Should You Retain Simon Property Stock in Your Portfolio Now?
In This Article:
Simon Property Group SPG boasts a portfolio of premium retail assets in the United States and abroad. Focus on supporting omnichannel retailing and developing mixed-use assets are encouraging. Also, accretive buyouts and redevelopment efforts augur well for long-term growth. A healthy balance sheet will likely aid growth endeavors. However, growing e-commerce adoption and limited consumers’ willingness to spend amid persistent macroeconomic uncertainties raise concerns.
What’s Supporting SPG Stock?
This retail REIT behemoth’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.
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. Going forward, an improving leasing environment is likely to benefit this retail REIT’s properties at premium locations. We expect the company’s 2024 total revenues to increase 3.9% on a year-over-year basis.
In the first half of 2024, it 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.
Given the favorable retail real estate environment, this leasing momentum is expected to continue in the upcoming quarters. As of June 30, 2024, the ending occupancy for the U.S. Malls and Premium Outlets portfolio came in at 95.6%, up 90 basis points from 94.7% as of June 30, 2023. We project the 2024 year-end occupancy for this portfolio to be 95.7%.
SPG’s Acquisitions & Redevelopment Efforts
To enhance its portfolio, Simon Property has been focusing on premium acquisitions and transformative redevelopments. In fact, for the past years, the company has been investing billions to transform its properties. Last week, it concluded the expansion and renovation of Busan Premium Outlets in South Korea. Such efforts bode well for long-term growth.
Moreover, the company also capitalized on buying recognized retail brands in bankruptcy. With the brands generating a decent amount from digital sales, investments in them seem strategic for SPG.
SPG’s Solid Balance Sheet Position
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 June 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.
