Simon Property Q3 profit beats Wall St estimate

Reuters

By Ilaina Jonas

NEW YORK, Oct 25 (Reuters) - Simon Property Group Inc reported a better-than-expected third-quarter profit onFriday, raised its forecast for the year and said it wasboosting its dividend.

Simon posted higher rents, occupancy at its malls and outletcenters. Sales at its tenants' stores also rose, but theincrease has slowed, reflecting weaker consumer spending andfewer shoppers meandering through the malls.

"September was a pretty bad month in terms of traffic andsales for all retailers," David Simon, chairman and chiefexecutive officer, said during a conference call with analysts."We are starting to hear and feel that traffic is bouncing backin October. But clearly, clearly, the general economy hasslowed."

David Simon also said that J.C. Penney Co Inc's problems have had little effect "on what I will call the mallenvironment."

Simon reported third-quarter funds from operations (FFO), aclosely watched measure of real estate investment trust (REIT)earnings, rose 11.5 percent to $802.8 million, or $2.21 pershare, in the quarter. A year earlier, FFO was $720.1 million,or $1.99 per share.

Analysts, on average, expected third-quarter FFO of $2.16per share, according to Thomson Reuters I/B/E/S.

FFO usually excludes gains or losses from property sales andremoves the effect depreciation has on earnings.

"They grind it out so well, quarter after quarter," RichardImperiale, president of Uniplan Investment Counsel Inc,referring to Simon's ability to consistently post better resultseach quarter.

"It's such a big company. Yet they continue to move theneedle with a fair amount of precision. You wonder how long theycan do it, but they continue to execute well."

Still, shares fell 1 percent or $1.74, to $158.80 inafternoon trade, underperforming the benchmark MSCI US REITindex, which was down 0.72 percent.

Third-quarter sales, rents and occupancy all increased.Sales at tenants' stores in its U.S. core portfolio malls andoutlet centers rose 3 percent on a trailing 12-month basis to$579 per square foot.

Stronger sales attract tenants and eventually lead to higherrents. Also, landlords take a share of tenant sales.

Occupancy at Simon's malls and outlet centers rose to 95.5percent from 94.6 percent a year earlier, and it was able topush up base rents by 3.5 percent for new leases.

The average base rent was $41.73 per square foot. New leaseswere $8.05 higher per square foot than expiring ones, up 3.2percent over a year earlier.

Net operating income, which reflects how well propertiesowned for at least a year are being managed, rose 4.9 percent.

Simon raised its full-year FFO forecast, excluding one-timeitems, to a range of $8.72 to $8.78 per share from $8.50 to$8.60. Analysts expected $8.75 per share, according to ThomsonReuters I/B/E/S.

It also increased its quarterly dividend by 5 cents to $1.20per share, payable on Nov. 29 to shareholders of record on Nov.15.

Simon, the only real estate company in the Standard & Poor's100 index, owns or has an interest in 327 retailproperties in North America and Asia.

Its portfolio includes Roosevelt Field Mall and WoodburyCommon Premium Outlets in New York, Forum Shops at CaesarsPalace in Las Vegas, and Lenox Square Mall in Atlanta.

The company has international outlet centers in Canada,Malaysia, Japan, Korea, Mexico and Europe. It also has a 28.7percent stake in Klepierre SA, Europe's second largestretail real estate owner.

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