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Simon Property (SPG) Misses on Q1 FFO, Raises '23 Outlook

Simon Property Group, Inc.’s SPG first-quarter 2023 funds from operations (FFO) per share of $2.74 missed the Zacks Consensus Estimate of $2.80. The figure, however, compared favorably with the year-ago quarter’s $2.70.  

Results reflect better-than-anticipated revenues on healthy leasing activity and a rise in base rent per square foot and occupancy levels. However, higher operating expenses were a woe. This retail behemoth also raised its 2023 FFO per share outlook and dividend.

Simon Property generated revenues of $1.35 billion in the quarter, surpassing the Zacks Consensus Estimate of $1.34 billion. The reported figure increased 4.2% year over year.

Per David Simon, chairman, CEO, and president of the company, “We continue to strengthen our company through disciplined investments and proactive capital markets activities, further enhancing our already strong financial flexibility. Given our current view for the remainder of 2023, today we raised our quarterly dividend and are increasing the mid-point of our full-year 2023 guidance.”

Behind the Headlines

SPG reported revenues from lease income of $1.25 billion, higher than the prior-year period’s $1.21 billion. Our estimate for the same was pegged at $1.19 billion.

As of Mar 31, 2023, the occupancy for the U.S. Malls and Premium Outlets portfolio came in at 94.4%, up from 93.3% as of Mar 31, 2022. We projected the same to be 94.2%.

The base minimum rent per square foot for the U.S. Malls and Premium Outlets portfolio was $55.84 as of Mar 31, 2023, rising from $54.14 as of Mar 31, 2022, reflecting an increase of 3.1%. The figure also surpassed our estimate of $55.18.

Simon Property’s total operating expenses in the first quarter came in at $688.1 million, increasing 1.9% from the prior-year quarter. The domestic property net operating income (NOI) increased 4% year over year, whereas the portfolio NOI climbed 3.9%.

Balance Sheet Position

Simon Property exited the first quarter of 2023 with $9.3 billion of liquidity. This comprised $1.8 billion of cash in hand, including its share of joint-venture cash, and $7.5 billion of available capacity under the company’s revolving credit facilities.

2023 Outlook Raised

For 2023, the company now projects FFO per share in the range of $11.80-$11.95, up from the prior-guided range of $11.70-$11.95. This marks an increase of 5 cents at the mid-point. The Zacks Consensus Estimate for the same is currently pegged at $12.04.

Dividend

Concurrent with its first-quarter earnings release, Simon Property announced a quarterly common stock dividend of $1.85 for the first quarter of 2023, indicating a hike of 8.8% year over year. The increased dividend will be paid out on Jun 30 to shareholders of record as of Jun 9, 2023.

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

Simon Property Group, Inc. Price, Consensus and EPS Surprise

Simon Property Group, Inc. Price, Consensus and EPS Surprise
Simon Property Group, Inc. Price, Consensus and EPS Surprise

Simon Property Group, Inc. price-consensus-eps-surprise-chart | Simon Property Group, Inc. Quote

Performance of Other REITs

SITE Centers Corp. SITC reported first-quarter 2023 operating funds from operations per share of 30 cents, beating the Zacks Consensus Estimate by 2 cents. Moreover, the figure was higher than the prior-year quarter’s 29 cents.

SITC’s results reflected better-than-anticipated revenues on healthy leasing activity and year-over-year growth in base rent per square foot. The company also raised its outlook for 2023.

Kimco Realty Corp.’s KIM first-quarter 2023 FFO per share came in at 39 cents, in line with the Zacks Consensus Estimate. The figure was on par with the year-ago quarter’s tally and our estimate.

KIM’s results reflected better-than-anticipated revenues, aided by rental rate growth and a rise in occupancy. It revised its 2023 FFO per share outlook.

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

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