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Simon Property Group Reports Record Second Quarter 2018 Results And Raises Quarterly Dividend And Full Year 2018 Guidance

INDIANAPOLIS, July 30, 2018 /PRNewswire/ -- Simon, a global leader in premier shopping, dining and entertainment destinations, today reported results for the quarter ended June 30, 2018.

Simon (PRNewsfoto/Simon)

Results for the Quarter

  • Net income attributable to common stockholders was $547.0 million, or $1.77 per diluted share, as compared to $382.0 million, or $1.23 per diluted share, in the prior year period. Results for the second quarter 2017 included a charge of $0.36 per diluted share related to the early redemption of certain senior notes of Simon Property Group, L.P.
  • Funds from Operations ("FFO") was $1.061 billion, or $2.98 per diluted share, as compared to $884.7 million, or $2.47 per diluted share, in the prior year period, a 20.6% increase. FFO in the second quarter 2017 includes the aforementioned charge related to the redemption of certain of our senior notes.

Results for the Six Months

  • Net income attributable to common stockholders was $1.168 billion, or $3.77 per diluted share, as compared to $859.7 million, or $2.75 per diluted share, in the prior year period. Results for the six months ended 2018 include net gains of $144.9 million, or $0.41 per diluted share, primarily related to disposition activity. Results for the six months ended 2017 include the $0.36 per diluted share charge on the extinguishment of debt.
  • FFO was $2.087 billion, or $5.85 per diluted share, as compared to $1.870 billion, or $5.20 per diluted share, in the prior year period, a 12.5% increase. FFO for the six months ended 2017 includes the aforementioned charge on the extinguishment of debt.

"This was an excellent quarter for our Company, with strong financial and operational performance and the successful opening of our fourth outlet center in Canada," said David Simon, Chairman and Chief Executive Officer.  "Based upon our results to date and expectations for the remainder of 2018, today, we raised our quarterly dividend and are again increasing our full-year 2018 guidance."  

U.S. Malls and Premium Outlets Operating Statistics

  • Reported retailer sales per square foot for the trailing 12-months ended June 30, 2018 was $646, an increase of 4.6%.
  • Occupancy was 94.7% at June 30, 2018.
  • Base minimum rent per square foot was $53.84 at June 30, 2018, an increase of 3.3% compared to the prior year period.
  • Leasing spread per square foot for the trailing 12-months ended June 30, 2018 was $7.32, an increase of 10.7%.

Portfolio Net Operating Income ("NOI") and Comparable Property NOI

Total portfolio NOI growth for the six months ended June 30, 2018 was 4.5%.  Total portfolio NOI includes comparable property NOI, NOI from new development, redevelopment, expansion and acquisitions, NOI from international properties and our share of NOI from investments.  Comparable property NOI growth for the six months ended June 30, 2018 was 2.3%.      

Dividends

Today, Simon's Board of Directors declared a quarterly common stock dividend of $2.00 per share.  This is an 11.1% increase year-over-year.  The dividend will be payable on August 31, 2018 to shareholders of record on August 17, 2018. 

Simon's Board of Directors also declared the quarterly dividend on its 8 3/8% Series J Cumulative Redeemable Preferred Stock (NYSE: SPGPrJ) of $1.046875 per share, payable on September 28, 2018 to shareholders of record on September 14, 2018. 

Development Activity

On May 2, 2018, Premium Outlet Collection Edmonton International Airport (Edmonton, Alberta, Canada) opened with 424,000 square feet of high-quality, name brand stores.  Simon owns a 50% interest in this center. 

Construction continues on four new development projects including:

  • Denver Premium Outlets (Thornton, Colorado); scheduled to open in September 2018. Simon owns 100% of this project.
  • Queretaro Premium Outlets (Queretaro, Mexico); scheduled to open in December 2018. Simon owns a 50% interest in this project.
  • Malaga Designer Outlet (Malaga, Spain); scheduled to open in spring 2019. Simon owns a 46% interest in this project.
  • Cannock Designer Outlet (Cannock, United Kingdom); scheduled to open in spring 2020. Simon owns a 20% interest in this project.

Construction also continues on significant redevelopment and expansion projects at other properties including Town Center at Boca Raton, Toronto Premium Outlets and Southdale Center (Edina (Minneapolis), MN). 

At quarter-end, redevelopment and expansion projects, including the addition of new anchors, were underway at properties in the U.S., Canada, Europe and Asia. 

During the second quarter, construction started on significant expansion projects at Vancouver Designer Outlet (Vancouver, British Columbia, Canada) and Ashford Designer Outlet (Kent, United Kingdom). 

Financing Activity

During the first six months of 2018, the Company closed on eight mortgage loans totaling approximately $2.4 billion, (U.S. dollar equivalent), of which Simon's share is approximately $850 million.  The weighted average interest rate and weighted average term on these loans is 3.98% and 8.9 years, respectively. 

As of June 30, 2018, Simon had more than $7.0 billion of liquidity consisting of cash on hand, including its share of joint venture cash, and available capacity under its revolving credit facilities.

Common Stock Repurchase Program

During the quarter ended June 30, 2018, the Company repurchased 514,659 shares of its common stock.

2018 Guidance

The Company currently estimates net income to be within a range of $7.46 to $7.54 per diluted share for the year ending December 31, 2018 and that FFO will be within a range of $12.05 to $12.13 per diluted share.        

The following table provides the reconciliation for the expected range of estimated net income attributable to common stockholders per diluted share to estimated FFO per diluted share:

For the year ending December 31, 2018





Low
End


High
End

Estimated net income attributable to common stockholders 
     per diluted share

$7.46


$7.54

Depreciation and amortization including Simon's share 
     of unconsolidated entities    

5.00


5.00

Gain upon acquisition of controlling interests, sale or disposal

     of, or recovery on, assets and interests in unconsolidated 
     entities and impairment, net 

(0.41)


(0.41)

Estimated FFO per diluted share

$12.05


$12.13

Conference Call

Simon will hold a conference call to discuss the quarterly financial results today at 8:30 a.m. Eastern Time, Monday, July 30, 2018.  A live webcast of the conference call will be accessible in listen-only mode at investors.simon.com.  An audio replay of the conference call will be available until August 6, 2018.  To access the audio replay, dial 1-855-859-2056 (international 404-537-3406) passcode 5187818. 

Supplemental Materials and Website

Supplemental information on our second quarter 2018 performance is available at investors.simon.com. This information has also been furnished to the SEC in a current report on Form 8-K.

We routinely post important information online on our investor relations website, investors.simon.com. We use this website, press releases, SEC filings, quarterly conference calls, presentations and webcasts to disclose material, non-public information in accordance with Regulation FD. We encourage members of the investment community to monitor these distribution channels for material disclosures.  Any information accessed through our website is not incorporated by reference into, and is not a part of, this document.

Non-GAAP Financial Measures

This press release includes FFO, FFO per share, portfolio net operating income growth and comparable property net operating income growth, which are financial performance measures not defined by generally accepted accounting principles in the United States ("GAAP"). Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in this press release and in Simon's supplemental information for the quarter. FFO and comparable property net operating income growth are financial performance measures widely used in the REIT industry. Our definitions of these non-GAAP measures may not be the same as similar measures reported by other REITs.

Forward-Looking Statements

Certain statements made in this press release may be deemed "forward‑looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company believes the expectations reflected in any forward‑looking statements are based on reasonable assumptions, the Company can give no assurance that its expectations will be attained, and it is possible that the Company's actual results may differ materially from those indicated by these forward‑looking statements due to a variety of risks, uncertainties and other factors. Such factors include, but are not limited to: changes in economic and market conditions that may adversely affect the general retail environment; the potential loss of anchor stores or major tenants; the inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise; decreases in market rental rates; the intensely competitive market environment in the retail industry; the inability to lease newly developed properties and renew leases and relet space at existing properties on favorable terms; risks related to international activities, including, without limitation, the impact of the United Kingdom's vote to leave the European Union; changes to applicable laws or regulations or the interpretation thereof; risks associated with the acquisition, development, redevelopment, expansion, leasing and management of properties; general risks related to real estate investments, including the illiquidity of real estate investments; the impact of our substantial indebtedness on our future operations; any disruption in the financial markets that may adversely affect our ability to access capital for growth and satisfy our ongoing debt service requirements; any change in our credit rating; changes in market rates of interest and foreign exchange rates for foreign currencies; changes in the value of our investments in foreign entities; our ability to hedge interest rate and currency risk; our continued ability to maintain our status as a REIT; changes in tax laws or regulations that result in adverse tax consequences; risks relating to our joint venture properties; environmental liabilities; changes in insurance costs, the availability of comprehensive insurance coverage; security breaches that could compromise our information technology or infrastructure; natural disasters; the potential for terrorist activities; and the loss of key management personnel. The Company discusses these and other risks and uncertainties under the heading "Risk Factors" in its annual and quarterly periodic reports filed with the SEC.  The Company may update that discussion in its periodic reports, but except as required by law, the Company undertakes no duty or obligation to update or revise these forward-looking statements, whether as a result of new information, future developments, or otherwise.

About Simon
Simon is a global leader in the ownership of premier shopping, dining, entertainment and mixed-use destinations and an S&P 100 company (Simon Property Group, NYSE: SPG). Our properties across North America, Europe and Asia provide community gathering places for millions of people every day and generate billions in annual sales. For more information, visit simon.com.

 

Simon Property Group, Inc.
Unaudited Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)





For the Three Months


For the Six Months


Ended June 30,


Ended June 30,


2018

2017


2018

2017







REVENUE:






Minimum rent

$ 857,106

$ 851,552


$1,717,277

$1,698,350

Overage rent

31,942

29,764


64,932

57,967

Tenant reimbursements

372,949

380,527


753,312

759,442

Management fees and other revenues

28,541

31,367


56,722

61,914

Other income

97,820

68,338


195,929

129,638

Total revenue

1,388,358

1,361,548


2,788,172

2,707,311







EXPENSES:






Property operating

102,951

107,371


216,400

211,419

Depreciation and amortization

320,198

322,396


637,134

633,228

Real estate taxes

111,449

113,415


225,635

220,073

Repairs and maintenance

22,191

21,700


49,875

47,301

Advertising and promotion

36,491

36,496


71,291

72,444

Provision for credit losses

3,299

2,659


8,931

7,870

Home and regional office costs

32,316

36,476


73,380

79,455

General and administrative

10,913

13,074


23,542

27,075

Other

10,875

21,812


42,377

45,627

Total operating expenses

650,683

675,399


1,348,565

1,344,492







OPERATING INCOME

737,675

686,149


1,439,607

1,362,819







Interest expense

(206,624)

(207,174)


(412,115)

(405,373)

Loss on extinguishment of debt

-

(128,618)


-

(128,618)

Income and other taxes

(10,137)

(5,990)


(16,357)

(2,470)

Income from unconsolidated entities

100,828

92,017


190,854

161,101

Gain upon acquisition of controlling interests, sale or disposal of, or recovery on,






  assets and interests in unconsolidated entities and impairment, net

9,672

4,989


144,949

4,989







CONSOLIDATED NET INCOME

631,414

441,373


1,346,938

992,448







Net income attributable to noncontrolling interests 

83,576

58,549


177,611

131,053

Preferred dividends

834

834


1,669

1,669







NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS

$ 547,004

$ 381,990


$ 1,167,658

$ 859,726













BASIC AND DILUTED EARNINGS PER COMMON SHARE:






Net income attributable to common stockholders

$ 1.77

$ 1.23


$ 3.77

$ 2.75

 

 

Simon Property Group, Inc.
Unaudited Consolidated Balance Sheets
(Dollars in thousands, except share amounts)








June 30,

December 31,


2018

2017

ASSETS:



Investment properties, at cost

$ 36,429,603

$ 36,393,464

Less - accumulated depreciation

12,354,966

11,935,949


24,074,637

24,457,515

Cash and cash equivalents

714,247

1,482,309

Tenant receivables and accrued revenue, net

681,551

742,672

Investment in unconsolidated entities, at equity

2,302,833

2,266,483

Investment in Klépierre, at equity

1,772,155

1,934,676

Deferred costs and other assets

1,297,717

1,373,983

Total assets

$ 30,843,140

$ 32,257,638




LIABILITIES:



Mortgages and unsecured indebtedness

$ 23,505,002

$ 24,632,463

Accounts payable, accrued expenses, intangibles, and deferred revenues

1,230,775

1,269,190

Cash distributions and losses in unconsolidated entities, at equity

1,531,136

1,406,378

Other liabilities

499,598

520,363

Total liabilities

26,766,511

27,828,394




Commitments and contingencies



Limited partners' preferred interest in the Operating Partnership and noncontrolling



   redeemable interests in properties

198,001

190,480




EQUITY:



Stockholders' Equity



Capital stock (850,000,000 total shares authorized,  $ 0.0001 par value, 238,000,000



  shares of excess common stock, 100,000,000 authorized shares of preferred stock):






Series J 8 3/8% cumulative redeemable preferred stock, 1,000,000 shares authorized,



  796,948 issued and outstanding with a liquidation value of $39,847

42,912

43,077




Common stock, $ 0.0001 par value, 511,990,000 shares authorized, 320,324,839 and



  320,322,774 issued and outstanding, respectively

32

32




Class B common stock, $ 0.0001 par value, 10,000 shares authorized, 8,000



  issued and outstanding

-

-




Capital in excess of par value

9,657,810

9,614,748

Accumulated deficit

(4,833,826)

(4,782,173)

Accumulated other comprehensive loss

(115,285)

(110,453)

Common stock held in treasury, at cost, 11,115,156 and 9,163,920 shares, respectively

(1,380,619)

(1,079,063)

  Total stockholders' equity

3,371,024

3,686,168

Noncontrolling interests

507,604

552,596

  Total equity

3,878,628

4,238,764

  Total liabilities and equity

$ 30,843,140

$ 32,257,638

 

 

Simon Property Group, Inc.
Unaudited Joint Venture Combined Statements of Operations
(Dollars in thousands)










For the Three Months Ended
June 30,


For the Six Months Ended
June 30,


2018

2017


2018

2017







REVENUE:






Minimum rent

$ 483,976

$ 465,705


$ 959,931

$ 916,760

Overage rent

51,067

46,447


110,728

97,816

Tenant reimbursements

220,426

212,465


443,916

428,246

Other income

78,378

71,753


159,487

136,079

Total revenue

833,847

796,370


1,674,062

1,578,901







OPERATING EXPENSES:






Property operating

139,553

132,028


285,845

265,013

Depreciation and amortization

166,299

159,748


326,134

313,202

Real estate taxes

68,576

63,977


136,843

130,560

Repairs and maintenance

20,736

20,471


43,933

40,701

Advertising and promotion

20,884

21,836


45,108

44,034

Provision for credit losses

5,577

2,789


12,078

6,566

Other

49,885

45,030


99,617

88,384

Total operating expenses

471,510

445,879


949,558

888,460







OPERATING INCOME

362,337

350,491


724,504

690,441







Interest expense

(190,751)

(146,440)


(341,684)

(288,647)

Gain on sale or disposal of, or recovery on, assets and interests in unconsolidated entities, net

25,792

-


25,792

-







NET INCOME

$ 197,378

$ 204,051


$ 408,612

$ 401,794







Third-Party Investors' Share of Net Income

$ 96,240

$ 104,265


$ 202,424

$ 203,950







Our Share of Net Income

101,138

99,786


206,188

197,844

Amortization of Excess Investment (A)

(21,395)

(22,979)


(42,921)

(45,436)

Our Share of Gain on Sale or Disposal of, or Recovery on, Assets and Interests in






  Unconsolidated Entities, net

(9,672)

-


(9,672)

-







Income from Unconsolidated Entities (B)

$ 70,071

$ 76,807


$ 153,595

$ 152,408







Note: The above financial presentation does not include any information related to our investments in Klépierre S.A. 
          ("Klépierre") and HBS Global Properties ("HBS"). For additional information, see footnote B.

 

 

Simon Property Group, Inc.

Unaudited Joint Venture Combined Balance Sheets

(Dollars in thousands)













June 30,

December 31,


2018

2017

Assets:



Investment properties, at cost

$ 18,580,295

$ 18,328,747

Less - accumulated depreciation

6,618,858

6,371,363


11,961,437

11,957,384

Cash and cash equivalents

970,605

956,084

Tenant receivables and accrued revenue, net

386,980

403,125

Deferred costs and other assets

389,710

355,585

Total assets

$ 13,708,732

$ 13,672,178




Liabilities and Partners' Deficit:



Mortgages

$ 15,252,252

$ 14,784,310

Accounts payable, accrued expenses, intangibles, and deferred revenue

859,475

1,033,674

Other liabilities

386,151

365,857

Total liabilities

16,497,878

16,183,841




Preferred units

67,450

67,450

Partners' deficit

(2,856,596)

(2,579,113)

Total liabilities and partners' deficit

$ 13,708,732

$ 13,672,178




Our Share of:



Partners' deficit

$ (1,240,838)

$ (1,144,620)

Add: Excess Investment (A)

1,693,800

1,733,063

Our net Investment in unconsolidated entities, at equity

$ 452,962

$ 588,443




Note: The above financial presentation does not include any information related to our investments in Klépierre and 
          HBS Global Properties. For additional information, see footnote B.


 

 

Simon Property Group, Inc.

Unaudited Reconciliation of Non-GAAP Financial Measures (C)

(Amounts in thousands, except per share amounts)













Reconciliation of Consolidated Net Income to FFO 














For the Three Months Ended


For the Six Months Ended






June 30,


June 30,






2018


2017


2018


2017













Consolidated Net Income (D)


$               631,414


$           441,373


$         1,346,938


$         992,448

Adjustments to Arrive at FFO:






















Depreciation and amortization from consolidated 









     properties 



317,364


318,585


631,370


626,273


Our share of depreciation and amortization from









     unconsolidated entities, including Klépierre and HBS

137,279


135,476


272,204


266,694


Gain upon acquisition of controlling interests, sale or disposal of, or recovery on,









assets and interests in unconsolidated entities and impairment, net

(9,672)


(4,989)


(144,949)


(4,989)


Unrealized change in fair value of equity instruments

(9,692)


-


(6,664)


-


Net (income) loss attributable to noncontrolling interest holders in









     properties



(279)


(74)


(186)


170


Noncontrolling interests portion of depreciation and amortization

(4,537)


(4,315)


(9,185)


(8,215)


Preferred distributions and dividends

(1,313)


(1,313)


(2,626)


(2,626)

FFO of the Operating Partnership (E)

$            1,060,564


$           884,743


$         2,086,902


$      1,869,755

























Diluted net income per share to diluted FFO per share reconciliation:








Diluted net income per share


$                    1.77


$                1.23


$                 3.77


$              2.75


Depreciation and amortization from consolidated properties









     and our share of depreciation and amortization from unconsolidated 









     entities, including Klépierre and HBS, net of noncontrolling 









     interests portion of depreciation and amortization

1.27


1.25


2.51


2.46


Gain upon acquisition of controlling interests, sale or disposal of, or recovery on,









assets and interests in unconsolidated entities and impairment, net

(0.03)


(0.01)


(0.41)


(0.01)


Unrealized change in fair value of equity instruments

(0.03)


-


(0.02)


-

Diluted FFO per share (F)


$                    2.98


$                2.47


$                 5.85


$              5.20













Details for per share calculations:





















FFO of the Operating Partnership (E)

$            1,060,564


$           884,743


$         2,086,902


$      1,869,755

Diluted FFO allocable to unitholders

(139,426)


(116,599)


(273,985)


(246,028)

Diluted FFO allocable to common stockholders (G)

$               921,138


$           768,144


$         1,812,917


$      1,623,727













Basic and Diluted weighted average shares outstanding

309,355


311,579


309,966


312,191

Weighted average limited partnership units outstanding

46,827


47,287


46,845


47,304













Basic and Diluted weighted average shares and units outstanding

356,182


358,866


356,811


359,495













Basic and Diluted FFO per Share (F)

$                    2.98


$                2.47


$                 5.85


$              5.20

    Percent Change



20.6%




12.5%















 

 

Simon Property Group, Inc.

Footnotes to Unaudited Financial Information














Notes:  

























(A)

Excess investment represents the unamortized difference of our investment over equity in the underlying net assets of the related partnerships and joint ventures shown therein.  The Company generally amortizes excess investment over the life of the related properties.














(B)

The Unaudited Joint Venture Combined Statements of Operations do not include any operations or our share of net income or excess investment amortization related to our investments in Klépierre and HBS Global Properties.  Amounts included in Footnotes D below exclude our share of related activity for our investments in Klépierre and HBS Global Properties.  For further information on Klépierre, reference should be made to financial information in Klépierre's public filings and additional discussion and analysis in our Form 10-Q.














(C)

This report contains measures of financial or operating performance that are not specifically defined by GAAP, including FFO and FFO per share.  FFO is a performance measure that is standard in the REIT business.  We believe FFO provides investors with additional information concerning our operating performance and a basis to compare our performance with those of other REITs.  We also use these measures internally to monitor the operating performance of our portfolio. Our computation of these non-GAAP measures may not be the same as similar measures reported by other REITs.















We determine FFO based upon the definition set forth by the National Association of Real Estate Investment Trusts ("NAREIT"). We determine FFO to be our share of consolidated net income computed in accordance with GAAP, excluding real estate related depreciation and amortization, excluding gains and losses from extraordinary items, excluding gains and losses from the sale, disposal or property insurance recoveries of, or any impairment related to, previously depreciated retail operating properties, plus the allocable portion of FFO of unconsolidated joint ventures based upon economic ownership interest, and all determined on a consistent basis in accordance with GAAP. 















We have adopted NAREIT's clarification of the definition of FFO that requires it to include the effects of nonrecurring items not classified as extraordinary, cumulative effect of accounting changes, or a gain or loss resulting from the sale, disposal or property insurance recoveries of, or any impairment relating to, previously depreciated retail operating properties. We include in FFO gains and losses realized from the sale of land, outlot buildings, equity instruments, and investment holdings of non-retail real estate. However, you should understand that FFO does not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to net income determined in accordance with GAAP as a measure of operating performance, and is not an alternative to cash flows as a measure of liquidity.














(D)

Includes our share of: 























-

Gains on land sales of $1.4 million and $5.0 million for the three months ended June 30, 2018 and 2017, respectively, and $2.7 million and $7.7 million for the six months ended June 30, 2018 and 2017, respectively. 














-

Straight-line adjustments increased income by $6.4 million and $5.1 million for the three months ended June 30, 2018 and 2017, respectively, and $15.0 million and $15.3 million for the six months ended June 30, 2018 and 2017, respectively. 














-

Amortization of fair market value of leases from acquisitions increased income by $1.0 million and $1.5 million for the three months ended June 30, 2018 and 2017, respectively, and $2.4 million and $3.2 million for the six months ended June 30, 2018 and 2017, respectively. 














(E)

Includes a loss on the extinguishment of debt of $128.6 million for the three and six months ended June 30, 2017.



(F)

Includes Basic and Diluted FFO per share related to a loss on the extinguishment of debt of $0.36 for the three and six months ended June 30, 2017.














(G)

Includes Diluted FFO allocable to common stockholders related to a loss on the extinguishment of debt of $111.7 million for the three and six months ended June 30, 2017.

 

 

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SOURCE Simon

Tom Ward, 317-685-7330, Investors; Les Morris 317-263-7711, Media