Simon: We're not in negotiations With General Growth
Simon Property Group Inc., the largest U.S. shopping-mall owner, climbed the most in three months after its fourth-quarter profit and 2010 forecast exceeded analysts' estimates.
The shares rallied 3.6 percent to $71.96 at 12:19 p.m. in New York Stock Exchange composite trading. They rose as much as 5.6 percent, the biggest intraday advance since Oct. 29.
The company had "a pretty darn good report," said William Acheson, equity analyst for New York-based Benchmark Co. "It beat the pants off my estimate."
Simon raised its average rent per square foot at both regional malls and outlet centers even as U.S. consumer spending flagged. Retail spending excluding automobiles fell 0.2 percent in December, while Simon said it raised mall rents about 1.4 percent and boosted outlet rents nearly 21 percent. In December the company agreed to buy Prime Outlets Acquisition Co. for $2.33 billion.
"We are growing again with the acquisition of Prime, we are paying our dividend in cash, and we believe we are positioned to deliver solid operating results in 2010," Chief Executive Officer David Simon said today during a conference call with analysts and investors. The company said today it would return to an all-cash dividend after paying partly in stock during 2009.
Simon responded to a slumping U.S. economy by raising money through stock and debt offerings last year. The company and partner Ivanhoe Cambridge Inc. said today they will sell their stake in seven malls in Poland and France.
'Unsolicited Offer'"We got an unsolicited offer, and we took that to the next level," David Simon said. The sale provided Simon "an excellent opportunity to recycle capital" and take advantage of the value of the euro, he said.Simon Ivanhoe, a joint venture between Simon Property and Ivanhoe Cambridge, agreed to sell their stakes in French and Polish malls to Unibail-Rodamco SE, Europe's biggest shopping- center owner, for 715 million euros ($981 million). Simon expects a gain of about $200 million from the sale, which is projected to close in the first half of 2010.The company isn't in active negotiations with Chicago-based rival General Growth Properties Inc., Simon said on the call. General Growth is in Chapter 11 bankruptcy as it re-organizes debt. Simon Chief Financial Officer Stephen Sterrett has said some of its malls would be a "good fit" for his company.FFO ResultsSimon had adjusted funds from operations of $573 million, or $1.66 a share, for the fourth quarter, the Indianapolis-based company said in a statement today. Analysts expected FFO of $1.52, the average of 15 estimates in a Bloomberg survey.Adjusted FFO excluded an $88.1 million impairment charge. Including that cost, funds from operations fell to $485.2 million, or $1.40 a share, from $540.5 million, or $1.86, a year earlier.The company's better-than-estimated earnings aren't "a function of returning to the shopaholic days of a few years ago, but rather consumers feeling more comfortable with the current environment and Simon having a good portfolio of productive malls and outlets," said Alexander Goldfarb, an analyst with Sandler O'Neill Partners in New York.Simon forecast 2010 adjusted FFO of $5.72 to 5.87 a share. The average analyst estimate is for FFO of $5.59 a share.FFO is net income excluding interest, depreciation and other gains and losses. It doesn't comply with generally accepted accounting principles.Simon shares gained 69 percent in the 12 months through yesterday, compared with a 40 percent increase in the Bloomberg Real Estate Investment Trust Index.