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Simon Property (NYSE:SPG) will be the first big retail REIT to report Q4 earnings, set for after the close on Monday. While Q4 FFO per share is expected to rise from both previous and year-ago quarter's, watch for 2023 guidance.
For retail REITs overall, Evercore ISI analyst Samir Khanal expects mall REIT FFO to grow 2.2% in 2023. He also notes that Simon Property (SPG) generally guides conservatively. The REIT's actual year results usually come in about 1% higher than the original consensus, he said. The average analyst estimate for Simon Property's 2023 comparable FFO stands at $12.13; Khanal's 2023 estimate is $12.14.
For Q4 2022, the mall landlord is expected to report comparable FFO of $3.13 per share, according to the average analyst estimate, compared with $2.97 in Q3 and $3.09 in Q4 2021. Simon Property's (SPG) full-year 2022 guidance for comparable FFO per share of $11.83-$11.88 implied Q4 2022 comparable FFO of $3.12-$3.17 per share.
Revenue is expected to reach $1.29B, down from $1.32B in Q3 and $1.33B in Q4 2021.
In the past seven quarters, Simon Property's (SPG) FFO per share beat the consensus estimate in all but one, Q1 2022. For revenue, it has beat consensus for every quarter since Q1 2021. Analysts appear to be confident in their estimates, with the Q4 FFO consensus rising 0.5% in the past three months. The average revenue consensus edged down 0.1% in the past three months and slipped 0.5% in the past month.
Evercore ISI's Khanal expects Simon Property's (SPG) occupancy of 94.7% for FY2022 (was 94.5% at Sept. 30, 2022), rising to 95.1% in 2023, 95.3% in 2024 and 95.3% in 2025.
One area that Khanal is keeping an eye on in Q4 results: "J.C. Penney forms a sizable portion of retailer investments and could potentially be a drag on income for 4Q given that EBITDA in fiscal 3Q ending Oct. was down ~63%."
Investor sentiment was quite positive for Simon (SPG) in the last quarter of the year, as its stock jumped 30% in Q4, vs. the S&P 500's 7.1% increase in the same period. For other mall owners, Macerich (MAC) shares climbed 42%, Tanger Factory Outlets (SKT) gained 31%, and PREIT (OTC:PRET) dropped 60%.
Regarding the overall retail REIT sector: "Given the slowing economy, investors are also looking for cracks in the leasing environment and any potential fallout from bankruptcies or higher credit losses," Khanal wrote in a note to clients in January.
SA contributor Samuel Smith discusses one retail REIT with its dividend at risk and another that lets investors sleep well at night.