Simon Property Group SPG owns a high-quality portfolio of premium retail assets across the United States and abroad. Backed by healthy demand in the retail real estate sector, SPG stands to gain from robust leasing momentum, solid occupancy levels and sustained rent increases.
SPG’s focus on strengthening omnichannel retail offerings and growing its mixed-use portfolio bodes well for future performance. Its long-term growth prospects are further bolstered by value-accretive acquisitions and active redevelopment initiatives.
Simon Property recently acquired Swire Properties’ stake in the retail and parking component at Brickell City Centre, which is a mixed-use property in Miami. SPG earlier owned a 25% non-managing interest in the retail at Brickell City Centre and has now secured full ownership and operational control.
A solid balance sheet provides crucial support for SPG’s growth plans. However, the company still faces headwinds such as the persistent expansion of e-commerce, restrained consumer spending due to economic uncertainty and the pressure of higher interest rates.
What’s Supporting SPG Stock?
This top-tier retail REIT has delivered solid performance through its omnichannel strategy and collaborations with high-end retail partners. Its online platform, combined with its integrated retail strategy, is poised to drive sustained growth. SPG is also facilitating the transition of digital-native brands into physical stores, strengthening their brick-and-mortar footprint. Simon Property has been actively enhancing its portfolio through strategic premium acquisitions and major redevelopment projects. Moreover, its growing focus on mixed-use developments, a trend gaining significant traction, has enabled it to tap growth opportunities in areas where people prefer to live, work, shop and socialize.
In the first quarter of 2025, it signed 259 new leases and 550 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. This comprised roughly 3.1 million square feet, of which 2.4 million square feet were related to consolidated properties. Given the favorable retail real estate environment, this leasing momentum is expected to continue in the upcoming quarters.
As of March 31, 2025, the ending occupancy for the U.S. Malls and Premium Outlets portfolio was 95.9%, up 40 basis points from 95.5% as of March 31, 2024. We expect the company’s 2025 total revenues to increase 2.2% 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%.
Simon Property is making efforts to bolster its financial flexibility. This enabled the company to exit the first quarter of 2025 with $10.1 billion of liquidity. As of March 31, 2025, its total secured debt to total assets was 16%, while the fixed-charge coverage ratio was 4.6, ahead of the required level. Moreover, SPG 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 12 times in the past five years, and its payout has grown 11.69% over the same period. This spate of dividend increases brings additional relief to investors and reaffirms confidence in this retail landlord.
What’s Hurting SPG Stock?
While mall foot traffic has seen a strong recovery since the pandemic, the convenience of online shopping is expected to keep it a preferred option for many consumers. As a result, brick-and-mortar retailers, and by extension, retail REITs like Simon Property, are likely to continue to face pressure on market share.
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.
The company has a substantial debt burden, and its share of total debt as of March 31, 2025 was approximately $30.86 billion. For 2025, our estimate implies a year-over-year rise of 4.6% in the company’s interest expenses.
Over the past three months, shares of this Zacks Rank #3 (Hold) company have risen 9.1%, well ahead of the industry’s growth of 1.8%.
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Stocks to Consider
Some better-ranked stocks from the broader REIT sector are Digital Realty Trust DLR and SBA Communications SBAC, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for DLR’s full-year FFO per share is pegged at $7.03, calling for a 4.8% increase year over year.
The Zacks Consensus Estimate for SBAC’s 2025 FFO per share is pegged at $12.74, moving marginally northward 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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This article originally published on Zacks Investment Research (zacks.com).
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