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

UPDATE: Simon shares climb after profit beats estimates

February 5, 2010

Indianapolis-based Simon Property Group Inc., the largest U.S. shopping-mall owner, saw its stock make its biggest climb in more than three months Friday morning after the company announced fourth-quarter profit and a 2010 forecast that exceeded analysts’ estimates.

The shares rallied 4.9 percent, to $72.85 at 10:43 a.m. in New York Stock Exchange composite trading. They rose as much as 5.6 percent earlier, the biggest intraday advance since Oct. 29.

“It beat the pants off my estimate,” said Alexander Goldfarb, an analyst at Sandler O’Neill & Partners in New York. “It’s a function of Simon having good, productive centers where retailers want to locate.”

The company raised its average rent per square foot at both regional malls and outlet centers even as U.S. consumer spending flagged. Retail spending excluding automobiles fell 0.2 percent in December, while Simon said it raised mall rents about 1.4 percent and boosted outlet rents nearly 21 percent. In December, the company agreed to buy Prime Outlets Acquisition Co. for $2.33 billion.

Simon responded to a slumping U.S. economy by raising money through stock-and-debt offerings. The company and partner Ivanhoe Cambridge Inc. said today they will sell their stake in seven malls in Poland and France for $981 million.

Simon had adjusted funds from operations of $573 million, or $1.66 a share, for the fourth quarter, the company said. Analysts expected FFO of $1.52, the average of 15 estimates in a Bloomberg survey.

Adjusted FFO excluded an $88.1 million impairment charge. Including that cost, funds from operations fell to $485.2 million, or $1.40 a share, from $540.5 million, or $1.86, a year earlier.

Simon forecast 2010 adjusted FFO of $5.72 to 5.87 a share. The average analyst estimate is for FFO of $5.59 a share.

FFO is net income excluding interest, depreciation and other gains and losses. It doesn’t comply with generally accepted accounting principles.

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

About 92.1 percent of the regional malls the Simon 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.

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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