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Is it the Right Time to Retain SPG Stock in Your Portfolio Now?
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Simon Property Group (SPG - Free Report) boasts a portfolio of premium retail properties both in the United States and internationally. With healthy near-term demand for retail real estate, the company is well-positioned to benefit from increased leasing activity, high occupancy rates, and continued rent growth.
SPG’s strategic emphasis on enhancing omnichannel retail capabilities and expanding its mixed-use developments is promising. Additionally, accretive acquisitions and ongoing redevelopment projects support its long-term growth outlook. A strong balance sheet further underpins these growth initiatives. That said, challenges remain, including the continued rise of e-commerce, cautious consumer spending amid ongoing economic uncertainty, and the impact of elevated interest rates.
Over the past year, shares of this Zacks Rank #3 (Hold) company have risen 4.3%, outperforming the industry’s growth of 2%. Moreover, analysts seem bullish on this retail REIT carrying a Zacks Rank #3 (Hold), with the Zacks Consensus Estimate for its 2025 and 2026 funds from operations (FFO) per share both being raised marginally northward over the past month to $12.54 and $12.90, respectively.
Image Source: Zacks Investment Research
What’s Supporting SPG Stock?
This leading retail REIT has seen strong results from its omnichannel approach and strategic partnerships with premium retailers. Its online retail platform, combined with its integrated retail strategy, is expected to support long-term growth. SPG is also helping digital-native brands expand into physical retail spaces, enhancing their offline presence. Further, SPG’s efforts to explore the mixed-use development option, which has gained immense popularity in recent years, have enabled it to tap growth opportunities in areas where people prefer to live, work, play, stay and shop.
During 2024, it signed 1,149 new leases and 2,549 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. Given the favorable retail real estate environment, this leasing momentum is expected to continue in the upcoming quarters. As of Dec. 31, 2024, the ending occupancy for the U.S. Malls and Premium Outlets portfolio was 96.5%, up 70 basis points from 95.8% as of Dec. 31, 2023. We expect the company’s 2025 total revenues to increase 1.9% on a year-over-year basis. We project the 2025 year-end occupancy for the U.S. Malls and Premium Outlets portfolio to be 96.7%.
Simon Property has been actively enhancing its portfolio through strategic premium acquisitions and major redevelopment projects. Over the past few years, it has invested billions to revamp and modernize its properties — moves that support its long-term growth trajectory. Additionally, SPG has taken advantage of opportunities to acquire well-known retail brands during bankruptcy proceedings. These brands, which generate solid digital sales, make for strategic additions that align with SPG’s evolving retail strategy.
Simon Property is making efforts to bolster its financial flexibility. This enabled the company to exit 2024 with $10.1 billion of liquidity. As of Dec. 31, 2024, Simon Property’s total secured debt to total assets was 17%, while the fixed-charge coverage ratio was 4.5, 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.
Solid dividend payouts are the biggest enticements for REIT investors, and Simon Property is committed to boosting shareholder wealth. The retail REIT has increased its dividend 13 times in the past five years, and its payout has grown 9.09% over the same period. This spate of dividend increases brings additional relief to investors and reaffirms confidence in this retail landlord. Given the company’s solid operating platform, opportunities for growth and a decent financial position compared with the industry, this dividend rate is expected to be sustainable over the long run.
What’s Hurting SPG Stock?
The market is witnessing a shift in retail shopping from brick-and-mortar stores to Internet sales. Moreover, given the convenience of online shopping, it is likely to remain a popular choice among customers. Consequently, this is likely to adversely impact the market share for brick-and-mortar stores and affect retail REITs, including Simon Property.
Moreover, macroeconomic uncertainty and a still high-interest-rate environment are likely to limit consumers’ willingness to spend to some extent. Also, potential tenant bankruptcies for some of Simon Property’s tenants could adversely impact the company’s top line in the upcoming period.
Despite the Federal Reserve announcing rate cuts late in 2024, the interest rate is still high and is a concern for Simon Property. Elevated rates imply high borrowing costs for the company, which would affect its ability to purchase or develop real estate. SPG has a substantial debt burden, and its share of total debt as of Dec. 31, 2024, was approximately $30.35 billion. For 2025, our estimate implies a year-over-year rise of 5% in the company’s interest expenses.
The Zacks Consensus Estimate for Regency’s 2025 FFO per share has been revised a cent upward over the past month to $4.54.
The consensus mark for Tanger’s 2025 FFO per share has been revised three cents upward to $2.26 over the past two months.
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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Is it the Right Time to Retain SPG Stock in Your Portfolio Now?
Simon Property Group (SPG - Free Report) boasts a portfolio of premium retail properties both in the United States and internationally. With healthy near-term demand for retail real estate, the company is well-positioned to benefit from increased leasing activity, high occupancy rates, and continued rent growth.
SPG’s strategic emphasis on enhancing omnichannel retail capabilities and expanding its mixed-use developments is promising. Additionally, accretive acquisitions and ongoing redevelopment projects support its long-term growth outlook. A strong balance sheet further underpins these growth initiatives. That said, challenges remain, including the continued rise of e-commerce, cautious consumer spending amid ongoing economic uncertainty, and the impact of elevated interest rates.
Over the past year, shares of this Zacks Rank #3 (Hold) company have risen 4.3%, outperforming the industry’s growth of 2%. Moreover, analysts seem bullish on this retail REIT carrying a Zacks Rank #3 (Hold), with the Zacks Consensus Estimate for its 2025 and 2026 funds from operations (FFO) per share both being raised marginally northward over the past month to $12.54 and $12.90, respectively.
Image Source: Zacks Investment Research
What’s Supporting SPG Stock?
This leading retail REIT has seen strong results from its omnichannel approach and strategic partnerships with premium retailers. Its online retail platform, combined with its integrated retail strategy, is expected to support long-term growth. SPG is also helping digital-native brands expand into physical retail spaces, enhancing their offline presence. Further, SPG’s efforts to explore the mixed-use development option, which has gained immense popularity in recent years, have enabled it to tap growth opportunities in areas where people prefer to live, work, play, stay and shop.
During 2024, it signed 1,149 new leases and 2,549 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. Given the favorable retail real estate environment, this leasing momentum is expected to continue in the upcoming quarters. As of Dec. 31, 2024, the ending occupancy for the U.S. Malls and Premium Outlets portfolio was 96.5%, up 70 basis points from 95.8% as of Dec. 31, 2023. We expect the company’s 2025 total revenues to increase 1.9% on a year-over-year basis. We project the 2025 year-end occupancy for the U.S. Malls and Premium Outlets portfolio to be 96.7%.
Simon Property has been actively enhancing its portfolio through strategic premium acquisitions and major redevelopment projects. Over the past few years, it has invested billions to revamp and modernize its properties — moves that support its long-term growth trajectory. Additionally, SPG has taken advantage of opportunities to acquire well-known retail brands during bankruptcy proceedings. These brands, which generate solid digital sales, make for strategic additions that align with SPG’s evolving retail strategy.
Simon Property is making efforts to bolster its financial flexibility. This enabled the company to exit 2024 with $10.1 billion of liquidity. As of Dec. 31, 2024, Simon Property’s total secured debt to total assets was 17%, while the fixed-charge coverage ratio was 4.5, 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.
Solid dividend payouts are the biggest enticements for REIT investors, and Simon Property is committed to boosting shareholder wealth. The retail REIT has increased its dividend 13 times in the past five years, and its payout has grown 9.09% over the same period. This spate of dividend increases brings additional relief to investors and reaffirms confidence in this retail landlord. Given the company’s solid operating platform, opportunities for growth and a decent financial position compared with the industry, this dividend rate is expected to be sustainable over the long run.
What’s Hurting SPG Stock?
The market is witnessing a shift in retail shopping from brick-and-mortar stores to Internet sales. Moreover, given the convenience of online shopping, it is likely to remain a popular choice among customers. Consequently, this is likely to adversely impact the market share for brick-and-mortar stores and affect retail REITs, including Simon Property.
Moreover, macroeconomic uncertainty and a still high-interest-rate environment are likely to limit consumers’ willingness to spend to some extent. Also, potential tenant bankruptcies for some of Simon Property’s tenants could adversely impact the company’s top line in the upcoming period.
Despite the Federal Reserve announcing rate cuts late in 2024, the interest rate is still high and is a concern for Simon Property. Elevated rates imply high borrowing costs for the company, which would affect its ability to purchase or develop real estate. SPG has a substantial debt burden, and its share of total debt as of Dec. 31, 2024, was approximately $30.35 billion. For 2025, our estimate implies a year-over-year rise of 5% in the company’s interest expenses.
Stocks to Consider
Some better-ranked stocks from the retail REIT sector are Regency Centers (REG - Free Report) and Tanger, Inc. (SKT - Free Report) . Regency Centers and Tanger carry a Zacks Rank #2 (Buy) each 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 2025 FFO per share has been revised a cent upward over the past month to $4.54.
The consensus mark for Tanger’s 2025 FFO per share has been revised three cents upward to $2.26 over the past two months.
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.