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Simon Property Group Inc. (SPG - Analyst Report), a leading real estate investment trust (REIT), reported fourth quarter 2011 FFO (funds from operations) of $678.9 million or $1.91 per share, compared to $638.7 million or $1.80 in the year-earlier quarter. Fund 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.
The reported quarterly FFO marginally exceeded the Zacks Consensus Estimate by a penny. Total revenue during the reported quarter was $1,171.3 million compared to $1,119.7 million in the year-ago period. The revenue figure surpassed the Zacks Consensus Estimate of $1,128 million.
For full year 2011, Simon Property reported FFO of $2,438.8 million or $6.89 per share, compared to $1,770.5 million or $5.03 in 2010. The reported fiscal FFO exceeded the Zacks Consensus Estimate by 2 cents. Total revenue during fiscal 2011 increased to $4,306.4 million from $3,957.6 billion in 2010. The full year revenue exceeded the Zacks Consensus Estimate of $4,183 million.
Occupancy in the regional malls and premium outlet centers combined portfolio was 94.8% at quarter-end, compared to 94.5% in the year-ago period. Comparable sales in the combined portfolio increased to $536 per square foot, compared to $484 in the prior-year quarter. Average rent per square foot in the combined portfolio increased to $39.42 during fourth quarter 2011 from $37.77 in the year-ago period.
The company continued its active development and redevelopment programs. Simon Property presently has two new development projects under construction – Merrimack Premium Outlets in Merrimack, New Hampshire – a 409,000 square foot upscale outlet center scheduled to open on June 14, 2012; and Tanger Outlets - Texas City – a 350,000 square foot upscale outlet center in Texas City, Texas, scheduled to open in October 2012.
At the same time, Simon Property continued renovation and expansion projects at 23 centers in addition to the restoration of Opry Mills in Nashville, Tennessee, which is scheduled to reopen on March 29, 2012. During the reported quarter, Simon Property completed the 90,000 square foot expansion of Ami Premium Outlets in Ibaraki Prefecture, Japan. The company had a 40% stake in the project, which was 100% leased at the opening.
During the quarter, Simon Property also opened Johor Premium Outlets – the first Premium Outlet Center of the company in Southeast Asia. Spanning 190,000 square feet of gross leasable area featuring 80 stores, the property is strategically located in Johor, Malaysia, in close proximity to Senai Airport and the city center of Singapore. The project was 100% leased at opening.
Subsequent to the quarter-end, Simon Property had the groundbreaking for Busan Premium Outlets – a 240,000 square foot upscale outlet center serving Southeastern Korea. The company has a 50% ownership interest in the project, which will be its third Premium Outlet Center in Korea.
During the quarter, Simon Property exchanged its 50% ownership interests in six malls and one community center with Macerich Co. (MAC - Analyst Report) for its 50% ownership interests in five malls and one community center. The transaction did not involve any cash exchange, other than the customary net working capital adjustments. As a result of the transaction, Simon owns 100% of Empire Mall, Lindale Mall, Mesa Mall, Rushmore Mall, Southern Hills Mall and Empire East, while Macerich fully owns Eastland Mall, Lake Square Mall, Northpark Mall, South Ridge Mall, Southpark Mall, Valley Mall and Eastland Convenience Center.
Simon Property also sold three properties during the quarter, including Gwinnett Place, Factory Merchants Branson, and Crystal River Mall. Simultaneously, the company acquired an additional 25% ownership interest in Del Amo Fashion Center, increasing its ownership stake to 50%.
During the reported quarter, Simon Property entered into a new unsecured revolving credit facility that increased its borrowing capacity to $4.0 billion. The new credit facility is scheduled to mature on October 30, 2015, and has a one-year extension option. The company also sold $1.2 billion worth of senior unsecured notes during the quarter. Net proceeds from the offering were used to partially repay the outstanding debt.
At year-end 2011, the company had approximately $798.7 million of cash on hand, compared to $796.7 billion in the year-earlier period. The company increased its quarterly dividend by 5.6% to 95 cents per share. With strong quarterly and fiscal results, Simon Property expects 2012 FFO in the range of $7.20–$7.30 per share.
We maintain our ‘Neutral’ recommendation on the stock, which presently has a Zacks #3 Rank translating into a short-term ‘Hold’ rating.