Simon Property Group (SPG), a leading real estate investment trust (REIT), reported relatively modest second quarter results, with FFO (funds from operations) of $313.1 million or $0.96 per share, compared to $427.9 million or $1.49 per share in the year-earlier quarter. FFO, 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 quarterly FFO figure was negatively impacted by the non-cash impairment charge of $140.5 million or $0.42 per share, related to a decline in the company’s investment in Liberty Property Trust (LRY). Excluding this charge, FFO during the quarter was $453.6 million or $1.38 per share.

Occupancy in the regional malls and premium outlet centers was 90.9% and 97.0%, respectively during the quarter, compared to 91.8% and 98.3% in the year-ago period. Comparable sales in the regional malls decreased to $442 per square feet in the quarter, compared to $494 in the prior-year quarter, while that of premium outlet centers decreased to $493 from $510 in the previous year. The decrease in the comparable sales was primarily due to the continued economic downturn resulting in a cut in consumer discretionary spending.

During the quarter, the company completed the sale of 23 million shares at $50 per share. Simon Property also completed two refinancing during the quarter totaling $230 million and closed an additional mortgage financing of $400 million. The company decided to pay its quarterly dividend of $0.60 per share in a combination of cash and stock, the cash portion not exceeding 20% of the total dividend.

The company continues its active development and redevelopment program. Currently, Simon Property has three new development projects each in the domestic market as well as in the international market.

The company has reaffirmed its earlier FFO guidance of $5.35 to $5.50 per share. We reiterate our Neutral recommendation on the stock.

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