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

Simon ups dividend after results top analysts' expectations

October 25, 2013

Simon Property Group Inc.reported a 12-percent increase in third-quarter funds from operations as retailer demand for space in outlet centers climbed.

FFO, which gauges a company’s ability to generate cash, rose to $803 million, or $2.21 a share, from $720 million, or $1.99, a year earlier, the Indianapolis-based real estate investment trust said Friday in a prepared statement.

The average of 22 analyst estimates was $2.16 a share, according to data compiled by Bloomberg. Simon declared a $1.20 per share dividend, a 5-cent boost from the previous quarter and a 9.1 percent year-over-year increase..

Simon is benefiting as retailers seek space in outlet centers, where brand-name items are sold at a discount. Rents and occupancies also are increasing at regional malls, where tenants are competing for limited space.

Simon is renovating and expanding its properties and developing new outlet centers to boost growth, and has stakes in Paris-based Klepierre SA and McArthurGlen Group, Europe’s biggest outlet-center operator.

“The existing portfolio, whether it’s the malls or the outlet centers, will see strong rental growth because there’s so much demand for space of that quality,” Rich Moore, an analyst at RBC Capital Markets in Solon, Ohio, said before earnings were announced. “They have myriad ways to make money.”

Domestic and international retailers are adding locations and expanding new store concepts, providing a boost to their U.S. landlords, Nathan Isbee and Jennifer Hummert, analysts at Stifel Nicolaus & Co., wrote in a report Thursday.

Simon’s revenue increased about 6 percent from a year earlier to $1.3 billion. Occupancy at the company’s U.S. properties climbed to 95.5 percent from 94.6 percent.

Simon’s 12-month-trailing tenant sales per square foot rose 3 percent, to $579 a square foot. The base minimum rent climbed 3.5 percent, to $41.73, from $40.33 in the third quarter.

The company raised its estimate of FFO for the year to a range of $8.72 to $8.78 a share, up from a July forecast of $8.60 to $8.70 a share. The average of 24 analyst estimates is $8.75.

Earnings were announced before U.S. markets opened. Simon rose 1.1 percent to $160.50 Thursday. The shares have gained 1.5 percent this year, compared with a 6.6 percent advance for the Bloomberg Real Estate Investment Trust Index.
 

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