"We expect the transaction will be a net positive from an NAV perspective, " say Janney's Mike Gorman and Tim Peron of Simon Property's (SPG +2%) plan to spin off its strip centers and smaller enclosed malls. With SPG trading at 15.4x FFO per share, the two see room for multiple expansion to the 16.3x high-quality mall peers are trading at. The duo reiterate their Buy rating.
Post-spin, U.S. malls will contribute 52.9% to NOI vs. 54% today, Premium outlets 28.1% vs. 25.4% today, and International 9.2% vs. 8.3% today. Strip centers will go to zero from 3.3% today.