NEW YORK (TheStreet) -- Simon Property Group (SPG) shares are up 0.93% to $191.83 in trading on Wednesday after the real estate investment trust teamed up with Canadian retailer Hudson Bay (HBC) for a retail venture valued at $1.8 billion today.
Hudson Bay agreed to contribute 42 properties to the retail venture, which it plans to eventually take public, as part of its plan to acquire outside REITs rather than spinoff its own investment trust.
Hudson Bay is planning to lease back the properties it has committed to the venture, according to a statement it released today. Some of the locations included in the venture are Beverly Hills, CA Saks Fifth Avenue, and the Westchester County and Manhasset Lord & Taylor stores in New York, according to Bloomberg.
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The company also announced plans for a joint venture with Toronto-based RioCan Real Estate Investment Trust that focuses on growth opportunities in Canada and is valued at $1.6 billion.
"This is the optimal structure for our shareholders to participate in the long-term growth of our real estate and retail businesses. If we had done an IPO we wouldn't have created as much value as we will when we have a more mature, diversified portfolio," said Hudson Bay chairman Richard Baker.
TheStreet Ratings team rates SIMON PROPERTY GROUP INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate SIMON PROPERTY GROUP INC (SPG) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, notable return on equity, expanding profit margins and increase in net income. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 25.88% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, SPG should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- SIMON PROPERTY GROUP INC has improved earnings per share by 5.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, SIMON PROPERTY GROUP INC increased its bottom line by earning $4.46 versus $3.86 in the prior year. This year, the market expects an improvement in earnings ($5.04 versus $4.46).
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, SIMON PROPERTY GROUP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for SIMON PROPERTY GROUP INC is rather high; currently it is at 52.65%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 29.94% trails the industry average.
- SPG, with its decline in revenue, slightly underperformed the industry average of 0.3%. Since the same quarter one year prior, revenues slightly dropped by 7.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: SPG Ratings Report