Simon Beats Expectations with Q2 Report

INDIANAPOLIS-Retail giant Simon Property Group, based here, beat analyst expectations with its recent second quarter report. The company reported that FFO improved from $313.1 million in Q2 2009 to $487.7 million this recent quarter, or about $1.38 per share.

Analysts predicted the company would only hit $1.34 per share FFO. Simon also reported that net income improved to $152.5 million from a $20.8 million loss same time last year.

David Simon, CEO, said during a Q2 conference call Friday that he thinks that an uncertain economic macro environment still exists. However, there’s still work to do, he said. “We have a, I'd say, roughly 20 potential transformational redevelopments that we've been working on. We essentially put them on hold, obviously, last year. And we have reinvigorated the company to pursue those. And I think they're very exciting. It'll add a lot of opportunity for our company, and we're going to accelerate that process. And they go from South Hills in Pittsburgh; to Plaza Carolina in Puerto Rico; to La Plaza in McAllen, TX; Dadeland; Del Amo; Nanuet; Roswell Field; the Walt Whitman. So there's a lot that we are excited about internally that we've kind of said, let's get started on.”

Richard Sokolov, president and COO, said contrary to some claims, major tenants are looking to expand rather than contract space. He said a Simon team was with three major department store companies last week and none of them were talking about store closings. “In fact, the emphasis now is looking for new opportunities and primarily, in our existing product. So we expect that to be the trend rather than store closings,” Sokolov said during the call.

The company has continued activity outside the United States. Current projects include Paju Premium Outlets, a new 328,000-square-foot upscale outlet center with approximately 160 shops, located north of Seoul. This will be the company's second Premium Outlet Center in South Korea. The center is expected to open in April 2011. The company owns a 50% interest in this project. Also, Simon is expanding Tosu Premium Outlets in Fukuoka, Japan by 54,000 square feet. The company owns a 40% interest in this project.

David Simon said a main effort for the company has been finalizing the $700 million purchase of Prime Outlets Inc., a deal announced in late 2009. One recent aspect of the deal, Simon said during the call, is that three properties will not be included in the purchase: Prime Outlets in St. Augustine, FL, and two land sites in Livermore Valley, CA and Grand Prairie, TX. There was no explanation for the deletion, though Simon said the US Federal Trade Commission is still reviewing the deal.