Simon Property reports an increase in FFO and hikes its dividend

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Simon Property Group's 1Q14 earnings: Important takeaways (Part 2 of 4)

(Continued from Part 1)

Simon Property records an increase in FFO and increases its dividend

Simon Property generated funds from operations (usually abbreviated as FFO) of $865 million, or $2.38 per diluted share, as compared to $742 million, or $2.05 per diluted share in the first quarter of 2013. On a per-diluted-share basis, FFO increased by 16%.

Net income attributable to common stockholders was $341.6 million, or $1.10 a diluted share, as compared to $283.1 million, or $0.91 per diluted share, in the first quarter of 2013. Simultaneously, Simon Property Group declared a $1.30 dividend payable in May, which was a 5 cent increase from the quarter before and 15 cents higher than the first quarter of 2013. As a REIT, Simon must pay out 90% of its earnings to shareholders via a dividend.

Operating statistics

Occupancy percentage increased to 95.5% from 94.7% a year ago, an increase of 80 basis points. Total sales per square foot increased 20 basis points to $576 from $575 a year ago. Base minimum rent per square foot increased 4.2%, to $42.77 from $41.05.

New mall construction has been leveling off for some time, and now, demand exceeds supply for high quality real estate. Simon has been able to replace struggling tenants at higher rental rates, which has been pushing up income. Other Mall REITs like General Growth Properties (GGP), Macerich (MAC), Realty Income (O), and Tabuman (TCO) have seen a similar phemomenon.

Company takes up guidance for the full year

For the full year, Simon Property forecasted funds from operations of $9.60 to $9.70, an increase from their previous guidance of $9.50 to $9.60. The Street estimate was $9.57 a share.

Comments from management

David Simon, chairman and CEO, said, ”We are off to an outstanding start in 2014, reporting strong financial and operating results led by a 16.1% growth in FFO per diluted share. The increase in comparable property net operating income of 3.7% was driven by strong releasing spreads and occupancy gains, and demonstrates our ability to continue to increase our cash flow. We are increasing our full year 2014 guidance and raising our dividend due to our strong first quarter performance and expectations for continued growth.”

Continue to Part 3

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