Simon Property profit falls 31 percent

Jennifer Shubinski

Monday, Nov. 3, 2003 | 11:06 a.m.

Jennifer Shubinski

Simon Property Group Inc. of Indianapolis, the world's largest owner of shopping malls, last week said third-quarter earnings fell 31 percent because of costs connected to the failed hostile takeover of Taubman Centers Inc.

The owner of the Forum Shops at Caesars and a 50 percent stake in the Las Vegas Premium Outlets said net income declined to $58.4 million, or 22 cents a share, from $74.6 million, or 32 cents, a year earlier. Revenue at the Indianapolis-based real estate investment trust increased 4.8 percent to $566.6 million.

Net income available to common shareholders dropped to $42.7 million, or 22 cents per share, from $58.9 million, or 32 cents a share, in the year-ago quarter.

Simon Property and Westfield America Inc. earlier this month withdrew their unsolicited offer valued at more than $1 billion for Taubman Centers because Michigan enacted a law letting the Taubman family block the transaction. Simon Property said total costs of $10.5 million related to the takeover attempt were taken last quarter.

Taubman Centers, which has 31 shopping centers in 13 U.S. states, had rejected a $20-a-share bid as inadequate before Michigan Gov. Jennifer Granholm signed the legislation. The bill was designed to bypass a May court ruling that said the shares held by the Taubman family couldn't be used in voting without shareholders' approval.

Last month, a federal judge ordered Simon Property to relinquish control of the biggest mall in the United States to the four Canadian brothers who developed it. Simon must sell a 27.5 percent stake in the Mall of America in Bloomington, Minnesota, for $81.4 million to Triple Five of Minnesota Inc., U.S. District Judge Paul Magnuson ruled.

Triple Five is owned by the Ghermezian family of Edmonton, Alberta, who secured development rights for the mall in 1986. Simon Property, which set aside $6 million as of Sept. 30 as a result of the court's order, said it would contest the order.

Funds from operations -- a measure of cash flow for real-estate investment trusts -- was unchanged at 93 cents a share. On that basis, which isn't in accordance with generally accepted accounting principles, results missed analysts' average estimate of 98 cents, according to a survey by Thomson Financial.

Simon Property owns or has stakes in 238 properties with 183 million square feet of leasable area in 36 U.S. states. The company also has properties in Europe and Canada.

One of those properties is the 500,000-square-foot Forum Shops at Caesars, which is being expanded with a 175,000-square-foot, three-story addition that will house 35 stores. The expansion is slated to open in November 2004.

In the meantime, stores continue to open at the mall. Pen store Mont Blanc is moving from the Desert Passage at Aladdin and men's and women's clothier Just Cavalli is expected to open in the first half of next year, said Maureen Crampton, marketing director of the mall.

Annual sales per square foot continue to be strong, at $1,300, General Manager Jeffrey P. Silbert said during a recent retailers' conference. The national average is between $350 and $400 per square foot annually.

While sales are strong, Crampton said they show signs of picking up.

"Sales continue to be great and are up 7 percent," she said. "That's very exciting going into the fourth quarter holiday season. Our luxury-brand stores are doing very well."

Luxury retailers that recently opened include Tod's, Valentino, Dolce & Gabbana, D&G Sport, and Burberry. Louis Vuitton recently tripled its store size and Christian Dior plans to expand, Crampton said.

Bloomberg News

contributed to this report.