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UPDATE 3-Simon Property FFO rises, tops expectations

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

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

* Raises quarterly dividend by 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, the No. 1 U.S. mall and outlet center owner, 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.

Improving retail sales and consumer confidence are good news for mall owners. Luxury mall owner Taubman Centers Inc reported strong sales on Wednesday and raised its outlook for the year.

``The retailers have become much more aggressive in paying up for the right (mall) space in good locations, where last year they were much more hesitant to do that,'' said Richard Imperiale, president of Uniplan Investment Counsel Inc.

Simon shares were down 21 cents to $150.96 in afternoon trade. The shares have come under pressure from speculation that the REIT may try for a second time to buy smaller peer General Growth Properties Inc. Simon tried to buy GGP out of bankruptcy in 2010 but has said it is not interested in a deal now.

William Ackman, manager of hedge fund Pershing Square Capital, which owns just over 10 percent of GGP, has been trying to broker such as deal. But Brookfield Asset Management Inc , which controls more than 40 percent of GGP shares, has said it is not interested in selling at this time.

``We have no dog in that hunt,'' David Simon, Simon Property chairman and chief executive, said during a conference call on Thursday. ``This is a discussion between GGP, Brookfield and Pershing Square, and we're focused on running our business.''

Simon 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.

Earlier this year, Simon embarked on a massive plan to build new outlet centers and redevelop its existing malls and centers, which could include adding new stores and more parking space. The company is on track to spend $1 billion this year and at least a $1 billion in both 2013 and 2014.

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.