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5 Reasons to Add Simon Property (SPG) Stock to Your Portfolio
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Simon Property Group (SPG - Free Report) , the retail REIT behemoth, is well-poised to ride on this growth curve, backed by its portfolio of premium retail assets in the United States and abroad, solid operating fundamentals and strategic moves.
Earlier in August, Simon Property reported second-quarter 2024 funds from operations (FFO) per share of $2.90, which increased from $2.88 reported in the year-ago period. An increase in revenues, backed by a rise in the base rent per square foot and occupancy levels, supported the results. SPG also increased its 2024 FFO per share outlook and raised its dividend. For 2024, Simon Property now projects FFO per share in the range of $12.80- $12.90, up from the $12.75-$12.90 range guided earlier.
According to David Simon, the chairman, chief executive officer and president of Simon Property Group, "We continue to invest in our retail real estate platforms with transformative redevelopments, including the addition of mixed-use components, and selective new developments including the grand opening of Tulsa Premium Outlets on Aug 15, 2024, at 100% leased.”
Shares of SPG have risen 13.7% year to date, while its industry advanced 9.1%. Also, the trend in the 2024 FFO per share estimate revision indicates a favorable outlook for SPG as it moved 1.7% up to $12.85 over the past two months. This Zacks Rank #2 (Buy) stock is likely to rally further in the near term on several favorable factors.
Image Source: Zacks Investment Research
Let’s Explore What Makes the SPG Stock a Solid Choice
Premium Asset Base: Simon Property enjoys wide exposure to retail assets across the United States. Moreover, SPG’s international presence fosters sustainable long-term growth as compared with its domestically focused peers. The REIT’s ownership stake in Klépierre facilitates the expansion of its global footprint, which gives it access to premium retail assets in the high barrier-to-entry markets of Europe. Diversification, with respect to both product and geography, will help SPG grow in the long term.
Simon Property’s adoption of an omnichannel strategy and successful tie-ups with premium retailers have paid off well. Its online retail platform, coupled with an omnichannel strategy, is likely to be accretive to its long-term growth. It is also focused on helping digital brands enhance their brick-and-mortar presence.
Improving Leasing Environment: In the first half of 2024, SPG signed 572 new leases and 1,251 renewal leases (excluding mall anchors and majors, new development, redevelopment and leases with terms of one year or less) with a fixed minimum rent across its U.S. Malls and Premium Outlets portfolio. This comprised roughly 6.6 million square feet, of which 5.1 million square feet were related to consolidated properties. Given the favorable retail real estate environment, this leasing momentum is expected to continue in the upcoming quarters.
As of Jun 30, 2024, the occupancy for the U.S. Malls and Premium Outlets portfolio came in at 95.6%, up 90 basis points from 94.7% as of Jun 30, 2023. The base minimum rent per square foot for the U.S. Malls and Premium Outlets portfolio was $57.94 as of Jun 30, 2024, rising from $56.27 as of Jun 30, 2023, reflecting an increase of 3%.
Acquisitions, Development and Redevelopment: Simon Property has been restructuring its portfolio, aiming at premium acquisitions and transformative redevelopments. For the past years, the company has been investing billions to transform its properties, focused on creating value and driving footfall at the properties. Moreover, Simon Property has redevelopment and expansion projects, including the addition of anchors, big box tenants and restaurants ongoing at properties in North America and abroad.
Simon Property is focused on generating consumer traffic in its retail properties through marketing efforts and strategic corporate alliances, including creating mixed-use destinations. The mixed-use development option has gained immense popularity in recent years as it helps catch the attention of people who prefer to live, work, play, stay and shop in the same area.
Balance Sheet: Simon Property is making efforts to bolster its financial flexibility. This enabled the company to exit the second quarter of 2024 with $11.2 billion of liquidity. As of Jun 30, 2024, Simon Property’s total secured debt to total assets was 17%, while the fixed-charge coverage ratio was 4.3, ahead of the required level.
Moreover, the company enjoys a corporate investment-grade credit rating of A- (stable outlook) from Standard and Poor's and a senior unsecured rating of A3 (stable outlook) from Moody’s. With solid balance sheet strength and available capital resources, it remains well-poised to tide over any mayhem and bank on growth opportunities.
Dividend: Solid dividend payouts are the biggest enticements for REIT investors, and Simon Property is committed to boosting shareholder wealth. Concurrent with its second-quarter earnings release, Simon Property announced a quarterly common stock dividend of $2.05 for the third quarter of 2024, marking a 2.5% hike from the prior quarter and 7.9% year over year.
This retail REIT has increased its dividend 11 times in the last five years. Given the company’s solid operating platform, opportunities for growth and decent financial position compared with the industry, this dividend rate is expected to be sustainable over the long run.
The Zacks Consensus Estimate for Regency’s 2024 FFO per share stands at $4.22, which indicates an increase of 1.7% from the year-ago reported figure.
The Zacks Consensus Estimate for Tanger’s 2024 FFO per share is pegged at $2.09, which suggests year-over-year growth of 6.6%.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
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5 Reasons to Add Simon Property (SPG) Stock to Your Portfolio
Simon Property Group (SPG - Free Report) , the retail REIT behemoth, is well-poised to ride on this growth curve, backed by its portfolio of premium retail assets in the United States and abroad, solid operating fundamentals and strategic moves.
Earlier in August, Simon Property reported second-quarter 2024 funds from operations (FFO) per share of $2.90, which increased from $2.88 reported in the year-ago period. An increase in revenues, backed by a rise in the base rent per square foot and occupancy levels, supported the results. SPG also increased its 2024 FFO per share outlook and raised its dividend. For 2024, Simon Property now projects FFO per share in the range of $12.80- $12.90, up from the $12.75-$12.90 range guided earlier.
According to David Simon, the chairman, chief executive officer and president of Simon Property Group, "We continue to invest in our retail real estate platforms with transformative redevelopments, including the addition of mixed-use components, and selective new developments including the grand opening of Tulsa Premium Outlets on Aug 15, 2024, at 100% leased.”
Shares of SPG have risen 13.7% year to date, while its industry advanced 9.1%. Also, the trend in the 2024 FFO per share estimate revision indicates a favorable outlook for SPG as it moved 1.7% up to $12.85 over the past two months. This Zacks Rank #2 (Buy) stock is likely to rally further in the near term on several favorable factors.
Image Source: Zacks Investment Research
Let’s Explore What Makes the SPG Stock a Solid Choice
Premium Asset Base: Simon Property enjoys wide exposure to retail assets across the United States. Moreover, SPG’s international presence fosters sustainable long-term growth as compared with its domestically focused peers. The REIT’s ownership stake in Klépierre facilitates the expansion of its global footprint, which gives it access to premium retail assets in the high barrier-to-entry markets of Europe. Diversification, with respect to both product and geography, will help SPG grow in the long term.
Simon Property’s adoption of an omnichannel strategy and successful tie-ups with premium retailers have paid off well. Its online retail platform, coupled with an omnichannel strategy, is likely to be accretive to its long-term growth. It is also focused on helping digital brands enhance their brick-and-mortar presence.
Improving Leasing Environment: In the first half of 2024, SPG signed 572 new leases and 1,251 renewal leases (excluding mall anchors and majors, new development, redevelopment and leases with terms of one year or less) with a fixed minimum rent across its U.S. Malls and Premium Outlets portfolio. This comprised roughly 6.6 million square feet, of which 5.1 million square feet were related to consolidated properties. Given the favorable retail real estate environment, this leasing momentum is expected to continue in the upcoming quarters.
As of Jun 30, 2024, the occupancy for the U.S. Malls and Premium Outlets portfolio came in at 95.6%, up 90 basis points from 94.7% as of Jun 30, 2023. The base minimum rent per square foot for the U.S. Malls and Premium Outlets portfolio was $57.94 as of Jun 30, 2024, rising from $56.27 as of Jun 30, 2023, reflecting an increase of 3%.
Acquisitions, Development and Redevelopment: Simon Property has been restructuring its portfolio, aiming at premium acquisitions and transformative redevelopments. For the past years, the company has been investing billions to transform its properties, focused on creating value and driving footfall at the properties. Moreover, Simon Property has redevelopment and expansion projects, including the addition of anchors, big box tenants and restaurants ongoing at properties in North America and abroad.
Simon Property is focused on generating consumer traffic in its retail properties through marketing efforts and strategic corporate alliances, including creating mixed-use destinations. The mixed-use development option has gained immense popularity in recent years as it helps catch the attention of people who prefer to live, work, play, stay and shop in the same area.
Balance Sheet: Simon Property is making efforts to bolster its financial flexibility. This enabled the company to exit the second quarter of 2024 with $11.2 billion of liquidity. As of Jun 30, 2024, Simon Property’s total secured debt to total assets was 17%, while the fixed-charge coverage ratio was 4.3, ahead of the required level.
Moreover, the company enjoys a corporate investment-grade credit rating of A- (stable outlook) from Standard and Poor's and a senior unsecured rating of A3 (stable outlook) from Moody’s. With solid balance sheet strength and available capital resources, it remains well-poised to tide over any mayhem and bank on growth opportunities.
Dividend: Solid dividend payouts are the biggest enticements for REIT investors, and Simon Property is committed to boosting shareholder wealth. Concurrent with its second-quarter earnings release, Simon Property announced a quarterly common stock dividend of $2.05 for the third quarter of 2024, marking a 2.5% hike from the prior quarter and 7.9% year over year.
This retail REIT has increased its dividend 11 times in the last five years. Given the company’s solid operating platform, opportunities for growth and decent financial position compared with the industry, this dividend rate is expected to be sustainable over the long run.
Other Stocks to Consider
Some other top-ranked stocks from the retail REIT sector are Regency Centers (REG - Free Report) and Tanger Inc. (SKT - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Regency’s 2024 FFO per share stands at $4.22, which indicates an increase of 1.7% from the year-ago reported figure.
The Zacks Consensus Estimate for Tanger’s 2024 FFO per share is pegged at $2.09, which suggests year-over-year growth of 6.6%.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.