Simon Property slashes annual profit forecasts as leasing demand slumps

Kimco Realty

02/08/2023 22:28

Aug 2 (Reuters) - Simon Property  SPG.N  lowered its
annual profit forecast on Wednesday, signaling a fall in leasing
demand from retailers who are battling conservative consumer
spending and higher rentals.
    High borrowing and input costs have weighed heavily on
retailers and restaurant owners, even as customers turn
conscious about spending under inflationary pressures. 
    This has slowed footfall at outlet malls, shopping centers
and restaurants, denting leasing demand for Simon Property. The
real estate trust has also raised its base minimum rent, which
was up 3.1% in the quarter ended June 30, in order to protect
margins.
    With student loan repayments returning in the second half of
the year, discretionary spending is likely to be curtailed
further. 
    The company now expects annual net income attributable to
shareholders to be between $6.39 and $6.49 per share, compared
with its previous forecast between $6.45 to $6.60 per share.  
    Data from UBS Evidence Lab showed that outlet malls have
seen lower foot traffic and mall tenant categories of clothing
and accessories, and food services and drinking places have seen
growth rates fall below the overall retail sales level in May.
    This is in contrast to grocery-oriented shopping centers
such as those owned by Simon Property's peer Kimco Realty
 KIM.N , which beat quarterly revenue estimates last week.
    Simon Property's reported funds from operations (FFO) per
share of $2.88 in the quarter ended June 30 dropped from $2.91 a
year ago. Analysts on average had expected per share FFO of
$2.92, as per Refinitiv data. 
    Net revenue from lease income in the second quarter came in
at $1.25 billion, in line with Street expectations.

 (Reporting by Juveria Tabassum; Editing by Pooja Desai and Maju
Samuel)
 ((Juveria.Tabassum@thomsonreuters.com;))