Commercial Real Estate and Real Estate & Retail

Simon ups dividend after beating analysts' expectations

February 4, 2013

Simon Property Group Inc. raised its quarterly dividend as funds from operations rose amid increased shopper spending at its shopping centers and outlet malls.

FFO, which gauges a real estate company’s ability to generate cash, climbed in the fourth quarter to $827.4 million, or $2.29 a share, from $678.9 million, or $1.91, a year earlier, Indianapolis-based Simon said Monday morning. The average estimate of 19 analysts in a Bloomberg survey was $2.17 a share. The company raised its quarterly dividend to $1.15 a share from $1.10.

Demand for space at regional malls is rising, helping to boost rent revenue. U.S. retail sales excluding autos advanced 4.1 percent in December from a year earlier, according to data from the Commerce Department.

Simon is the nation's biggest owner of both regional malls and outlet centers, where retailers sell at a discount.

“They’re doing very well,” Rich Moore, an analyst at RBC Capital Markets in Solon, Ohio, said in an interview before results were announced. “The notion that there are bargains to be had at the outlet center is enticing to people.”

Revenue increased 15 percent in the fourth quarter from a year earlier, to $1.34 billion. Occupancies at Simon’s U.S. properties climbed to 95.3 percent from 94.6 percent. The base minimum rent in the quarter was $40.73 a square foot, up from $39.40 a year earlier. Tenant sales rose 6.6 percent to $568 a square foot.

Earnings in the quarter fell 13 percent, to $315.4 million, or $1.01 per share, from $362.9 million, or $1.24 per share, in the prior year.

Earnings for the year rose 40 percent, to $1.43 billion, or $4.72 per share, from $1.02 billion, or $3.48 per share, in the previous year.

Annual revenue climbed 13 percent, to $4.88 billion from $4.31 billion.

For 2013, Simon Property anticipates FFO between $8.40 and $8.50 per share and earnings in a range of $3.55 to $3.65 per share. Analysts predict FFO of $8.43 per share and earnings of $3.83 per share.

Simon Property owns or has an interest in 328 retail properties in North America and Asia.

Company results were announced before the start of regular U.S. trading. Simon shares rose 1.1 percent, to $161.97 each, on Feb. 1. Its shares have advanced 19 percent in the past 12 months, compared with an 11-percent gain in the Bloomberg REIT Index.

Shares rose less the 1 percent Monday morning, to $162.90 each.

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