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UPDATE 2-Simon Property FFO rises, tops expectations

Ilaina Jonas
Thursday, 25 Oct 2012 | 2:10 PM ET

* Raises funds from operations, or FFO, outlook for 2012

* Q3 FF0 $1.99/share vs Street view $1.92

* Raises quarterly dividend 5 cents to $1.10/share

* Nets $327 mln from sale of stakes in British companies

Oct 25 (Reuters) - Simon Property Group Inc reported a 19 percent increase in a key earnings measure Thursday on higher rents and sales at its malls and outlet centers, easily beating estimates, and the real estate investment trust raised its outlook for the year.

The company also increased its quarterly dividend. It is the third time this year that Simon has raised its guidance, and its fifth dividend increase in as many quarters.

Its shares rose nearly 1 percent, or $1.28, to $152.46 in morning trading on the New York Stock Exchange.

Simon is one of the first mall companies to report quarterly results amid gradually improving retail sales and consumer confidence. Luxury mall owner Taubman Centers Inc also reported strong sales and raised its outlook for the year.

``The retailers have become much more aggressive in paying up for the right space in good locations where last year they were much more hesitant to do that,'' Richard Imperiale, president of Uniplan Investment Counsel Inc, said. ``It's a reflection of the quality of the properties and the reflection of the retail community to get much more aggressive on the retail side.''

Simon on Thursday reported that third-quarter funds from operations (FFO) rose to $720.1 million, or $1.99 per share, from $606.2 million, or $1.71 per share, a year earlier. Revenue increased 14.4 percent to $1.23 billion.

Analysts, on average, had expected FFO of $1.92 a share on revenue of $1.19 billion, according to Thomson Reuters I/B/E/S.

FFO is a REIT performance measure that usually excludes gains or losses from property sales and removes the effect that depreciation has on earnings.

Simon increased its FFO forecast for the year, excluding one-time items, to a range of $7.80 to $7.85 per share. It previously forecast $7.60 to $7.70.

The company's forecasts tend to be conservative, and Simon often raises them each quarter. Analysts expect $7.76 per share for the year, according to Thomson Reuters I/B/E/S.

Indianapolis-based Simon raised its quarterly dividend 5 cents to $1.10 per share.

In the third quarter, sales, rent and occupancy all increased. Sales at Simon's tenants' stores at U.S. core portfolio malls and outlet centers rose 9.3 percent to $562 per square foot on a trailing 12-month basis. Stronger sales attract tenants and eventually lead to higher rents. Also, landlords take a share of tenants' sales.

Late Wednesday, Taubman said sales at its luxury malls rose 10.7 percent to $681 per square foot.

Occupancy at Simon's malls and outlet centers rose to 94.6 percent from 93.8 percent a year earlier, and the company was able to push up average rent 3.8 percent to $40.33 per square foot.

Net operating income rose 4.7 percent.

Early in the fourth quarter, Simon sold its stakes in Capital Shopping Centres Group Plc and Capital & Counties Properties Plc, netting about $327 million.

Simon, the only real estate company in the Standard & Poor's 100 index, owns or has an interest in 333 retail real estate properties in North America and Asia.

Its portfolio includes some of the most popular U.S. malls, including Roosevelt Field Mall and Woodbury Common Premium Outlets in New York; The Forum Shops at Caesars Palace Las Vegas; and Lenox Square Mall in Atlanta.

Simon has international outlet centers in Canada, Malaysia, Japan, Korea and Europe. It is redeveloping or expanding 25 U.S. properties and two in Japan.

In Brazil, Simon has formed a joint venture with BR Malls Participacoes SA to build 10 to 14 outlet centers. Its first site, in Sao Paulo, is scheduled to open by early 2014, and construction is expected to start in the next 30 to 60 days. In China, it has a joint venture to open one outlet mall.

Simon also has a 28.7 stake in Klepierre SA, Europe's second-largest retail real estate owner, and has three seats on the French company's board. David Simon is chairman.

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