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Simon Taps Debt Market to Raise $2B on Senior Notes Sale

Zacks Equity Research
·4-min read

Simon Property Group SPG announced that its operating partnership subsidiary — Simon Property Group, L.P. — agreed to sell three series of senior unsecured notes for aggregate principal amount of $2 billion.

Specifically, the company will sell 3.500% notes with aggregate principal amount of $500 million maturing in September 2025. These will be issued as additional notes under the 3.500% notes series of which aggregate principal amounting $600 million was previously issued on Aug 17, 2015.

The company will also sell two new series of notes — 2.650% senior notes maturing in Jun 2030 and 3.800% senior notes due June 2050 — each with a principal amount of $750 million.

The two new issues of senior notes carry a weighted average coupon rate of 3.225% and a weighted average term of 20 years.

Subject to the satisfaction of customary closing norms, the offering is likely to close on Jul 9.

Simon Property plans to use to proceeds to address its near-term maturities and boost liquidity position. Specifically, the company is likely to redeem at par its 2.500% notes due September 2020, with aggregate principal amount of $500 million, and 2.375% notes set to mature in October 2020, with principal amount of €375 million.

Further, it will used the proceeds from the senior obligations for general corporate purposes, including the repayment of unsecured debt outstanding under its global commercial paper note program and/or senior revolving credit facilities.

Notably, Simon Property’s efforts to strengthen its liquidity in these testing times and tap the debt market amid a low interest-rate environment are a strategic fit. In fact, the company has a solid liquidity position of $8.5 billion. This includes $5 billion of available capacity under its revolving credit facilities and term loan (net of outstanding U.S. and Euro commercial paper) as of May 31, 2020, together with $3.5 billion of cash on hand, including its share of joint-venture cash.

With solid balance sheet strength and available capital resources, the company remains well-poised to navigate through current blues and capitalize on opportunities generating from market dislocations.

In fact, at a time when a number of REITs have suspended dividend payments in light of the coronavirus pandemic that has disrupted the macro economy and affected rent collections, Simon Property recently announced a second-quarter dividend of $1.30. Albeit a 38.1% decline from the prior payment of $2.10, the dividend announcement comes as a relief for investors.

Moreover, as the economy reopens, the company restarted operations at majority of its retail properties in the United States. Specifically, on Jun 29, it noted that it already reopened 199 of its 204 U.S. retail properties across 37 states. The properties denote more than 95% of the company’s property net operating income. The remaining five properties are also likely to reopen within the next week. For Simon, the reopening of retail properties has raised hopes for better cash flows from its properties.

However, the note offering increases the company’s long-term debt.

Moreover, shares of this Zacks Rank #5 (Hold) company have slumped 58% over the past year compared with the industry’s decline of 23.3%.

 


Stocks to Consider

City Office REIT, Inc.’s CIO funds from operations (“FFO”) per share estimates for the ongoing year have been unchanged at $1.11 over the past 30 days. The company currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Washington Prime Group Inc.’s WPG Zacks Consensus Estimate for 2020 FFO per share has been revised marginally to 73 cents over the past month. The company currently carries a Zacks Rank of 2.

Gladstone Land Corporation’s LAND FFO per share estimates for 2020 have been unchanged at 68 cents over the past month. It currently carries a Zacks Rank of 2.

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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Simon Property Group, Inc. (SPG) : Free Stock Analysis Report
 
Gladstone Land Corporation (LAND) : Free Stock Analysis Report
 
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City Office REIT, Inc. (CIO) : Free Stock Analysis Report
 
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