Simon Property results improve as U.S. retail sales advance

Simon Property Group Inc., the largest U.S. shopping-mall owner, said funds from operations rose 20 percent in the second quarter as rents and occupancies increased. The company raised its forecast for the year.

Funds from operations, which gauges a property company’s ability to generate cash, climbed to $583 million, or $1.65 a share, from $487.7 million, or $1.38, a year earlier, the Indianapolis-based real estate investment trust said Tuesday. Analysts expected FFO of $1.58 a share, the average of 18 estimates in a Bloomberg survey.

The company is among regional mall landlords increasing rents as their tenants’ sales rise. Consumer spending, excluding automobiles, gas stations and restaurants, increased 5.5 percent in June from a year earlier, the National Retail Federation said on July 14. That was the 12th straight month of gains.

“Our operating fundamentals reflect the high quality of our assets with higher occupancy, sales and rent than in the year earlier period,” CEO David Simon said in a prepared statement.

Simon also is benefiting from growth in its outlet-center business as apparel companies and other retailers expand in that part of industry. The company last year bought Prime Outlets Acquisition Co. for $2.3 billion to expand the business by 21 properties. It sold Prime Outlets at Jeffersonville after the Federal Trade Commission required the company to dispose of one of its two southwest Ohio centers as part of the Prime purchase.

“They’ve greatly benefited from having a quarter of their portfolio in outlet centers,” said Cedrik Lachance, managing director at Green Street Advisors Inc., a REIT-research firm in Newport Beach, Calif.

Simon raised its FFO forecast for the year to $6.65 to $6.73 a share. The company in April projected 2011 FFO of $6.55 to $6.65 a share.

The results were announced before the start of regular U.S. trading. Simon shares fell $1.38, or 1.1 percent, to $120.47 Monday in New York Stock Exchange composite trading. Shares have advanced 21 percent this year, compared with a 12 percent increase in the Bloomberg REIT Index.

Simon, the largest U.S. REIT by market value, owns or has stakes in almost 400 properties in North America, Europe and Asia.