By Ilaina Jonas

(Reuters) - Simon Property Group Inc <SPG.N>, the largest owner of U.S. malls and outlet centers, raised its full-year earnings forecast on Friday after breezing past Wall Street's expectations, sending its stock to a record high.

"It was a blowout quarter," said Richard Imperiale, president of Uniplan Investment Counsel Inc. "It's no one or two things that really drove it. It was just solid improvement across most of the numbers."

Simon shares peaked at $155.92, before closing up 2 percent at $155.33 on the New York Stock Exchange.

During the first quarter, sales at its U.S. core portfolio of 325 mostly malls and outlet centers jumped 11.2 percent to $546 per square foot. Stronger sales attract tenants and eventually lead to higher rents. Landlords also take a share of tenants' sales.

Simon's top 100 U.S. assets generate more than $700 in sales per square foot, with the top 50 generating over $800 per square foot and top 12 generating over $1,000 per square foot.

The real estate investment trust said first-quarter funds from operations were $648.7 million, or $1.82 per share, compared with $570.6 million, or $1.61 per share, a year earlier. Revenue grew 9.7 percent to $1.12 billion.

Analysts on average had expected funds from operations, or FFO, of $1.68 a share, on revenue of $1.05 billion, according to Thomson Reuters I/B/E/S.

FFO is a REIT performance measure that usually excludes gains or losses from property sales and removes the effect depreciation has on earnings.

Simon again raised its forecast for FFO for the year to a range of $7.50 to $7.60 per share, from $7.20 to $7.30. Analysts are expecting $7.48. The company's forecasts tend to be conservative, and Simon more often than not raises them each quarter.

First-quarter net operating income, a closely watched measure of management performance, rose 5.7 percent at properties the company has operated at least a year.

The gap between so-called Class A U.S. malls in dense, high income or vacation destinations and others, which have more trouble luring shoppers, that widened after the recession seems to be stabilizing, some analysts said.

Asked if this trend was happening at his company, Chief Executive David Simon told analysts on a conference call that "I don't think we could produce these results if only the top end of the assets were producing results."

Simon said he is more optimistic that some of the company's lower producing malls, including two from its Mills unit that could put be up for sale within the next 12 months, will find buyers that could include non-traditional private investors.

Recently, private equity group KKR & Co LP <KKR.N> and Starwood Capital have bought malls or stakes in malls.

"The fact that there's more people coming into that market might lead to a few more sales from us over a period of time," he said.

Simon, the world's largest real estate company, raised its dividend for the third consecutive quarter, to $1.00 per share from 95 cents to comply with U.S. tax rules. As a REIT, Simon must distribute 90 percent of its taxable income to shareholders in exchange for being mostly free of corporate-level income taxes. It has had to raise its dividend along as its income has grown.

"We're still chasing our taxable income, so the answer is at some point we'll catch up," the CEO said.

Simon, the only real estate company in the Standard & Poor's 100 index, owns or has an interest in 337 retail real estate properties in North America and Asia. Its portfolio includes some of the most popular U.S. malls, including Roosevelt Field Mall and Woodbury Common Premium Outlets in New York; The Forum Shops at Caesars Palace Las Vegas; and Lenox Square Mall in Atlanta.

Simon's international outlet centers, in areas that include Malaysia, Canada, Japan, Korea and Europe, generate $1,000 per square foot, he said.

In Brazil, Simon has formed a joint venture with BR Malls Participacoes SA to eventually build 10 to 14 outlets. Its first site, in Sao Paulo, is scheduled to open by early 2014.

In China, it has a joint venture to open one outlet mall.

During the quarter, Simon also agreed to take a 28.7 stake in Klepierre, Europe's second-largest retail real estate owner.

Simon, which has three seats on the French company's board, plans to play an active role, including advising it on countries to enter and exit, where to invest, and how to manage its balance sheet.

Simon, who serves as Klepierre's chairman, hopes both companies can share retail tenants and that the U.S. REIT can impart some of its management style to Klepierre.

"It's a great potential platform for us to really have a significant presence there and create kind of a sister or a fully integrated Simon company over there," Simon said.

(Editing by Bernadette Baum, Dave Zimmerman and Richard Chang)


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