I view Simon thru a different lens than most mall analysts, as I consider the company to be more of the Berkshire Hathaway ( BRK.A) ( BRK.B) for retail. and international portfolios, investments in hospitality, wellness, food and entertainment, e-commerce, retail brands and growth stage companies. Also, SPG continues to evolve by focusing on new development and redevelopment in the U.S. SPG has had consistent growth over multiple decades, and its core strengths (or moats) include capital allocation, balance sheet management, and operating expertise. The company expects that as it opens more and more tenants (replacing the ones lost through COVID-19), it will be above the 2019 NOI level. SPG’s Domestic Property Net Operating Income (“NOI”) in 2021 was approximately 8% below the record 2019 levels after posting a 17% decline in 2020. 2021 revenues increased more than $500 million (to $5.12 billion), cash flow increased $1.3 billion (to $3.88 billion), FFO increased $1.2 billion (to $4.49 billion), and SPG increased the quarterly dividend by 27% from 2020 levels.Īs you can see below, SPG’s dividend payout has not returned to 2019 levels of $8.30 per share ($6.77 now). It owns, or has an interest in, shopping centers located in 14 countries in Europe.ĭuring 2021, SPG recorded significant occupancy gains and record retailer sales, and demand for space is robust and increasing daily. Internationally, SPG has ownership interests in 33 Premium Outlets and Designer Outlet properties, primarily located in Asia, Europe and Canada, and also a 22.4% equity stake in Klépierre SA ( OTCPK:KLPEF), or Klépierre, a publicly traded, Paris-based real estate company. SPG also owns an 80% noncontrolling interest in The Taubman Realty Group, which has an interest in 24 regional, super-regional, and outlet malls in the U.S. SPG is a mall REIT that owns an interest in 199 income-producing properties in the U.S., consisting of 95 malls, 69 Premium Outlets, 14 Mills, 6 lifestyle centers, and 15 other retail properties in 37 states and Puerto Rico. So, let’s take a closer look at Simon Property Group – a blue chip REIT that I just added to our Durable Income Portfolio.Ģ021 SPG Annual Report Simon Property Group's Business Model These include leasing, development, and balance sheet management however, the market appears to be missing the substantial value behind this global retail juggernaut. It’s true that earnings drive returns, and I will also be focusing on SPG’s earnings drivers. More importantly, none of the valuation metrics that I just provided includes the significant brand equity behind Simon Property Group, which includes its non-real estate investments that I will touch on later. While some argue that there is no moat around SPG’s business model, I would argue that they’re completely ignoring the fact that SPG has become a more diversified platform that includes malls, outlets, hotels, apartments, and mixed-use products. SPG’s growth profile looks better in 2023 based upon these FFO growth estimate from other analysts. But what about dividend safety?Īs you can see below, FFO per share growth is expected to be slightly negative in 2022 for SPG (based on analyst consensus data): Now, clearly all three valuation metrics make SPG an attractive buy these days. As you can see below, shares are cheap on all metrics: Price / Funds from Operations Of course, Simon is the only A-rated mall REIT, and we consider this dominant REIT to be an absolute gem. In our view, there are really only three mall REITs worthy of capital allocation: Simon, The Macerich Company ( MAC), and Tanger Factory Outlet Centers ( SKT). Now, we know that the mall REIT sector has witnessed widespread pain, notably CBL & Associates ( CBL), Washington Prime, and PREIT ( PEI) – which have become virtual dinosaurs (in terms of investor sentiment). To put that into perspective, here’s how other A-rated REITs have performed during the same period (YTD): ( NYSE: SPG) is now on sale!Īs you can see below, shares have fallen by 20% year-to-date:
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