Simon Property Q3 profit beats Wall St estimate

By Ilaina Jonas

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

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

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

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

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

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

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

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

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

Still, shares fell 1 percent or $1.74, to $158.80 in afternoon trade, underperforming the benchmark MSCI US REIT index, 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 and outlet centers rose 3 percent on a trailing 12-month basis to $579 per square foot.

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

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

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

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

Simon raised its full-year FFO forecast, excluding one-time items, 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 Thomson Reuters I/B/E/S.

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

Simon, the only real estate company in the Standard & Poor's 100 index, owns or has an interest in 327 retail properties in North America and Asia.

Its portfolio includes Roosevelt Field Mall and Woodbury Common Premium Outlets in New York, Forum Shops at Caesars Palace 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 28.7 percent stake in Klepierre SA, Europe's second largest retail real estate owner.