INDIANAPOLIS—Simon Property Group's second-quarter funds from operations nudged analysts' expectations by two or three cents per share, reaching $783.8 million or $2.16 per diluted share. Analysts polled by Thomson Reuters had projected an average of $2.14 per share, while Street Insider.com reported a consensus of $2.13. The shopping center REIT raised its full-year guidance, after cutting it in May following the spinoff of smaller properties into a separate real estate trust.

“I am very pleased with our quarterly results as our strong momentum continued, with 5.6% quarterly growth in comparable property net operating income,” says David Simon, chairman and CEO. “It was also an eventful quarter, with our completion of the Washington Prime Group spin-off and the re-launch of our brand.”

During Q2, the shopping center REIT spun off 98 smaller malls and community centers to Washington Prime Group Inc. The spinoff began trading on the New York Stock Exchange as an independent, publicly-traded REIT under the WPG symbol.

Net income attributable to common stockholders for the quarter that ended June 30 was $406.6 million, or $1.31 per diluted share, as compared to $339.9 million, or $1.10 per diluted share, in the prior year period. Income from continuing operations was $489.61 million or $1.34 per share, up from $359.13 million or $0.99 per share a year ago.

The quarterly results included total revenue of $1.18 billion, up from $1.08 billion the year prior although falling short of Wall Street's estimate of $1.25 billion. Minimum rent revenues and occupancy were both up year over year, by 140 basis points in the case of occupancy. SPG raised its full-year FFO guidance by five cent to a range of $9.01-$9.11, compared to a consensus of $9.15.

In a survey of the REIT landscape issued ahead of Q2 earnings reports, Barclays Capital gave SPG a strong report card. “With the spin-off of Washington Prime complete, we believe investor focus will turn back to mall fundamentals, which for Simon, a pure-play A mall operator, remains very strong,” according to Barclays. “SPG remains well-positioned due to its portfolio of high quality in-demand properties. This is best illustrated by continued momentum in its releasing spreads, up 19.5% in 1Q14, even stronger than the 16.8% evidenced in 4Q13. The prospect of these sustainably high releasing spreads is driving a +$2 billion development and redevelopment pipeline, which offers 9-11% unlevered yields, on average.”

 

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.