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RBC Analysts Say Take Profits On Simon Property Group; Downgrades To Sector Perform

RBC Analysts Say Take Profits On Simon Property Group; Downgrades To Sector Perform - Simon Property Group, Inc. NYSE:SPG

RBC Capital Markets downgraded Simon Property Group Inc SPG to Sector Perform from Outperform and lifted its price target to $230 from $220.

According to the analysts, the company remains a strong and conservative player in the regional mall/factory outlet center space, but pricing relative to the growth outlook appears full at this point.

The analysts provided several elements behind the downgrade, including:

  • Key operating metrics have slowed. The 2Q16 operating results were not impressive in comparison to the regional mall/factory outlet center REIT peers and followed similarly soft results over the past several quarters.
  • A slowdown in travel to the United States hurts sales at Simon's gateway assets.
  • European uncertainty could weigh on partners. The company represents the only mall REIT with European exposure, and the recent turmoil from Brexit and a weak European economy may weigh on the company and its partners in the U.K.
  • External growth is modest compared to size. Although Simon's $2 billion of planned investment spend over the next two years is big, as a percentage of the gross market value of assets it is less than 2 percent.

At time of writing, Simon Property Group was trading at $224.04, down 1.56 percent on the day.

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