Outlets and Chicago Premium Outlets.
At the end of the third quarter, Simon Property has redevelopment and expansion projects in progress at 27 assets across the U.S. and Asia.
Moreover, construction activities are going on at three premium outlets which are scheduled to open in 2015.
In Jan 2015, Simon Property acquired two properties for an aggregate price of $1.09 billion.
Simon Property exited fourth-quarter 2014 with cash and cash equivalents of $612 million, as compared to $818 million at the end of third-quarter 2014.
2015 Outlook
Simon Property expects 2015 FFO per share in the range of $9.60–$9.70. The Zacks Consensus Estimate for the same is currently pegged at $9.78.
Dividend Update
Concurrent with its earnings release, Simon Property declared a quarterly dividend of $1.40 per share. Marking a 7.7% sequential and 12% year over increase, the latest dividend will be paid on Feb 27, 2015 to shareholders of record as of Feb 13.
Our Viewpoint
Strong financial and operational performances are expected to aid the company drive its growth, going forward. With the economy showing signs of recovery, spending power of richer consumers is improving and the company seems to leverage this trend.
Simon Property currently carries a Zacks Rank #3 (Hold).
Presently, we look forward to the results of other REITs such as Kimco Realty Corp. (KIM), The Macerich Co. (MAC) and DDR Corp. (DDR) that are scheduled to report in the upcoming days.
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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