SPG's Indy headquarters

INDIANAPOLIS—As reported in GlobeSt.com throughout much of this year, many REITs have been spinning off retail operations into separate, publically traded REITs, and analysts have begun to revise their estimates of these companies. Simon Property Group, an Indianapolis-based REIT, for example, recently spun off some of its regional mall holdings and shopping centers into a company called Washington Prime Group. And just last week, MLV & Co. LLC released an new set of estimates that includes an updated NAV that reflected a 15 bps cap rate reduction.

The reduction was necessary, MLV researchers said, because Simon had spun off some of its lesser assets into WPG, allowing it to focus more on its higher-quality regional mall portfolio. MLV’s new “FFO per share estimates are $9.18 and $9.56 for 2014 and 2015, respectively, and our spin-adjusted NAV per share estimate is $166, pro forma for 2Q14,” according to the report. Furthermore, the researchers said that “our price target of $178 is in-line with our forward 12-month NAV per share estimate, and represents 12% total return upside.”

Simon should also have somewhat stronger core growth, with higher occupancy and releasing spreads, due to the higher quality of its remaining portfolio. The researchers also expect “slightly lower disposition assumptions to reflect the fact that most non-core assets were divested in the spin-off.” Finally, Simon should have higher management fee income due to its agreement with WPG to manage the spin-off properties.