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UPDATE 3-Simon Property earnings blows past estimates
April 27, 2012 / 12:05 PM / 6 years ago

UPDATE 3-Simon Property earnings blows past estimates

* Q1 FFO/shr $1.82 vs Street view $1.68

* Tenant sales up 11.2 pct

* Company raises full-year forecast, dividend

* Shares up

By Ilaina Jonas

April 27 (Reuters) - Simon Property Group Inc raised its full-year forecast after posting better-than-expected quarterly earnings on Friday, thanks in part to higher occupancy and rent at its outlet centers and malls.

“It was a blowout quarter,” said Richard Imperiale, president of Uniplan Investment Counsel Inc. “It’s no one or two things that really drove it. It was just solid improvement across most of the numbers.”

The results sent Simon shares up 1.7 percent in early trade on the New York Stock Exchange.

The gap between good U.S. malls - in dense, high income or vacation destinations - and the not-so good - which struggle to lure shoppers - has widened since the recession. Retailers have been fleeing the weaker malls and lining up to get into the more productive ones. Simon Property is the largest owner of U.S. malls and owner and developer of outlet centers which have done phenomenally well.

During the quarter, sales at its U.S. core portfolio jumped 11.2 percent and occupancy and rent rose. The stronger the sales, the more power a landlord has when it comes to negotiating rent. Landlords also share in a part of the increased sales at its tenant stores.

Indianapolis-based Simon said first-quarter funds from operations were $648.7 million, or $1.82 per share, compared with $570.6 million, or $1.61 per share, a year earlier. Revenue grew 9.7 percent to $1.12 billion. The company again raised its quarterly dividend, this time to $1.00 per share from 95 cents per share.

Analysts on average had expected funds from operations of $1.68 a share, on revenue of $1.05 billion, according to Thomson Reuters I/B/E/S.

Funds from operations, or FFO, is a real estate investment trust performance measure that usually excludes gains or losses from property sales and removes the effect depreciation has on earnings.

Simon again raised its forecast range for FFO for the year to $7.50 - $7.60 per share, from $7.20 - $7.30 per share. Analysts are expecting $7.48 per share. The company’s forecasts are conservative, and Simon more often than not raises them each quarter.

Occupancy at its core U.S. portfolio in the first quarter rose to 93.6 percent, up 0.60 percentage points. Tenant sales were an $546 per square foot on a trailing 12-month basis. Average rent per square foot was up 4.4 percent to $39.87 per square foot.

Net operating income, a closely watched measure indicating how well the properties are managed, rose 5.7 percent at properties the company has operated at least a year.

Simon, the world’s largest real estate company and the only one in the S&P 100, owns or has an interest in 337 retail real estate properties in North America and Asia. Its portfolio includes some of the most popular malls in the United States, including Roosevelt Field Mall in New York; King of Prussia Mall in Pennsylvania; The Forum Shops at Caesars Palace Las Vegas; Lenox Square Mall in Atlanta, and Woodbury Common Premium Outlets in New York.

It also is at the forefront of global expansion, with outlet malls either in or planned for China, Brazil, Malaysia, Canada and Europe. During the quarter, Simon also agreed to take a 28.7 stake in Klepierre, Europe’s second-largest retail real estate owner.

Simon shares rose $2.64 to $154.83 in early trade on the New York Stock Exchange, outperforming the benchmark MSCI U.S. REIT index which was up 0.2 percent.

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