Simon Property Group Inc. (SPG) a leading real estate investment trust (REIT), reported third quarter 2011 FFO (funds from operations) of $606.2 million or $1.71 per share compared with $318.5 million or 90 cents in the year-earlier quarter.
Funds 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 quarterly FFO exceeded the Zacks Consensus Estimate by 4 cents. Total revenue in the reported quarter increased to $1074.4 million from $979.3 million in the year-ago quarter. Total revenue during the reported quarter also exceeded the Zacks Consensus Estimate of $1024 million.
Occupancy in the regional malls and premium outlet centers combined portfolio was 93.9% at quarter end, compared with 93.8% in the year-ago period – an increase of 10 basis points (bps) year over year. Comparable sales in the combined portfolio increased to $517 per square foot, versus $473 in the prior-year quarter. Average rent per square foot in the combined portfolio increased during the reported quarter to $38.87 from $37.58 in the year-ago period.
Comparable property net operating income during the quarter for regional malls and premium outlet centers combined portfolio expanded 3.8%.
The company continued its active development and redevelopment programs in the international market during the quarter. During the quarter, Simon Property opened an expansion center of Tosu Premium Outlets in Fukuoka, Japan, spanning 52,000 square feet of space and consisting of an additional 28 new stores.
The company also initiated construction of two additional expansion projects, a 103,000 square foot expansion of Rinku Premium Outlets in Izumisano (Osaka), Japan and a 78,000 square foot expansion of Kobe-Sanda Premium Outlets in Kobe, (Osaka), and Japan.
In the U.S., the company started construction work on Merrimack Premium Outlets – a new development project in Merrimack, New Hampshire, spanning 409,000 square feet of upscale outlet space. The company also commenced development of a 350,000 square foot upscale outlet center in Texas City.
The company continued redevelopment of Opry Mills in Nashville, Tennessee, and expects to complete the redevelopment by March 2012.
In 2011, the company plans to open 39 new anchors/big boxes spanning 1.7 million square feet of leasing activity. The company currently has 18 anchor/big box deals lined up for 2012 and 2013, encompassing nearly 900,000 square feet
During the reported quarter, the company acquired full ownership interest in ABQ Uptown – a lifestyle center in Albuquerque, New Mexico. The 222,000 square foot center, presently 95% leased, generates sales of approximately $650 per square foot.
Simon Property increased its ownership interest in King of Prussia from 12% to 96%. King of Prussia is one of the country’s largest shopping centers, with gross leasable area of 2.4 million square feet. The company also possesses the contractual ability to acquire the remaining interest in King of Prussia by fall 2013.
In the reported quarter, Simon Property entered into a new unsecured revolving credit facility that increased the company’s revolving borrowing capacity to $4.0 billion, with an option of increasing it to $5.0 billion during its term. The credit facility is expected to mature on October 30, 2015, and can be extended for an additional year.
At quarter end, the company had approximately $575.8 million in cash. The company increased its quarterly dividend by 12.5% to 90 cents per share. Given the strong quarterly results, Simon Property increased its 2011 FFO guidance from $6.65 – $6.73 per share to $6.80 – $6.85 per share.
Simon Property currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Macerich Co (MAC) holds a Zacks #3 Rank, which translates into a short-term Hold rating.
