* First-quarter FFO $2.05 vs Wall Street $2.01
* Dividend left unchanged but company may soon resume
* Largest owner of U.S. malls raises full-year forecast
* Simon has little interest in sale-leasebacks
By Ilaina Jonas
NEW YORK, April 26 Simon Property Group Inc
, the largest owner of U.S. malls, has little interest in
buying department store space from retailers and leasing it
back, a senior executive said on Friday, a stance that may limit
options for cash-strapped J.C. Penney Co Inc.
Penney, which has 111 stores in Simon malls across the
country, has been talking with its financial advisers about ways
to raise capital after a botched turnaround that led to a steep
sales slump. Sale-leasebacks may be one of those options,
analysts have said.
"I do not believe we believe we would be interested in
sale-leasebacks," Richard Sokolov, president of the real estate
investment trust, said during a conference call when analysts
asked him about the company's general position on the subject.
Simon may have little reason to be interested.
Earlier it reported funds from operations, a closely watched
measure of REIT earnings, rose 14.4 percent in the first
quarter. Rents, sales and occupancy at its malls and outlet
centers all rose, and it boosted its forecast for the year.
Shares of Simon were little changed at $175.91 on the New
York Stock Exchange. Since the start of the year, the stock has
risen 11.5 percent, while shares of its nearest competitor,
General Growth Properties Inc, increased 9.9 percent.
Of the 635 department stores in Simon's U.S. portfolio, only
six or seven are vacant, and there's a line of prospective
tenants, many of them in retail categories that traditionally
set up shop outside malls including supermarkets, theaters and
It's part of a diversification that is attracting more
shoppers to malls and the stores that pay rent there. Simon is
adding hotels and apartment buildings to some of its U.S.
properties, while CBL & Associates Properties Inc has
leased mall space to libraries.
"To the extent they can put them all in one box-like
destination for a community, that seems to work out really
well," said Richard Imperiale, president of Uniplan Investment
Counsel Inc, a fund that owns Simon shares.
BY THE NUMBERS
Simon's FFO increased to $741.9 million, or $2.05 a share,
from $648.7 million, or $1.82, a year earlier
Analysts, on average, expected FFO of $2.01 a share,
according to Thomson Reuters I/B/E/S.
FFO is a performance measure that is closely watched because
it usually excludes gains or losses from property sales and
removes the effect of depreciation on earnings.
Simon maintained its quarterly dividend at $1.15 per share
after raising it for the past six quarters, but it said it would
likely restart the increases.
"We anticipate - subject to review and board approval -
increasing our dividend as we anticipate our taxable income
continuing to grow," David Simon, the company's chief executive
and chairman, said during the call.
As a REIT, Simon is required to distribute at least 90
percent of its taxable income to shareholders.
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 percent on a trailing 12-month basis to
$575 per square foot. Some 121 of its U.S. properties averaged
tenant sales of more than $700 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
percent from 93.6 percent a year earlier, and it was able to
push up rents by 13.4 percent 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 percent.
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
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, Mexico and Europe. It also has a 28.7
percent stake in Klepierre SA, Europe's second-largest
retail real estate owner.