Simon Property Group, Inc (SPG), a real estate investment trust (:REIT), reported third quarter 2012 FFO (funds from operations) of $720.1 million or $1.99 per share, compared to $606.2 million or $1.71 in the year-earlier quarter.
The reported quarterly FFO well exceeded the Zacks Consensus Estimate of $1.92. Total revenues during the reported quarter increased to $1,228.6 million from $1,074.4 million in the year-ago period. Total revenues during the reported quarter beat the Zacks Consensus Estimate of $1,223 million.
Occupancy in the regional malls and premium outlet centers' combined portfolio was 94.6% at quarter-end, compared to 93.8% in the year-ago period. Comparable sales in the combined portfolio increased to $562 per square foot, compared to $514 in the prior-year quarter — an increase of 9.3%. Average rent per square foot in the combined portfolio increased during third quarter 2012 to $40.33 from $38.84 in the year-ago period.
The company continued its active development and redevelopment programs during the quarter. Simon Property expects construction to begin shortly on the first outlet center in Brazil which is a joint venture with BR Malls Participacoes S.A. Both parties hold equal share in the joint venture project spanning 310,000 square feet.
In addition, the company started construction work on the St. Louis Premium Outlet in Chesterfield, Missouri. Simon Property owns a 60% ownership stake in this joint venture project. The first phase of the project would include 85 stores totaling 350,000 square feet and is expected to open in September 2013.
Simon Property currently has an aggregate of 24 redevelopment and expansion projects in the U.S. and one property in Japan . Additionally, 40 new anchor and big box tenants are scheduled to open in the fourth quarter of 2012 and 2013.
The company is also continuing its construction work on several premium outlet centers across the globe. These included Shisui Premium Outlets – a 230,000 square foot upscale outlet center in Shisui (Chiba), Japan; Phoenix Premium Outlets – an upscale outlet center in Chandler (Phoenix), Arizona; Toronto Premium Outlets – a 360,000 square foot upscale outlet center in Halton Hills, Canada; and Busan Premium Outlets – a 340,000 square foot upscale outlet center in Busan, Korea.
Subsequent to the end of the quarter, Simon Property opened an upscale outlet center in collaboration with Tanger Factory Outlet Centers, Inc. (SKT) spanning 350,000 square feet in Texas City, Texas. Both parties hold equal ownership stake in the property.
Subsequent to the quarter-end, Simon Property completed the sale of its marketable securities of 35.4 million shares of Capital Shopping Centres Group PLC and 38.9 million shares of Capital & Counties Properties PLC, generating proceeds of approximately $327 million.
At quarter-end, the company had approximately $452.7 million in cash and cash equivalents. The company increased its quarterly dividend by 22.2% from the year-ago period to $1.10 per share. With strong quarterly results, Simon Property also increased its 2012 FFO guidance to $7.80–$7.85 per share from its earlier projections of $7.60–$7.70.
Simon Property currently retains a Zacks #1 Rank, which translates into a short-term Strong Buy rating. We are also maintaining our long-term Outperform recommendation on the stock. One of its competitors, The Macerich Company (MAC) holds a Zacks #2 Rank, which translates into a short-term Buy rating.
Note: FFO, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation and amortization and other non-cash expenses to net income.
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