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Simon Property's quarterly profit rises on improving retail sales

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Simon Property Group Inc., the largest U.S. shopping-mall owner, on Friday morning reported higher profit in the fourth quarter as retail sales showed improvement.

The Indianapolis-based company said quarterly profit increased to $217.9 million, or $1.80 per diluted share, from $91.5 million, or 32 cents per share, in the fourth quarter of 2009.

Funds from operations grew to $630.6 million, or $1.78 a share, from $485.2 million, or $1.40, a year earlier, Simon said. The results included an impairment charge of 2 cents a share.

Analysts projected FFO of $1.74 a share, the average of 16 estimates in a Bloomberg survey.

FFO is a cash-flow measure used by real estate investment trusts. It excludes depreciation and other items and doesn’t conform to generally accepted accounting principles.

“We delivered impressive results in an improving, but still challenging environment,” Simon Chairman and CEO David Simon said in a prepared statement.

Revenue increased 8.9 percent in the quarter, to $1.1 billion.

Rising sales for tenants help landlords boost occupancies and rents. Occupancy in Simon properties in 2010 grew to 94.2 percent, up from 93.4 percent the previous year. Comparable sales per square foot rose to $494, from $452 during the same period, while average rent per square foot increased to $38.87 from $38.47.

For the entire year, profit was $610.4 million, or $2.10 per diluted share, compared with $283.1 million, or $1.05 per diluted share, in 2009.

FFO in 2010, however, fell to $5.01 per diluted share from $5.33 per diluted share the previous year.

Revenue in 2010 grew 4.8 percent, to $3.9 billion.

Simon reported a dividend of 80 cents a share, payable on Feb. 28.

The company also raised its current-year forecast for FFO to a range of $6.45 to $6.60 a share, up from $5.90 to $5.95 in the third quarter.

Simon owns or has stakes in almost 400 properties in North America, Europe and Asia. It abandoned a takeover pursuit of Capital Shopping Centres Group Plc last month after the London- based company declined to share due diligence information.

Simon shares are trading at $104.70 each, near their 52-week high of $106.54 reached in November.

U.S. mall owners are benefiting from increased consumer spending as the economy grows. Sales at the nation’s retailers rose in December for a sixth consecutive month, capping the biggest one-year gain in more than a decade, the Commerce Department reported Jan. 14. Rising sales for tenants help landlords boost occupancies and rents.

“Malls are actually one of the better performing property types out there,” Craig Guttenplan, an analyst at CreditSights in London, said before the report. Simon is in a position to benefit from the rebound because “it has a lot of premier properties,” he said.


 

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