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Simon Property Group Inc - Stock Quote SPG

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Morningstar's Simon Property Group Inc Stock Analysis

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Strong Sales Growth Produces Healthy Retail Tenants for Simon in Q1

Kevin Brown, CFA Equity Analyst

Analyst Note

| Kevin Brown, CFA |

Simon Property Group reported first-quarter property fundamentals that beat our expectations, but its bottom-line missed our expectations. Still, we didn’t see anything in the quarter that would materially alter our $160 fair value estimate for the no-moat company. Portfolio occupancy sequentially fell 10 basis points to 93.3%, though occupancy typically falls in the first quarter as temporary holiday tenants vacate, and the reported figure is far better than the 110-basis-point decline we had anticipated. Simon reported sales per square foot growth of 19% to a company-record $734, which is better than our estimate of 7% growth, and is now well ahead of the $693 per square foot figure reported in the fourth quarter of 2019. Higher occupancy and percentage rent derived from higher sales drove same-store net operating income growth of 7.5% that beat our 6.3% estimate. Additionally, occupancy cost fell to 12.3% in the first quarter, the lowest it has been in over seven years. This suggests that Simon’s tenants are very healthy at the moment, which should attract more tenants to the properties to help the portfolio reach the 94.5% level we think it should return to and also allow the company to continue pushing positive re-leasing spreads as management marks rents up to market as leases come due.

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Simon Property Group Inc's Company Profile

Business Description

Simon Property Group is the second- largest real estate investment trust in the United States. Its portfolio includes an interest in 207 properties: 119 traditional malls, 69 premium outlets, 14 Mills centers (a combination of a traditional mall, outlet center, and big-box retailers), six lifestyle centers, and five other retail properties. Simon's portfolio averaged $693 in sales per square foot over the 12 months prior to the pandemic. The company also owns a 21% interest in Klepierre, a European retail company with investments in shopping centers in 16 countries, and joint venture interests in 33 premium outlets across 11 countries.

225 West Washington Street
Indianapolis, IN, 46204
T +1 317 636-1600
Sector Real Estate
Industry REIT - Retail
Most Recent Earnings Mar 31, 2022
Fiscal Year End Dec 31, 2022
Stock Type Hard Assets
Employees 3,300

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