Commercial Real Estate and Shopping Centers and Simon Property Group and Real Estate Investment Trust and Retail and Real Estate & Retail

Simon Property's quarterly profit tumbles

February 5, 2010

Indianapolis-based Simon Property Group Inc., the largest U.S. shopping-mall owner, said Friday morning that fourth-quarter earnings before gains and losses dropped as unemployment remained close to a 26-year high.

Funds from operations fell to $485.2 million, or $1.40 a share, from $540.5 million, or $1.86, a year earlier, the company said. Adjusted FFO, which excludes costs for an impairment, was $1.66 a share. That exceeded the average analyst forecast of $1.52, based on 15 estimates in a Bloomberg survey.

Quarterly revenue remained flat at about $1 billion, put profit fell 41 percent, from $196.4 million to $115.9 million.

Retailers and their landlords have been hurt by U.S. unemployment, which at 10 percent in December was close to the 26-year peak of 10.1 percent reached in October, according to Labor Department data. Simon has responded by raising money through stock and debt offerings, and in December agreed to buy Prime Outlets Acquisition Co. for $2.33 billion.

“We expect SPG’s portfolio to hold up relatively well due to its high productivity and diverse asset base,” Anthony Paolone and Michael W. Mueller, analysts at JPMorgan Chase & Co., said last week in a note to investors.

Simon announced its results before the start of regular U.S. trading on Friday. The company's stock fell $3.35, or 4.6 percent, to $69.45 per share Thursday in New York Stock Exchange composite trading. The shares gained 69 percent in the 12 months through Thursday, compared with a 40-percent increase in the Bloomberg Real Estate Investment Trust Index.

About 92.1 percent of the regional malls the company operates were occupied, nearly flat with the 92.4-percent occupancy rate from a year ago. About 98 percent of its premium outlet centers were occupied, from 98.9 percent last year.

For the year, FFO fell 6 percent to $1.75 billion, or $5.33 per share, from $1.85 billion, or $6.42 per share last year.

Simon Property Group issued 52.1 million shares through public offerings and dividends in 2009. The impact to FFO per share was 22 cents for the quarter and 57 cents for the year, and the impact to net income per share was 10 cents for the quarter and 21 cents for the year. Net income per share was also hurt by 9 cents for the quarter and the year due to losses on the sale of assets.

For the year ending Dec. 31, the company expects FFO of $5.25 to $5.40 per share, or $5.72 to $5.87 per share, excluding special items. Analysts expect FFO of $5.46 per share.

Finally, Simon declared a dividend of 60 cents, payable on Feb. 26, to shareholders of record as of Feb. 16. The company said it would return to an all-cash dividend after paying partly in stock during 2009..

- Associated Press contributed to this story

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