Solid 3Q for Simon Property - Analyst Blog
October 25 2011 - 11:08AM
Zacks
Simon Property Group Inc.
(SPG) a leading real estate investment trust (REIT), reported third
quarter 2011 FFO (funds from operations) of $606.2 million or $1.71
per share compared with $318.5 million or 90 cents 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.
The quarterly FFO exceeded the Zacks Consensus Estimate by 4
cents. Total revenue in the reported quarter increased to $1074.4
million from $979.3 million in the year-ago quarter. Total revenue
during the reported quarter also exceeded the Zacks Consensus
Estimate of $1024 million.
Occupancy in the regional malls and premium outlet centers
combined portfolio was 93.9% at quarter end, compared with 93.8% in
the year-ago period – an increase of 10 basis points (bps) year
over year. Comparable sales in the combined portfolio increased to
$517 per square foot, versus $473 in the prior-year quarter.
Average rent per square foot in the combined portfolio increased
during the reported quarter to $38.87 from $37.58 in the year-ago
period.
Comparable property net operating income during the quarter for
regional malls and premium outlet centers combined portfolio
expanded 3.8%.
The company continued its active development and redevelopment
programs in the international market during the quarter. During the
quarter, Simon Property opened an expansion center of Tosu Premium
Outlets in Fukuoka, Japan, spanning 52,000 square feet of space and
consisting of an additional 28 new stores.
The company also initiated construction of two additional
expansion projects, a 103,000 square foot expansion of Rinku
Premium Outlets in Izumisano (Osaka), Japan and a 78,000 square
foot expansion of Kobe-Sanda Premium Outlets in Kobe, (Osaka), and
Japan.
In the U.S., the company started construction work on Merrimack
Premium Outlets – a new development project in Merrimack, New
Hampshire, spanning 409,000 square feet of upscale outlet space.
The company also commenced development of a 350,000 square foot
upscale outlet center in Texas City.
The company continued redevelopment of Opry Mills in Nashville,
Tennessee, and expects to complete the redevelopment by March
2012.
In 2011, the company plans to open 39 new anchors/big boxes
spanning 1.7 million square feet of leasing activity. The company
currently has 18 anchor/big box deals lined up for 2012
and 2013, encompassing nearly 900,000 square feet
During the reported quarter, the company acquired full ownership
interest in ABQ Uptown – a lifestyle center in Albuquerque, New
Mexico. The 222,000 square foot center, presently 95% leased,
generates sales of approximately $650 per square foot.
Simon Property increased its ownership interest in King of
Prussia from 12% to 96%. King of Prussia is one of the country's
largest shopping centers, with gross leasable area of 2.4 million
square feet. The company also possesses the contractual ability to
acquire the remaining interest in King of Prussia by fall 2013.
In the reported quarter, Simon Property entered into a new
unsecured revolving credit facility that increased the company's
revolving borrowing capacity to $4.0 billion, with an option of
increasing it to $5.0 billion during its term. The credit facility
is expected to mature on October 30, 2015, and can be
extended for an additional year.
At quarter end, the company had approximately $575.8 million in
cash. The company increased its quarterly dividend by 12.5% to 90
cents per share. Given the strong quarterly results, Simon Property
increased its 2011 FFO guidance from $6.65 – $6.73 per share to
$6.80 – $6.85 per share.
Simon Property currently retains a Zacks #2 Rank, which
translates into a short-term Buy rating. We are also maintaining
our long-term Neutral recommendation on the stock. One of its
competitors, Macerich Co (MAC) holds a Zacks #3
Rank, which translates into a short-term Hold rating.
MACERICH CO (MAC): Free Stock Analysis Report
SIMON PROPERTY (SPG): Free Stock Analysis Report
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