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SPG’s 4Q15 Operating Metrics: Occupancy under Pressure

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Properties portfolio

Simon Property Group (SPG) had 179 properties under US malls and premium outlets as of the end of 4Q15 compared to 177 as of the end of 4Q14. With the increased number of properties, the total square footage of these properties increased from 151.5 million as of the end of 4Q14 to 153.5 million as of the end of 4Q15.

On the other hand, the number of properties under The Mills portfolio increased from 13 in 4Q14 to 14 in 4Q15. The total square footage rose from 19.6 million to 20.9 million during the same period. The international properties’ total square footage increased from 5.5 million in 4Q14 to 5.9 million in 4Q15.

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Occupancy rate declined for US portfolio

Simon Property Group’s (SPG) total portfolio occupancy for US malls and premium outlets declined from 97.1% in 4Q14 to 96.1% in 4Q15. Occupancy rate is the percentage of GLA (gross leasable area) that is leased to tenants during the fiscal year.

The decline in occupancy level doesn’t bode well for the company, as higher occupancy ensures higher rental income for the company. However, despite the decline in occupancy level, Simon is still at a comfortable position as its occupancy level is one of the highest in the industry.

On the other hand, the occupancy level for The Mills portfolio improved from 98.4% in 4Q14 to 98.5% in 4Q15. Its international portfolio’s occupancy also gained from 99.1% in 4Q14 to 99.8% in 4Q15.

Healthier total sales per square foot

Simon Property Group’s total sales PSF (per square foot) for US malls and premium outlets improved from $619 in 4Q14 to $620 in 4Q15. Total sales include total reported retail tenant sales on a trailing 12-month basis at owned GLA (for mall stores with less than 10,000 square feet) in the center. The Mills portfolio improved from $541 in 4Q14 to $568 in 4Q15, and the international portfolio grew by 7% in 4Q15 to 101,574 yen.

Base rent

Simon Property Group’s base minimum rent PSF for US malls and premium outlets improved from $47 in 4Q14 to $48.96 in 4Q15. Base minimum rent PSF is the average base minimum rent charge to all tenants that would qualify to be included in the ending occupancy. For The Mills portfolio, it increased from $25.43 in 4Q14 to $27.14 in 4Q15. The rise in minimum rent bodes well for the company as it improves its bottom line.

Simon Property Group constitutes 7.7% of the iShares Cohen & Steers REIT ETF (ICF). Macerich (MAC), General Growth Properties (GGP), and Taubman Centers (TCO) have weights of 2.5%, 3.9%, and 1.1%, respectively, in the same portfolio.

In the next part of this series, we’ll discuss Simon Property Group’s funds from operations and net operating income.

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