INDIANAPOLIS—As reported in throughout much of thisyear, many REITs have been spinning off retail operations into separate,publically traded REITs, and analysts have begun to revise theirestimates of these companies. Simon PropertyGroup, an Indianapolis-based REIT, for example, recentlyspun off some of its regional mall holdings and shopping centersinto a company called Washington Prime Group. And just lastweek, MLV & Co. LLC released an new set ofestimates that includes an updated NAV that reflected a 15 bps caprate reduction.


The reduction was necessary, MLV researchers said, because Simonhad spun off some of its lesser assets into WPG, allowing it tofocus 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, theresearchers said that “our price target of $178 is in-line with ourforward 12-month NAV per share estimate, and represents 12% totalreturn upside.”


Simon should also have somewhat stronger core growth, withhigher occupancy and releasing spreads, due to the higher qualityof its remaining portfolio. The researchers also expect “slightlylower disposition assumptions to reflect the fact that mostnon-core assets were divested in the spin-off.” Finally, Simonshould have higher management fee income due to its agreement withWPG to manage the spin-off properties.


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Brian J. Rogal

Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.