Simon Property Group Inc., the largest U.S. mall owner and operator and owner of 16 shopping properties in Massachusetts, reported a 6.5 percent increase in quarterly funds from operations on Friday, citing cost controls and curtailed spending on development.

Also, Simon's board voted to pay a quarterly dividend of 90 cents per share in 10 percent cash and 90 percent stock. The company, which had previously paid all-cash dividends, said the move would allow it to retain $925 million in cash in 2009.

"The retail environment has been and will continue to be challenging in the upcoming months, however, we are experienced in working through difficult economic cycles," Chief Executive David Simon said in a statement. "This decision is a reflection of our conservative stance on capital allocation and liability management and is not in response to the current retail operating environment."

But the move could temper some investors' interest in shares of Simon as well as of other real estate investment trust stocks.

"From a cash management standpoint I think it's good for companies to keep an eye on every piece of cash and be shepherding capital as well as they can," said Joseph Betlej, portfolio manager at Advantus Capital Management.

"But from the prospective of the REIT industry, there's a lot of investors that care about that dividend," he added, "and the idea that we're going to be paying these things now in stock lessens the attractiveness of REITs to the investing public, both retail and institutional investors."

At the end of the quarter, Simon had about $1.1 billion of cash on hand, including its share of joint ventures, and more than $2.4 billion of available capacity on its revolving credit facility.

For the fourth quarter, Simon's FFO, a performance measure for real estate investment trusts, rose to $540.5 million, or $1.86 per share, from $507.7 million, or $1.76 per share, a year earlier.

The latest results beat the average of analysts' forecasts of $1.85, according to Reuters Estimates. The results include an impairment charge of $21.2 million, or 7 cents per share for the write-off of certain predevelopment projects that have been abandoned as well as for a property in operation.

FFO removes from net earnings the profit-reducing effect of depreciation, a noncash accounting item. Under Generally Accepted Accounting Principles, Simon posted net income of $145.2 million, or 64 cents per share.

For 2009, the Indianapolis-based company said it expected FFO of $6.40 to $6.60 per share. Analysts have forecast $6.57, according to Reuters Estimates.

Simon has a stake in 386 malls and high-end outlet centers and shopping centers in the United States, Europe and Asia. In the Bay State, the company operates such flagship properties as Copley Place Mall in Boston and the South Shore Plaza in Braintree. (Reuters)