Financial Results and Commercial Real Estate and Simon Property Group and Real Estate Investment Trust and Real Estate & Retail

Simon boosts forecast as quarterly results exceed expectations

October 25, 2011
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Indianapolis-based Simon Property Group Inc., the largest U.S. shopping-mall owner, reported funds from operations that beat analyst estimates and raised its full-year forecast as income from rents rose. The company also boosted its dividend.

FFO, which gauges a property company’s ability to generate cash, was $606.2 million, or $1.71 a share, in the third quarter, the real estate investment trust said Tuesday morning in a prepared statement. Analysts expected $1.67 a share, the average of 19 estimates in a Bloomberg survey. A year earlier, FFO was $318.5 million, or 90 cents, including an expense of $185 million to buy back debt.

Simon is increasing rents and boosting occupancies as tenant sales rise and retailer demand for space grows. Nordstrom Inc.’s same-store sales jumped 11 percent in September from a year earlier. Saks Inc.’s climbed 9.3 percent and Macy’s Inc.’s gained 4.9 percent.

“They have an incredibly healthy and strong regional-mall portfolio,” Rich Moore, an analyst for RBC Capital Markets in Solon, Ohio, said before the results were announced. “Not only is it big, it’s very high quality.”

Occupancy at Simon’s U.S. properties rose to 93.9 percent from 93.8 percent a year ago. The average rent increased 3.4 percent, to $38.87 a square foot.

Sales at outlet malls also are helping Simon increase revenue as retailers and apparel companies grow in that part of the industry. The company bought Prime Outlets Acquisition Co. last year for $2.3 billion to expand that business.

Simon raised its FFO forecast for the year to $6.80 to $6.85 a share. That compares to a July projection of $6.65 to $6.73.

The REIT boosted its quarterly dividend to 90 cents a share, a 12.5-percent increase. It also declared a special stock dividend of 20 cents a share payable Dec. 30.

Simon's overall quarterly revenue fell from $829.4 million a year ago to $813 million this year, and profit fell from $101.8 million to $75.5 million.

The results were released before the start of regular U.S. trading. Simon shares rose 1.8 percent, to $122.87 each Monday.

The shares have advanced 24 percent this year, the third best performance in the Bloomberg REIT Index. The 129-member gauge has increased 1.1 percent in 2011.

Simon, the largest U.S. REIT by market value, owns or has stakes in more than 390 retail properties in North America, Europe and Asia.

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