Simon Property Group Inc.’s quarterly funds from operations topped Wall Street expectations, due to its acquisitions and greater occupancy at its malls and outlet centers.
The largest mall owner in the country – and operator of 16 shopping centers in Massachusetts, including Boston’s Copley Place mall and the South Shore Plaza – also raised its forecast for the year, despite damage to its Japanese properties from last month’s earthquake and tsunami.
The mall sector has weathered the nation’s commercial real estate downturn better than most sectors, with the sales at the highest quality malls in the most dense locations rising faster than their competitors. Real estate investment trusts (REITs) own about 71 percent of those so-called "A" malls, according to Green Street Advisors.
Simon’s outlet center business also contributed to the company’s growth, as consumers look for good deals.
Simon posted quarterly funds from operations of $570.6 million, or $1.61 per share, compared with $325.6 million, or 94 cents per share, a year earlier. Analysts on average had expected $1.54 per share, according to Thomson Reuters I/B/E/S.
After a charge for the early payment of debt, Simon reported FFO of $491.2 million, or $1.41 per share.
FFO removes the profit-reducing effect depreciation has on earnings.
Total revenue rose 10.25 percent to $1.02 billion.
"When you look at the earnings power and the investment discipline that these guys exhibit, it’s clear not only in the strong results they produce but also their ability to continue to grow earnings," Sandler O’Neill analyst Alex Goldfarb said.
Average sales at its centers rose 8.2 percent to $500 per square foot. Higher sales eventually translate into greater power to increase rents. Occupancy at centers it has owned for at least a year also rose, to 92.9 percent from 92.2 percent.
Simon, the largest U.S. REIT, owns or has an interest in 392 retail properties in North America, Europe and Asia. During the course of the year, Simon bought more than 20 outlet centers from Prime Outlets Acquisition Co.
Simon raised its forecast for the year, citing improving business conditions in the national retail real estate market, overshadowing uncertainty in Japan.
Simon, which typically issues conservative forecasts, expects full-year 2011 FFO in the range of $6.55 to $6.65 per share, up from its prior view of $6.45 to $6.60. Analysts had forecast $6.61 per share.
(Reuters)
