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Simon Property posts solid Q1 results, raises 2016 FFO per share guidance

Simon Property Group, a leading global retail real estate investment trusts (REIT), issued solid financials for the first quarter of 2016. Revenues increased 9.9% y-o-y to $1.34 bn and surpassed consensus estimate of $1.26 bn. For the US Malls and Premium Outlets portfolio, occupancy fell 20 basis points to 96.6%, and total sales per square foot moved down to $613 from $621 in the year-ago quarter. Base minimum rent per square feet rose 4.4% to $49.70. Funds from operations (FFO) jumped 15.4% to $2.63 comfortably beating analysts’ average projection of $2.54. Concurrent with its earnings release, Simon Property declared a quarterly dividend of $1.60 per share, which offers a healthy dividend yield of 3.1%.

During the quarter, Simon Property completed transformation of Roosevelt Field in Garden City, New York and added the first Neiman Marcus store in Long Island. The REIT has also begun construction work on a new project, the Premium Outlet Collection – Edmonton International Airport. The company is carrying out construction activities in six new development projects, three of which are slated to open in 2016 and the rest in 2017.

As a whole, at the end of the first quarter, Simon Property had redevelopment and expansion projects in progress at 33 properties across the US and Europe.

My outlook for Simon Property remains optimistic as the gradually recovering US economy and improving spending power of the US customers should help the company to continue to deliver robust financial and operational performance. To note, Simon Property raised its full-year 2016 FFO per share guidance and expects it to be in the range of $10.72-10.82 compared with the previous projection of $10.70-10.80.

Recently, shares of Simon Property rebounded from their 50-day moving average. I'd buy on breaking the $205 resistance level, with medium-term target at $215.