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Simon Property increases funds from operations and keeps dividend

Brent Nyitray, CFA, MBA

Must-know: Simon Property Group's 2Q14 earnings (Part 2 of 4)

(Continued from Part 1)

Simon Property records an increase in FFOs and keeps its dividend

Simon Property Group (SPG) generated funds from operations (or FFO) of $783.8 million, or $2.16 per diluted share, compared to $766.3 million, or $2.11 per diluted share, in the 2Q13. On a per-diluted-share basis, FFO increased by 2.4%. The 2Q14 FFO per share includes a $0.10 charge for the Washington Prime Group (or WPG) spinoff. On an equal comparison basis, excluding WPG and the costs associated with the spinoff, FFO increased 12.8%

Net income attributable to common stockholders was $406.6 million, or $1.31 a diluted share, compared to $339.9 million, or $1.10 per diluted share, in the 1Q13. At the same time, SPG declared a $1.30 dividend payable in August, which was flat with the quarter before and $0.15 higher than the 2Q13. As a real estate investment trust (or REIT), Simon must pay out 90% of its earnings to shareholders through a dividend.

Operating statistics

Occupancy percentage increased to 96.5% from 95.1% a year ago—an increase of 140 basis points. Total sales per square foot increased 5.4% to $608 from $577 a year ago. Base minimum rent per square foot increased 10.7% to $45.83 from $41.41.

New mall construction has been leveling off for some time. Now, demand exceeds supply for high quality real estate. Simon has been able to replace struggling tenants at higher rental rates, which has been increasing income. Other mall REITs like General Growth Properties (GGP), Macerich (MAC), Realty Income (O), and Tabuman (TCO) have seen a similar occurrence.

Company takes up guidance for the full year

For the full year, Simon Property forecasted funds from operations of $9.01–$9.11—an increase from their previous guidance of $8.96–$9.06. The Street estimate was $9.15 a share.

Comments from management

David Simon, Chairman and CEO, said this about the quarter, “I’m very pleased with our quarterly results as our strong momentum continued, with 5.6% quarterly growth in comparable property net operating income. It was also an eventful quarter with our completion of the Washington Prime Group spinoff and the re-launch of our brand. Based on our results to date and expectations for the remainder of 2014, we’re again increasing our full-year 2014 guidance.”

Continue to Part 3

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