Simon Property slips after long-time bull downgrades

Simon Property

03/09/2024 16:03

** Simon Property Group's  SPG.N  shares drop as much as
2.1% to $163.87 amid broader markets weakness on Tues after
Piper Sandler downgraded commercial REIT to "neutral"
    ** SPG last down 1.4% at $165 and among biggest losers in
S&P 500 Real Estate sector  .SPLRCR , which is up 0.2%
    ** S&P 500  .SPX  down 1.5% on the session
    ** Piper Sandler anticipates slower earnings growth for SPG
versus shopping center rivals over the next 2 years, noting this
represents the first time it hasn't had an "overweight" rating
since late 2009
    ** Growing headwind comes from more refinancing of low
coupon debt to higher rate, Piper said, adding it now assumes a
5% refinancing rate vs prior 6% projection
    ** Brokerage still positive on management's multiple levers
to drive revenue and increase efficiency, but compared to
shopping centers, it sees "better near-term growth in the latter
driven by faster occupancy and cash NOI (net operating income)
growth"
    ** It forecasts 4% NOI growth for SPG in 2026 vs 5% growth
for strip centers on avg and Macerich  MAC.N 
    ** Piper chops PT on SPG by $15 to $175 vs Street median of
$160, per LSEG data
    ** Now, 6 of 18 brokerages rate SPG "strong buy" or "buy",
rest "hold"
    ** Including move on Tues, shares up ~16% YTD. SPLRCR up
~9%in 2024, while SPX up 16.6%

 (Lance Tupper is a Reuters market analyst. The views expressed
are his own)
 ((lance.tupper@thomsonreuters.com
lance.tupper@tr.com 1-646-279-6380))