![]() ![]() Critically, Simon holds roughly $8.8 billion of liquidity and the REIT presents a compelling investment opportunity with its strong balance sheet set against Class A malls that are set to see steady growth over the next decade even as the broader mall universe looks to retrench.Retail REITs have seen an impressive run over the past 12 months, with many shopping center REITs such as Kimco Realty ( KIM) and Federal Realty Trust ( FRT) now trading above their pre-pandemic levels. This is at least 16% lower than its peer group median as shareholders eye a return of the quarterly distribution back to a pre-pandemic payout of $2.10 per share. Simon's current dividend yield is elevated when looked at over the last decade with the REIT currently trading for 9.5x times the lower end of its full-year 2023 FFO. Valuation And Sentiment As Interest Rate Hikes End The Series J preferreds ( NYSE: SPG.PR.J) have traded down in recent weeks to now swap hands around $5 above their $50 par value and offer a 7.6% yield on cost. Simon expects FFO per share for its full year to come in between $12.15 to $12.25, up from a prior range of $11.85 to $11.95. This means Simon can cover its quarterly distribution by 168%, around a 59% payout ratio. The REIT last declared a quarterly cash dividend of $1.90 per share, unchanged from its prior distribution and for a 6.5% annualized forward yield. Simon's FFO came in at $1.2 billion, around $3.20 per share, up from $2.93 per share in the year-ago period and beating consensus for FFO of $2.97 per share. These factors helped drag revenue up as domestic property net operating income moved up 4.2% over its year-ago period and with portfolio NOI moving up 4.3%. Third quarter base minimum rent per square foot at $56.41 also grew by roughly 14 cents over the second quarter and by $1.61 from $54.80 a year ago. This growth came as occupancy at its US malls and premium outlets advanced 50 basis points sequentially to 95.2% from 94.7% at the end of the second quarter. Simon reported a terrific third quarter with revenue of $1.41 billion growing by 6.8% over its year-ago period and beating analyst consensus by $140 million. Simon Property Group Fiscal 2023 Third Quarter Supplemental Revenue, FFO, And Dividend Coverage The refinancing of 11 property mortgages of $960 million closed year-to-date was completed at a weighted average rate of 6%, hence, the REIT's broader FFO generation profile could possibly face a progressive pull downward as debts face maturity and are refinanced. Bears would be right to flag that its cost of funds will be pulled upwards as these maturities are refinanced at higher rates. The REIT will see $4.1 billion of this come due next year, around 13% of its total. This also came with an unsecured interest coverage of 6x, a fixed charge coverage of 4.5x, and a weighted average years to maturity of 6.9 years. Simon's net debt of $31.41 billion came at a weighted average interest rate of 3.61%, markedly lower than the current Fed's funds rate of 5.25% to 5.50%. ![]() Simon Property Group Fiscal 2023 Third Quarter Supplemental SPG held cash and equivalents of $770 million at the end of its fiscal 2023 third quarter, up nearly $170 million from the year-ago balance. The mall REIT's property portfolio, liquidity profile, and debt maturities also offer reasons for strong investor confidence against broad economic forecasts for a US recession in 2024 and what JPMorgan's ( JPM ) Jamie Dimon described as the most dangerous period the world has faced in decades. I've been an investor in Simon Property Group ( NYSE: SPG) for most of this year, attracted to a dividend yield that has moved to healthy highs on the back of common shares that have lost 32% of their value since the Fed embarked on its campaign to bring CPI inflation back down to its target. Aimintang/iStock Unreleased via Getty Images ![]()
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