Simon Increases Forecast After Second-Quarter FFO Rises

Simon Property Group Inc. (SPG), the largest U.S. shopping-mall owner, raised its dividend and increased its full-year forecast for funds from operations after second-quarter FFO climbed 18 percent.

FFO, which gauges a property company’s ability to generate cash, will be $7.60 to $7.70 a share this year, the Indianapolis-based real estate investment trust said today in a statement. That compares with a previous forecast of $7.50 to $7.60. Simon boosted its dividend to $1.05 a share from $1.

Demand for space from retailers at regional malls and outlet centers is rising, helping to lift Simon’s revenue. The company also is expanding overseas to increase growth. It bought a 28.7 percent stake in European shopping-center operator Klepierre SA for about $2 billion in March and formed a venture in April with Rio de Janeiro-based BR Malls Participacoes SA (BRML3) to develop outlet centers in Brazil.

“Their business is really, really good,” Rich Moore, an analyst at RBC Capital Markets in Solon, Ohio, said by telephone before the report. “They’re actively engaged on the international front.”

Second-quarter FFO rose to $688.8 million, or $1.89 a share, from $583 million, or $1.65, a year earlier, Simon said. The average of 18 estimates in a Bloomberg survey was for FFO of $1.81 a share.

Revenue increased 14 percent to $1.19 billion from $1.04 billion a year earlier. U.S. occupancy climbed to 94.2 percent from 93.6 percent. The base minimum rent was $39.99 a square foot in the quarter, up from $38.57 a year earlier. Tenant sales per square foot rose 10 percent to $554.

The results were released before the start of regular U.S. trading. Simon fell 0.7 percent to $155.94 yesterday in New York. Its shares have advanced 21 percent this year, compared with a 13 percent gain in the Bloomberg REIT (BBREIT) Index.

To contact the reporter on this story: Brian Louis in Chicago at blouis1@bloomberg.net.

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net.

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