Simon Property Profits Up in Q2, While Brookfield Subsidiary Sees Dip in Earnings

The country’s largest publicly traded real estate company may have lost its bidding war for a troubled mall real estate investment trust (REIT) earlier this year, but Simon Property Group (SPG) reported profits topping the $150m mark in Q210. Simon said its Q210 net income was $152.5m, $0.52 per diluted share, up from net income of $147.2m, or $0.51 per share, in Q110 and a net loss of $20.8m, $0.08 per diluted share, in Q209. Chairman and CEO David Simon attributed the gain to improvement in business conditions, including higher occupancy rates and higher sales in Simon’s commercial real estate. Simon Property is the country’s largest owner of shopping malls. He said that sales at the company’s malls and Premium Outlets rose 4.9% compared to the same period in 2009 and grew 90 basis points from Q110. Simon’s major capital gains for the first two quarters of 2010 included a purchase of an outlet mall in Puerto Rico and an increase in ownership interest in the Houston Galleria, a cash expenditure of $1.5bn. The quarterly report stated an increase of 19% ownership in the Houston Galleria to 50.4% of the entire establishment. Earlier this year, Simon and Brookfield Asset Management (BAM) were involved in a heated bidding war over General Growth Properties (GGP), the country’s second largest owner of shopping malls that filed for the largest bankruptcy in US history in April 2009. The bidding war began in February, with Brookfield eventually emerging as the victor in May. BAM releases its Q210 earnings on August 6, but Brookfield Properties Corp. (BPO), a publicly traded subsidiary of Brookfield Asset Management that owns, manages and develops office towers in markets across North America, reported a Q210 net income of $154m or $0.28 per diluted share, a decrease of 39% from $252m or $0.48 per diluted share in Q110. The company reported an investment gain of $53m from repayment a loan purchased at a discount and secured by the equity in a portfolio of office properties in the Washington, DC area, of which it owned 51%. Brookfield said it expanded commercially and residentially, leasing 1.3m square feet of space, 66% of which are renewal leases, in Toronto (489,000 sq. ft.), Calgary (299,000 sq. ft.), Los Angeles (223,000 sq. ft.) and New York (100,000 sq. ft.). The report boasted acquiring the remaining 50% ownership interest in 77 K Street in Washington, DC for an estimated $38.6m or $237 per sq. ft. Write to Christine Ricciardi. The author held no relevant investments.

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