Simon Property Group Inc. (SPG), a leading real estate investment trust (REIT), reported fourth quarter 2010 FFO (funds from operations) of $630.6 million or $1.78 per share, compared to $485.2 million or $1.40 in the year-earlier quarter. Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
The reported quarterly FFO exceeded the Zacks Consensus Estimate by 4 cents. Excluding non-recurring items, FFO for fourth quarter 2010 was $638.7 million or $1.80 per share compared to $573.4 million or $1.66 per share in the year-ago quarter.
Total revenues during the reported quarter increased to $1.1 billion from $1.0 billion in the year-ago period. Total revenues during the reported quarter were in line with the Zacks Consensus Estimate.
For full year 2010, Simon Property reported FFO of $1.8 billion or $5.01 per share, compared to $1.7 billion or $5.33 in 2009. The reported fiscal FFO exceeded the Zacks Consensus Estimate by 5 cents. Excluding non-recurring items, FFO for fiscal 2010 was $2.1 billion or $6.03 per share compared to $2.0 billion or $6.01 per share in the previous year.
Total revenues during fiscal 2010 increased to $4.0 billion from $3.8 billion in 2009. Total revenues for full year 2010 marginally beat the Zacks Consensus Estimate of $3.9 billion.
Occupancy in the regional malls and premium outlet centers combined portfolio was 94.2% at quarter-end, compared to 93.4% in the year-ago period. Comparable sales in the combined portfolio increased to $494 per square foot, compared to $452 in the prior-year quarter. Average rent per square foot in the combined portfolio increased marginally during fourth quarter 2010 to $38.87 from $38.47 in the year-ago period.
The company continued its active development and redevelopment programs. Simon Property opened an expansion project spanning 114,000 square feet in Texas during the quarter. At the same time, Simon Property started expansion work on a project in New Hampshire. The company also continued construction work on an expansion project in Las Vegas, and a premium outlet each in Malaysia, Japan, South Korea and in New Hampshire.
Subsequent to the quarter-end, Simon Property has reportedly carried out its plans to acquire Capital Shopping Centers Group Plc, the largest shopping center operator in the U.K. Simon Property initially made a $3.6 billion acquisition offer for Capital Shopping during fourth quarter 2010, when the latter announced an agreement to buy the Trafford Centre shopping mall near Manchester in northwest England.
When Capital Shopping shuned its initial offer, Simon Property increased its conditional bid to $4.5 billion or 425 pence per share. However, Capital Shopping repeatedly rejected Simon Property’s overtures and instead remained adamant that it was worth over 625 pence per share. Eventually, Simon Property was forced to abandon its acquisition bid as Capital Shopping refused to share any due diligence information.
At year-end 2010, the company had approximately $796.7 million of cash on hand, compared to approximately $4.0 billion in the year-earlier period. The company maintained its quarterly dividend at 80 cents per share. With strong quarterly and fiscal results, Simon Property expects 2011 FFO in the range of $6.45 – $6.60 per share.
We currently maintain our ‘Neutral’ recommendation on the stock, which presently has a Zacks #3 Rank translating into a short-term ‘Hold’ rating. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank for Macerich Co. (MAC), one of the competitors of Simon Property.
MACERICH CO (MAC): Free Stock Analysis Report
SIMON PROPERTY (SPG): Free Stock Analysis Report
Zacks Investment Research
