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Simon Property increases earnings guidance as mounts profit

Simon Property Group Inc. raised its earnings guidance for this year due to increased earnings in the first quarter of this year. Its earningsincreased by 6.2% and have exceeded expectations. One cause of the increased profit is a real estate investment trust increased as a result of the centralization of the bigger malls and outlets.

Earnings beat expectations, though revenue was in line.

The Indianapolis real-estate investment trust has benefited in recent quarters from higher occupancy rates as it focuses on its bigger malls and outlets. Last May, Simon Property spun off its strip centers and smaller enclosed malls into an independent, publicly traded real-estate investment trust called Washington Prime Group Inc. The company’s occupancy and sales-per-square-foot rates have improved since then.

The company looked to beef up by bidding $16.8 billion for rival Macerich Co., the nation’s third-largest mall owner by market value, in March, but it withdrew its offer a little more than three weeks ago when Macerich refused to engage.

It has since announced a $2 billion stock buyback and formed a joint venture with Sears Holdings Corp. Sears will lease back the properties, which are located at Simon malls, from the joint venture. Simon, meanwhile, has contributed $114 million in cash to the venture.

For the quarter ended March 31, Simon earned $362 million, or $1.16 a share, up from $341 million, or $1.10 a share, a year earlier.

Revenue grew 5.1% to $1.22 billion.

Analysts polled by Thomson Reuters expected a profit of $1.06 a share on $1.22 billion in revenue.

Funds from operations, a closely watched profitability measurement for real-estate investment trusts, fell to $2.28 a share from $2.38 a share a year earlier. The measurement was weighed by the spinoff of Washington Prime Group properties, Simon said.

U.S. malls occupancy as of March 31 was 95.8%, up from 95.5% a year earlier, as the base minimum rent per square foot increased 11% to $47.59. Total sales per square foot grew 7.8% to $621.

For 2015, the company expects per-share earnings of $5.10 to $5.20, up from its previous guidance of $5.05 to $5.15. Analysts expected $4.79 a share.

Funds from operations are expected to fall within a range of $9.65 to $9.75 a share, up a nickel from the previous range.

Simon also raised its quarterly dividend to $1.50 from $1.40, a move expected to cost the company an additional $31.1 million a quarter.

Shares, inactive premarket, are up about 4% this year through Thursday’s close.

Access Investor Kit for Macerich Co.

About Christopher T. Ellis

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