Simon Property Results Speed Past Wall Street Estimates

Industries Reuters

Simon Property Group Inc said a key earnings measure rose 14.4% in the first quarter, helped by higher rents and sales at its malls and outlet centers, prompting the company to raise its forecast for the year.

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Simon also ended its six-quarter streak of raising dividends.

Funds from operations (FFO) increased to $741.9 million, or $2.05 per share, from $648.7 million, or $1.82 per share, a year earlier, Simon, the largest U.S. owner of malls and shopping centers, said on Friday.

Analysts, on average, expected FFO of $2.01 a share, according to Thomson Reuters I/B/E/S.

FFO is a performance measure for real estate investment trusts (REIT) that usually excludes gains or losses from property sales and removes the effect that depreciation has on earnings.

Simon raised its full-year FFO forecast, excluding one-time items, to a range of $8.50 to $8.60 per share from $8.40 to $8.50. Analysts expect $8.59 per share, according to Thomson Reuters I/B/E/S.

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The company's outlooks tend to be conservative, and Simon often raises them each quarter. As a REIT, Simon is exempt from paying most corporate-level income tax if they distribute at least 90 percent of operating income to shareholders.

Simon has raised its dividend for the past six quarters, but kept its payout at $1.15 per share this quarter.

Simon, the only real estate company in the Standard & Poor's 100 index, owns or has an interest in 327 retail properties in North America and Asia.

Its portfolio includes some popular U.S. malls, including Roosevelt Field Mall and Woodbury Common Premium Outlets in New York, the Forum Shops at Caesars Palace in Las Vegas, and Lenox Square Mall in Atlanta.

The company has international outlet centers in Canada, Malaysia, Japan, Korea and Europe.

First-quarter sales, rent and occupancy all increased. Sales at tenants' stores at its U.S. core portfolio malls and outlet centers rose 5.3% on a trailing 12-month basis to $575 per square foot.

Stronger sales attract tenants and eventually lead to higher rents. Also, landlords take a share of tenants' sales.

Occupancy at Simon's malls and outlet centers rose to 94.7% from 93.6% a year earlier, and it was able to push up rents by 13.4% for new leases. The average base rent was $41.05 per square foot.

Net operating income, which reflects how well properties owned for at least a year are being managed, rose 4.8%.

Shares of Simon closed at $176.01 down 83 cents, or 0.5% on Thursday. Since the start of the year, the stock has risen 4.2%, while shares of its nearest competitor, General Growth Properties Inc, increased 1.6%.