Simon curbing expansion plans for 2009 despite 3Q 2008 higher income

By Greg Andrews and Norm Heikens, The IBJ

Simon Property Group this morning reported third-quarter results that beat analysts' expectations. But in a late-morning conference call, CEO David Simon said the retail developer would curb its expansion in response to the weak economy.

"Given the current economic conditions, we anticipate our capital spending will be down significantly in 2009," he said.

Investors initially sent the stock down this morning before the shares roared back, moving into positive territory. At midday, Simon stock traded at $68.24, up $1.21, or 1.8 percent.

The company said funds from operations in its third quarter rose 10.8 percent compared with the same quarter a year earlier. Funds rose to $463.9 million, or $1.61 per share - 4 cents per share more than expected by analysts surveyed by Thomson Financial.

Funds from operations is a common measurement of real estate investment trusts like Simon. The figure excludes depreciation and amortization.

Mall occupancy dipped slightly. However, the company pushed up rents at a time when retailers are suffering and expecting a dour holiday shopping season.

Rent at its regional malls increased by an average of 6.3 percent, to $39.26 per square foot. At premium outlet centers, rent increased 6.6 percent to $27.12 per square foot.

At properties open at least a year, Simon said rent increased 0.4 percent at its regional malls and 4.2 percent at its premium outlet centers.

In the conference call, Simon officials said it was highly unlikely the company would purchase Chicago-based General Growth Properties, a struggling competitor many analysts believe will be sold outright or in pieces.