Simon Property Group Earnings: Healthy Real Estate Fundamentals Mixed With Retail Charges and Gains

First-quarter results for Simon Property Group were mixed compared with our estimates, though we didn't see anything that would materially change our $156 fair value estimate for the no-moat company. Occupancy declined 30 basis points sequentially to 95.5%, though the first quarter typically sees a modest decline, and the reported figure was smaller than our estimate of an 80-basis-point drop. Minimum rents improved 3.0% year over year, better than our estimate of 2.0% higher rents. Simon reported same-store net operating income growth of 3.7%, relatively in line with our estimate. However, it reported an $83 million loss on NOI from other retail investments, below our estimate of a $12 million profit, though we will note that the loss includes one-time charges of $18.9 million related to Sparc Group and a $14.3 million charge related to the JCPenney investment. Simon reported funds from operations of $3.56 per share in the first quarter. However, that figure includes a gain on sale of $303.9 million, or $0.81 per share, related to the company selling its remaining share in Authentic Brands Group. Excluding that gain, FFO was only a penny better than the $2.74 figure the company reported in the first quarter of 2023 and $0.16 below our $2.91 estimate due to the retail investment losses and charges in the quarter.