MAC Macerich Co

Simon Property Group Inc. (SPG), a leading real estate investment trust (REIT), reported first quarter 2011 FFO (funds from operations) of $570.6 million or $1.61 per share, compared to $325.6 million or $0.94 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 exceeded the Zacks Consensus Estimate by 7 cents. Total revenues during the reported quarter increased to $1.0 billion from $925.1 million in the year-ago period. Total revenues during the reported quarter were well ahead of the Zacks Consensus Estimate of $964 million.

Occupancy in the regional malls and premium outlet centers combined portfolio was 92.9% at quarter-end, compared to 92.2% in the year-ago period. Comparable sales in the combined portfolio increased to $500 per square foot, compared to $462 in the prior-year quarter. Average rent per square foot in the combined portfolio increased during first quarter 2011 to $39.26 from $38.72 in the year-ago period.

The company continued its active development and redevelopment programs during the quarter. Simon Property opened Paju Premium Outlets – its second Premium Outlet Center in South Korea spanning 328,000 square feet of space. At the same time, Simon Property opened a major expansion of Las Vegas Outlet Center during the reported quarter. The expansion added 13 new stores and approximately 70,000 square feet of space. The center was also renovated with a complete external makeover and significant interior improvements, and was renamed as Las Vegas Premium Outlets - South.

During the quarter, Simon Property started expansion work on a 93,000 square foot expansion of Ami Premium Outlets, near Tokyo, Japan. The company also continued construction work on a premium outlet each in Malaysia, Japan, and in New Hampshire.

At quarter-end, the company had approximately $636.1 million of cash on hand. The company maintained its quarterly dividend at 80 cents per share. With strong quarterly and fiscal results, Simon Property increased its 2011 FFO guidance from the range of $6.45 – $6.60 per share to $6.55 – $6.65.

We currently maintain our ‘Neutral’ recommendation on the stock, which presently has a Zacks #3 Rank translating into a short-term ‘Hold’ rating. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank for Macerich Co. (MAC), one of the competitors of Simon Property.

 
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