Simon Property (SPG) has become quite the fashionable stock since 2012. For almost all of Simon Property’s history, the real estate investment trust (REIT) traded somewhere between 13 and 17x its annual funds from operations. That’s about what you’d expect from an outlet and regional mall landlord. You could reasonably argue that the difficulties in filling malls with tenants should have brought the valuation down to the 13 range, or you could have argued that the low interest rates and generally rising property values should put Simon Property towards the 17 end of that range.
You wouldn’t think that too many people would argue that Simon Property deserves to trade above the end of its historical 17x funds from operations rates.
But now, Simon Property trades at $220 compared to its expected funds from operations figure of $10.60 per share. That’s a P/FFO ratio of 20.7. The stock, which has … Read the rest of this article!