INDIANAPOLIS-Simon Property Group reported Tuesday that its conversion to outlet malls is moving ahead quickly, with a number of retail properties set to open this year and next around the globe. David Simon, chairman and CEO, also discussed the mall giant’s financial improvement during its second quarter conference call.
During the quarter, the company reports that funds from operations was $688.8 million, compared to $583 million in second quarter 2011. The company also reported 5.1% growth in comparable property net operating income, tenant sales are up 9.9% to $554 per square foot, and the company has raised the dividend from $1 per share to $1.05 per share. “Our dividend is now 31% higher than it was a year ago,” Simon said.
He said that commercial real estate construction continues on a number of new Premium Outlet Centers in the markets of Houston, Phoenix, Toronto, Tokyo and Busan, Korea, all set to open this year or in 2013. The company also started construction July 11 at its outlet center in St. Louis, a property already 62% leased but going up against a similar outlet center being built by Bloomfield Hills, MI-based Taubman Centers. Simon admitted that there has been competition to gain tenants in St. Louis, and that Taubman has grabbed a few tenants that Simon sought.
The company is also active with its agreement to develop outlet centers in Brazil with partner BR Malls, which Equity International recently confirmed a split from last week, as well as redeveloping 25 properties in Japan. “We continue to expect our share of the development and redevelopment spend to approximate $1 billion this year, next year and 2014,” Simon said.
China has been a tough puzzle to crack, he said, with a fast-paced pipeline and complex business practices. “We do have a good partner in Shanghai, but we’re going to be very, very judicious in how we ultimately build something there,” Simon said.
He also said the firm is examining its partnership with Paris-based Klepierre, in which Simon purchased a 29% stake in March. While David Simon was positive in his comments about the second largest owner of European retail assets, he said there’s too much turmoil today in Europe to confidently map out the future of the partnership. “Their business has been remarkably stable considering the turmoil of Europe,” Simon said. “The negative is, they’re going to have to weather a tough environment, the one country that continues to be difficult for them is Spain. I think as things stabilize, we’ll get back to being able to generate cash flow growth from those assets.”
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