Retail goliath Simon nails quarterly expectations, increases dividend

Simon Property Group Inc. on Wednesday posted robust fourth-quarter results that met analyst expectations, and increased its quarterly dividend.

The Indianapolis-based shopping mall giant reported fourth-quarter funds from operations of $1.1 billion, or $3.12 per share, compared with $912.2 million, or $2.53 per share, from the same quarter in the previous year.

The average estimate of 10 analysts surveyed by Zacks Investment Research was for FFO of $3.12 per share.

FFO is a key measure in the REIT industry for operating performance. It takes net income and adds back items such as depreciation and amortization.

"We had a strong fourth quarter concluding another year of industry-leading growth with record earnings and dividends for our company," CEO David Simon said in a written statement. “We continue to strengthen our portfolio through our innovative and disciplined investment activities that will allow us to continue to deliver cash flow and FFO per share growth."  

Simon reported revenue of $1.4 billion in the fourth quarter, matching its revenue from the year-ago quarter and Wall Street's forecasts.

The company reported quarterly profit of $571.1 million, or $1.84 per share, compared with $394.4 million, or $1.26 per share, in the prior year's fourth quarter. Results for 2016's fourth quarter included a 38-cent per-share charge related to the redemption of certain senior notes.

Occupancy at Simon’s U.S. malls and other outlet centers was 95.6 percent as of Dec. 31, down from 96.8 percent a year ago.

Acknowledging the struggles of brick-and-mortar retail, Simon said in a conference call with analysts that “the reality is we’ve got work to do to get our occupancy up.”

Base minimum rent per square foot in Simon malls was $53.11, up 2.9 percent compared with the prior-year period.

For the entire year, Simon reported FFO of $4 billion, or $11.21 per share, compared with $3.8 billion, or $10.49 per share, in 2016.

Last year’s full FFO is the highest the company has ever reported, Simon said, noting that the amount has risen by $1 billion since the company spun off Washington Prime Group in early 2014.

Profit was $1.9 billion, or $6.24 per share, compared with $1.8 billion, or $5.87 per share, in 2016.

Simon reported revenue of $5.54 billion for all of 2017.

For 2018, the company expects funds from operations in the range of $11.90 to $12.02 per share.

It also declared a quarterly dividend of $1.95 per share, an 11.4 percent year-over-year increase, to be paid Feb. 28.

Simon shares opened Wednesday morning trading at $162.61 each, down 31 cents from Tuesday’s close.

The company's shares have dropped slightly more than 5 percent since the beginning of the year, while the Standard & Poor's 500 index has increased almost 6 percent. Simon's stock has declined 8.5 percent in the last 12 months.