Simon Ppy Reports Modest Quarter

Simon Property Group Inc. (SPG - Analyst Report), a leading real estate investment trust (REIT), has reported relatively modest third quarter results, with FFO (funds from operations) of $473.1 million or $1.38 per share compared to $463.9 million or $1.61 per share 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.

Occupancy in the regional malls and premium outlet centers was 91.4% and 97.5%, respectively during the quarter, compared to 92.5% and 98.8% in the year-ago period. Comparable sales in the regional malls decreased to $438 per square feet in the quarter compared to $493 in the prior-year quarter, while that of premium outlet centers decreased to $492 from $515 in the previous year. The decrease in the comparable sales was primarily due to the continued economic downturn resulting in a cut in consumer discretionary spending.

Average rent per square feet in the regional malls increased marginally during the quarter to $40.05 compared to $39.26 in the year-ago period. In the premium outlet centers, average rent per square feet during the quarter increased to $32.95 year-over-year versus $27.12.

The company continues its active development and redevelopment programs. Currently, Simon Property has two new development projects in the domestic market and three new development projects in the international market. During the quarter, the company opened a 400,000 square feet premium outlet center in the U.S. and two international projects in China.

During the quarter, Simon Property closed mortgage financing of $400 million. In addition, the company issued $500 million 6.75% senior unsecured notes due 2014. At quarter end, Simon Property had over $4 billion of cash in hand and $3 billion of available capacity under its revolving credit facility. The company decided to pay its quarterly dividend of 60 cents per share in a combination of cash and stock, the cash portion not exceeding 20% of the total dividend.

With continued improvements in the capital markets and early signs of an economic recovery, Simon Property has increased the lower end of its earlier FFO guidance while maintaining the higher end. The company now expects 2009 FFO to vary within $5.40 to $5.50 per share.