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Simon Property Group Grows Cash Flow, Reports Solid Key Operating Metrics

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Simon Property Group Inc. had a very productive quarter for Q1 and is pleased with its financial results. So said CEO David Simon on the firm’s Q1 earnings call.

Results in the quarter were highlighted by funds from operation of $3.04 per share, an increase of 5.9% compared to the prior year.

“Our reported FFO exceeded — per share exceeded the First Call consensus at the end of the first quarter by $0.10. Adjusting the prior year for the $11.3 million impact of expensing internal leasing cost our FFO per share growth was 7%. We continue to grow our cash flow and report solid key operating metrics,” he explained.

Total portfolio net operating income increased 1.7% compared to prior year and our comp NOI increased 1.6%, he said. “NOI growth was impacted by approximately 100 basis points due to the impact of retailer liquidations and bankruptcies resulting higher bad debt expense, unfavorable foreign exchange rates and slightly and NOI, slightly lower NOI from properties undergoing significant redevelopment.”

Redevelopment activity is moving quickly and in some cases, it’s moving quicker than the company had originally anticipated, he noted. “For example, the transformation of Northgate in Seattle, which was originally budgeted to occur next year, will start this summer with the demolition of the mall. The NOI will be significantly reduced while we begin this massive redevelopment. These types of decisions are in the best long-term interest of the asset and our future growth. Especially when you think about a property like North Gate where we are replacing a majority of the retail with the NHL Seattle Corporate office, practice facility, ice skating facilities for the public as well as significant residential, hotel and office uses.”

As for leasing activity, he said it remains solid with an average base minimum rent was $54.34. “The malls and outlets recorded leasing spreads of $14.17 per square foot, an increase of 27.3%. Reported retail sales per square foot for our malls and outlets was 660 per foot, compared to 641 in the prior year period, an increase of 3.1%. Keep in mind this growth is on top of a very strong growth throughout 2018, and reflects a late Easter and Passover as well as some recent lackluster tourism spending at some of our tourist-oriented centers due to the strengthening dollar.”