Diluted funds from operations--considered a key measure of a REIT's operating performance--for the quarter increased 30.1% to $349.4 million from $268.5 million in 2004. On a per share basis the increase was 16.8% to $1.18 from $1.01 in the second quarter of 2004. Diluted FFO of the Simon portfolio for the six months increased 30.7% to $683.2 million from $522.8 million in 2004. On a per share basis the increase was 17.3% to $2.31 per share from $1.97 per share in 2004.
BofA Securities Equity released a report stating that Simon's reported FFO was 6 cents above Wall Street estimates. "The upside does not appear to relate to one item, but looks to be primarily due to higher-than-expected percentage rents, unexpected credit loss recoveries, modestly lower-than-expected G&A and higher-than-expected 'other income,'" BofA reports.
The REIT raised its guidance for 2005, expecting diluted FFO to be within a range of $4.80 to $4.85 per share for the year ending December 31, 2005, and diluted net income to be within a range of $1.67 to $1.72 per share. As of June 30, comparable sales per sf increased from a year ago in all property categories with a jump of 5.5% to $442 in its regional malls; 7.3% to $426 in its Premium Outlet centers; and a 2.3% increase to $218 in the community/lifestyle center category.
During the last year, occupancy of Simon-owned regional malls increased 90 basis points from the same period last year to 92.2%, while its Premium Outlet centers increased 120 basis points to 99.2% occupancy. The company's community/lifestyle centers remained stable at 91.5%. Average rents also increased across the board with the region mall sector generating $34.16 per sf, up from $32.92 in the same period last year; $22.83 per sf for Premium Outlet centers, up 7.9% from $21.16; and $11.13 for community/lifestyle centers from $10.77 last year.
During the quarter, Simon opened the $58 million first phase of Seattle Premium Outlets, a 381,000-sf outlet center in Tulalip, WA, 35 miles north of Seattle, and Wolf Ranch, a $98 million 670,000-sf community center located north of Austin, TX in Georgetown. The company started construction on three new projects in Q2 including: Round Rock Premium Outlets, a 433,000-sf outlet center in Round Rock, TX, anticipated to open in the fall of 2006; the Domain, a 700,000-sf urban village in Austin, TX, slated to open in March 2007; and the Village at SouthPark, mixed-use project adjacent to Simon's SouthPark Mall in Charlotte, NC. Simon continues construction on: The 785,000-sf open-air regional shopping center Firewheel Town Center in Garland, TX; Coconut Point, an open-air, mixed-use mainstreet regional shopping center in Estero/Bonita Springs, FL; and three development projects in Italy, partially owned by Gallerie Commerciali Italia, the company's Italian joint venture.
Further international activity has been announced throughout the quarter with a signed an agreement with Seoul-based Shinsegae Co. Ltd. and Shinsegae International Co. Ltd. to jointly develop Premium Outlet centers in South Korea; the opening of a regional office in Hong Kong; and most recently, an agreement with the Morgan Stanley Real Estate Funds and Szitic Commercial Property Co. Ltd. to develop retail shopping center projects in China.
The company's current total market capitalization is approximately $39 billion. Through its subsidiary partnership, it currently owns or has an interest in 294 properties in the US containing an aggregate of 201 million sf of gross leasable area in 40 states plus Puerto Rico. Simon also holds interests in 51 European shopping centers in France, Italy, Poland and Portugal; five Premium Outlet centers in Japan; one Premium Outlet center in Mexico; and one shopping center in Canada.
Following the Q2 announcement Thursday, shares of Simon Property gained 1.1% to $79.56.
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