NEW YORK — Buoyed by robust operational and sales growth in its second quarter, Simon Property Group, the country’s largest retail real estate investment trust, laid out grand plans for its portfolio.
For the second quarter, Simon faced a tough year-over-year comparison at the bottom line, but operating income rose significantly. Despite an increase in total revenue of 6.2 percent, to $798.7 million from $752.1 million a year ago, net earnings fell 41.5 percent, to $101.3 million, or 37 cents per diluted share, from $173.2 million, or 70 cents. Operating income in the quarter leapt 7.6 percent, to $310 million from $288 million.
The mall owner has slated $1.6 billion for redevelopment projects and $350 million for development in its regional mall portfolio, and $650 million for an “asset intensification” program, adding mixed-use elements such as residential and self-storage to retail projects. The company is considering adding hotels to its sites, but has yet to determine the costs, said president and chief operating officer Rick Sokolov during a company conference call.
Simon’s expansion strategy is not restricted to domestic operations. In addition to exploring options in South Korea with its existing Chelsea Property Group premium outlet division, Simon is “very close to starting a potential joint venture” with an Indian real estate company. Simon expects to begin due diligence and explore opportunities in India “in earnest” soon, said David Simon, chief executive officer.
In China, the company is pursuing joint venture options, but will remain cautious about diving into the market, said Simon. “New rules and regulations seem to surface out of the blue, so we’re going to be very thoughtful and very deliberate about our entry into China,” he noted.
“We do not believe in adjusting net income or funds from operations,” said Simon. But he pointed out that the dramatic drop in income resulted in the sale of two non-core office properties in the second quarter of 2005, which propped up earnings that quarter a full 40 cents per share.