What does the company do?
A leading mall owner, Simon Property Group (SPG) is engaged in acquiring, owning, and leasing a diverse portfolio of shopping malls. The company’s US properties primarily consist of malls, premium outlets, including the Mills outlets, community centers, and other retail properties. The company owned almost 87% in operating partnerships on March 31, 2017.
Business in the US
On March 31, 2017, Simon Property Group’s business in the US stood at a hefty figure of 206 properties, including malls, premium outlets, and lifestyle centers. The company covers a vast geographical expanse within the US and owns 13 retail properties in 37 states and Puerto Rico.
Business in emerging markets
Apart from the US, Simon Property has spread its business around the globe, including several emerging markets that can help it diversify the risks associated with macroeconomic factors of a particular market. Almost 5.3% of the company’s assets are located outside the US.
Simon Property owns several premium outlets in Asia and emerging markets. The company’s international assets include:
- Japan: nine outlets
- Europe: six designer outlets
- South Korea: three outlets
- Canada: two outlets
- Mexico: one outlet
- Malaysia: one outlet
- Canada: one designer outlet
In fiscal 2016, the company’s international business comprised almost 1.5% of the company’s consolidated total revenues.
The revenue drivers
In 1Q17, minimum rent comprised 63% of SPG’s total revenues, overage rent comprised 2.1% of its total revenues, and tenant reimbursement comprised 28.2% of its total revenues.
Investors looking for exposure in commercial real estate can invest in REIT ETFs. Simon Property Group, Equity Residential (EQR), GGP (GGP), and Public Storage (PSA) make up ~6.3%, ~2.9%, ~1.2%, and 3.0%, respectively, of the Vanguard REIT ETF (VNQ).
In the next article, we’ll have a look at the broader sector of REITs and how it affects Simon Property Group.