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Simon Property (SPG) Stifled Online: Will You Stay Away?

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We updated our research report on Simon Property Group, Inc. (SPG - Free Report) on Mar 22.  

This Indianapolis, IN, retail real estate investment trust (REIT) is engaged in acquiring, owning and leasing a diverse portfolio of shopping malls. Late in January, the company declared adjusted funds from operations (FFO) per share of $2.91, up from the year-ago quarter tally of $2.73. The Zacks Consensus Estimate for the quarter was $2.51. Growth in operating income aided the results.

However, increasing consumer purchases through the Internet has emerged as a pressing concern for retail REITs. While the company is striving to counter this pressure through various initiatives, their implementation requires a decent upfront cost, and therefore, would limit any robust growth in its profit margins in the near term.

Also, hike in interest rate remains a concern for the company as this would restrict its ability to refinance existing debt and increase the interest cost on new debt. This could affect the company’s financial results and dividend payout.

Shares of Simon Property underperformed the Zacks categorized REIT and Equity Trust – Retail industry over the past three months. During this time, Simon Property declined 4%, while the industry lost 2.6%. Also, its FFO per share estimate for 2017 declined slightly in the last 30 days.


Currently, Simon Property carries a Zacks Rank #4 (Sell).

Investors interested in the REIT space, may consider stocks like Global Net Lease, Inc. (GNL - Free Report) , CoreSite Realty Corporation (COR - Free Report) and CorEnergy Infrastructure Trust, Inc. , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the last 30 days, Global Net Lease’s FFO per share for first-quarter 2017 escalated 11.1% to 60 cents.

In the last seven days, CoreSite Realty’s FFO per share for first-quarter 2017 increased 0.9% to $1.06.

CorEnergy Infrastructure Trust’s first-quarter 2017 FFO per share estimates moved up 6.5% to $1.14, in the last 30 days.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. All EPS numbers presented in this write up represent FFO per share.

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