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Simon sees jump in cash flow, sunny skies ahead

July 24, 2015

Simon Property Group Inc., the largest U.S. mall owner, reported a 22-percent jump in second-quarter funds from operations and increased its full-year forecast as rising employment helps lure in shoppers.

FFO, a measure of cash flow for real estate investment trusts, rose to $955.4 million, or $2.63 a share, from $783.8 million, or $2.16, a year earlier, the Indianapolis-based company said Friday. The results included a gain of 22 cents a share tied to the sale of securities.

Simon is among the retail landlords benefiting from increased hiring, with the U.S. jobless rate falling to a seven-year low of 5.3 percent last month. The company, after failed attempts to acquire competitors, has been redeveloping existing properties and expanding through joint ventures with retailers Sears Holdings Corp. and Hudson’s Bay Co. Earlier this year, Simon withdrew a $16.8 billion proposal for Macerich Co. after being rebuffed by its smaller rival.

The sale-leaseback deals Sears made with Simon in the second quarter were a “quicker and cleaner” way for the landlord to acquire new properties, said Ki Bin Kim, an analyst with SunTrust Robinson Humphrey Inc. “Otherwise, you don’t know when Simon might have gotten that space or for how much.”

For the full year, Simon increased its forecast for FFO to $10.02 to $10.07 a share. The company previously estimated $9.65 to $9.75 a share.

Simon announced its second-quarter results Friday  before the start of regular U.S. trading. The company’s shares fell 0.6 percent to $181.38 on Thursday. They’ve dropped 0.4 percent this year, making Simon the best performer in the eight-company Bloomberg REIT Regional Mall Index.

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