Simon Property Group, raised its full-year outlook when it reported first-quarter earnings last week increased 6.5 percent on higher occupancy and rent figures.
David Simon, chief executive officer of the real estate investment trust, in a conference call with analysts, discussed new domestic and overseas projects. He also spoke about Simon’s failed attempt to acquire competitor Macerich. Simon last month bid $16.8 million to acquire rival Macerich, but was rebuffed and withdrew its offer.
For the quarter ended March 31, Simon earnings rose 5.9 percent to $362 million, or $1.16 a share, up from $341 million, or $1.10 a share in the previous year’s same quarter. Revenue grew 5.1 percent to $1.22 billion. Analysts were expecting a profit of $1.06.
Funds from operations was $830.7 million in the first quarter or $2.28 per share compared with $865 million or $2.38 per share in the prior year period, a decrease of 4.29 percent. Results for the 2014 first quarter included a 24 cent charge per share from the Washington Prime Group properties that were spun-off last May. On a comparable basis, funds from operations of $2.28 per share in the first quarter of 2015 would be compared with $2.14 in the year ago first quarter.
Occupancy in U.S. malls was 95.8 percent, up from 95.5 percent in last year’s first quarter and rents increased 11 percent to $47.59. For the full year, Simon expects earnings per share of $5.10 to $5.20, up from its previous guidance of $5.10 to $5.15.
Simon recently closed on its $1.09 billion acquisition of Jersey Gardens in Elizabeth, N.J., and University Park Village in Fort Worth, Tex. Simon purchased from Taubman Centers — and is changing the name of — a 39-acre property in Syosset, N.Y., to Syosset Park. Taubman, which had spent 20 years trying to redevelop the tract was calling it the Mall at Oyster Bay.
Construction continues on four new outlet centers that will open later this year in Vancouver, Gloucester, N.J., Tuscon, Ariz., and Tampa, Fla. Simon said construction is slated to begin this year on three international premium outlets in France, Mexico and Malaysia that will be developed with partners.
In addition to Simon’s previously announced $1.18 billion joint venture with Hudson’s Bay Co., which will seek out property to acquire and pursue tenants in the U.S. and overseas, Simon last month entered into a joint venture with Sears Holdings Corp. Under the agreement, the retailer will leaseback properties located at Simon shopping centers. Simon on Thursday announced a partnership with Swire Properties and Whitman Family Development to jointly develop the retail component of Brickell City Centre, a $1.05 billion mixed use development in downtown Miami whose luxury shopping center will be anchored by Saks Fifth Avenue.
Simon revealed that the company has a 25 percent stake in Brickell. While the Miami Design Center has a leg up on high-profile luxury tenants with Louis Vuitton and Cartier among the 60 retailers that have opened stores and Hermès, Dior, Dolce & Gabbana and Céline building large flagships, Simon said, “We’ve made a lot of progress on leasing. This is going to be a unique, long-term, mixed-use retail asset. It’s going to blow people’s minds away.
“We’re pleased to see a rebound in the European shopper,” Simon said, noting that the REIT in 2012 became the largest shareholder of Klépierre, a European mall owner. “We have a $21 billion portfolio in Europe.”
In terms of American consumers, “We’re still dealing with a cautious customer and it’s volatile,” Simon said. The patterns of the consumer are tougher to predict right now. Confidence is getting better, but there’s still a lot of debt being reduced.
“We’re not concerned about not being able to find avenues of growth,” Simon said. “Our outlet business is very strong. Sales are very strong and we see that growth continuing. Also, we are redeveloping [and expanding] some of our iconic mall properties.” Those include Roosevelt Field in Garden City, N.Y.; Del Amo Fashion Center in Torrance, Calif.; the Galleria in Houston; King of Prussia in King of Prussia, Pa., and Woodbury Common Premium Outlets in Central Valley, N.Y. “They’ll all bring a significant amount of new square footage in 2016.”
Simon said the Macerich opportunity is now an afterthought whose costs were “immaterial.” “Since we were not able to engage with Macerich — even though we tried very hard to put an unbelievable, hell of an offer on the table — we’ve been so busy running the business and doing the redevelopment of our centers and working on all the new ventures” that Macerich won’t be missed.
Asked whether Simon is in the market for other acquisitions, the ceo said, “You’ll see us at the appropriate times of volatility. We’re going to take advantage of volatility in the REIT industry. We’ll do this opportunistically and you’ll see us in the market at the appropriate times.”