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Press Release

Simon Property Group Reports Record Third Quarter 2018 Results And Raises Full Year 2018 Guidance

INDIANAPOLIS, Oct. 25, 2018 /PRNewswire/ -- Simon, a global leader in premier shopping, dining and entertainment destinations, today reported results for the quarter ended September 30, 2018.

Simon (PRNewsfoto/Simon)

Results for the Quarter

  • Net income attributable to common stockholders was $556.3 million, or $1.80 per diluted share, as compared to $513.8 million, or $1.65 per diluted share, in the prior year period.
  • Funds from Operations ("FFO") was $1.086 billion, or $3.05 per diluted share, as compared to $1.035 billion, or $2.89 per diluted share, in the prior year period, an increase of 5.5% per diluted share.

Results for the Nine Months

  • Net income attributable to common stockholders was $1.724 billion, or $5.57 per diluted share, as compared to $1.374 billion, or $4.41 per diluted share, in the prior year period.
  • FFO was $3.173 billion, or $8.90 per diluted share, as compared to $2.905 billion, or $8.09 per diluted share, in the prior year period, a 10.0% increase per diluted share.

"We produced another excellent quarter highlighted by strong financial and operational performance, the very successful openings of Denver Premium Outlets and the expansion of Shisui Premium Outlets, and another increase to our full-year 2018 guidance," said David Simon, Chairman and CEO.    

U.S. Malls and Premium Outlets Operating Statistics

  • Reported retailer sales per square foot for the trailing 12-months ended September 30, 2018 was $650, an increase of 4.5%.
  • Occupancy was 95.5% at September 30, 2018.
  • Base minimum rent per square foot was $53.88 at September 30, 2018, an increase of 2.8% compared to the prior year period.
  • Leasing spread per square foot for the trailing 12-months ended September 30, 2018 was $7.59, an increase of 13.9%.

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

Total portfolio NOI growth for the nine months ended September 30, 2018 was 4.1%.  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 nine months ended September 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 8.1% increase year-over-year.  The dividend will be payable on November 30, 2018 to shareholders of record on November 16, 2018.  The Company will pay $7.90 per share in common stock dividends in 2018, a 10.5% increase year-over-year.

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 December 31, 2018 to shareholders of record on December 17, 2018. 

Development Activity

On September 27, 2018, we opened Denver Premium Outlets (Thornton, CO), a 330,000 square-foot LEED-certified center featuring a dynamic mix of merchandise, amenities and experiences.  Simon owns 100% of this center. 

During the quarter, the 68,000 square-foot, phase three expansion of Shisui Premium Outlets opened featuring new fashion and sports brands, in vogue cafes and an outdoor garden area.  Simon owns 40% of this center. 

Construction continues on three new international development projects including:

  • Queretaro Premium Outlets (Queretaro, Mexico); scheduled to open in spring 2019. Simon owns a 50% interest in this project.
  • Malaga Designer Outlet (Malaga, Spain); scheduled to open in summer 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, The Shops at Riverside (Hackensack, NJ) and Southdale Center (Edina (Minneapolis), MN). 

During the third quarter, construction started on significant expansion projects at Paju Premium Outlets (Seoul, South Korea) and Tosu Premium Outlets (Kyushu, Japan). 

Subsequent to quarter end, construction started on a transformative mixed-use redevelopment at Phipps Plaza.  The dynamic, reimagined development is headlined by the arrival of Nobu Hotel and Restaurant Atlanta, along with a 90,000 square-foot Life Time healthy living and entertainment destination and a unique, curated dining experience.  A 13-story, 350,000 square-foot Class A office building, One Phipps Plaza, is yet another element of the redevelopment.    

Financing Activity

During the first nine months of 2018, the Company closed on 13 mortgage loans totaling approximately $3.0 billion, (U.S. dollar equivalent), of which Simon's share is approximately $1.3 billion.  The weighted average interest rate and weighted average term on these loans is 3.83% and 8.4 years, respectively. 

As of September 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.

2018 Guidance

The Company currently estimates net income to be within a range of $7.50 to $7.54 per diluted share for the year ending December 31, 2018 and that FFO will be within a range of $12.09 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

$7.50

$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 

$12.09

$12.13

Conference Call

Simon will hold a conference call to discuss the quarterly financial results today at 8:30 a.m. Eastern Time, Thursday, October 25, 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 November 1, 2018.  To access the audio replay, dial 1-855-859-2056 (international 404-537-3406) passcode 5597981. 

Supplemental Materials and Website

Supplemental information on our third 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, if any, of the United Kingdom's exit from 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 Nine Months


Ended September 30,


Ended September 30,


2018

2017


2018

2017







REVENUE:






Minimum rent

$ 864,514

$ 861,184


$ 2,581,792

$ 2,559,535

Overage rent

39,601

36,634


104,533

94,601

Tenant reimbursements

385,543

386,713


1,138,855

1,146,156

Management fees and other revenues

28,784

28,946


85,506

90,860

Other income

90,563

90,161


286,491

219,796

Total revenue

1,409,005

1,403,638


4,197,177

4,110,948







EXPENSES:






Property operating

119,021

118,807


335,420

330,226

Depreciation and amortization

316,175

317,037


953,309

950,265

Real estate taxes

119,315

111,953


344,950

332,027

Repairs and maintenance

23,632

25,352


73,507

72,654

Advertising and promotion

36,688

36,006


107,979

108,450

Provision for credit losses

4,984

2,895


13,915

10,765

Home and regional office costs

32,714

31,451


106,093

110,906

General and administrative

12,172

13,014


35,713

40,089

Other

26,913

57,055


69,293

102,678

Total operating expenses

691,614

713,570


2,040,179

2,058,060







OPERATING INCOME

717,391

690,068


2,156,998

2,052,888







Interest expense

(199,469)

(199,032)


(611,585)

(604,408)

Loss on extinguishment of debt

-

-


-

(128,618)

Income and other taxes

(10,118)

(14,511)


(26,475)

(16,981)

Income from unconsolidated entities

134,408

116,110


325,263

277,212

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






assets and interests in unconsolidated entities and impairment, net

-

-


144,949

4,989







CONSOLIDATED NET INCOME

642,212

592,635


1,989,150

1,585,082







Net income attributable to noncontrolling interests 

85,111

78,018


262,722

209,070

Preferred dividends

834

834


2,503

2,503







NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS

$ 556,267

$ 513,783


$ 1,723,925

$ 1,373,509













BASIC AND DILUTED EARNINGS PER COMMON SHARE:






Net income attributable to common stockholders

$ 1.80

$ 1.65


$ 5.57

$ 4.41







 

 

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






September 30,

December 31,


2018

2017

ASSETS:



Investment properties, at cost

$ 36,943,299

$ 36,393,464

Less - accumulated depreciation

12,638,409

11,935,949


24,304,890

24,457,515

Cash and cash equivalents

695,718

1,482,309

Tenant receivables and accrued revenue, net

722,730

742,672

Investment in unconsolidated entities, at equity

2,281,688

2,266,483

Investment in Klépierre, at equity

1,776,655

1,934,676

Deferred costs and other assets

1,298,012

1,373,983

Total assets

$ 31,079,693

$ 32,257,638




LIABILITIES:



Mortgages and unsecured indebtedness

$ 23,678,264

$ 24,632,463

Accounts payable, accrued expenses, intangibles, and deferred revenues

1,268,099

1,269,190

Cash distributions and losses in unconsolidated entities, at equity

1,534,550

1,406,378

Other liabilities

503,342

520,363

Total liabilities

26,984,255

27,828,394




Commitments and contingencies



Limited partners' preferred interest in the Operating Partnership and noncontrolling



redeemable interests in properties

197,937

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

42,830

43,077




Common stock, $0.0001 par value, 511,990,000 shares authorized, 320,411,571 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

9,736,720

9,614,748

Accumulated deficit

(4,896,754)

(4,782,173)

Accumulated other comprehensive loss

(118,593)

(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

3,383,616

3,686,168

Noncontrolling interests

513,885

552,596

Total equity

3,897,501

4,238,764

Total liabilities and equity

$ 31,079,693

$ 32,257,638

 

 

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




For the Three Months Ended
September 30,


For the Nine Months Ended
September 30,


2018

2017


2018

2017







REVENUE:






Minimum rent

$ 483,685

$ 466,601


$ 1,443,617

$ 1,383,361

Overage rent

52,417

52,560


163,144

150,376

Tenant reimbursements

222,153

215,774


666,068

644,020

Other income

73,259

74,208


232,747

210,287

Total revenue

831,514

809,143


2,505,576

2,388,044







OPERATING EXPENSES:






Property operating

151,873

145,288


437,718

410,301

Depreciation and amortization

161,964

156,682


488,098

469,884

Real estate taxes

60,654

54,668


197,497

185,228

Repairs and maintenance

20,035

18,811


63,968

59,512

Advertising and promotion

20,318

19,837


65,425

63,871

Provision for credit losses

1,300

1,063


13,378

7,629

Other

43,916

45,174


143,533

133,558

Total operating expenses

460,060

441,523


1,409,617

1,329,983







OPERATING INCOME

371,454

367,620


1,095,959

1,058,061







Interest expense

(163,855)

(149,746)


(505,540)

(438,393)

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

-

-


25,792

-







NET INCOME

$ 207,599

$ 217,874


$ 616,211

$ 619,668







Third-Party Investors' Share of Net Income

$ 101,750

$ 110,581


$ 304,174

$ 314,531







Our Share of Net Income

105,849

107,293


312,037

305,137

Amortization of Excess Investment (A)

(21,526)

(22,608)


(64,447)

(68,045)

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






Unconsolidated Entities, net

-

-


(9,672)

-

Income from Unconsolidated Entities (B)

$ 84,323

$ 84,685


$ 237,918

$ 237,092







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)

















September 30,

December 31,


2018

2017

Assets:



Investment properties, at cost

$ 18,632,287

$ 18,328,747

Less - accumulated depreciation

6,672,267

6,371,363


11,960,020

11,957,384

Cash and cash equivalents

1,013,153

956,084

Tenant receivables and accrued revenue, net

403,315

403,125

Deferred costs and other assets

395,144

355,585

Total assets

$ 13,771,632

$ 13,672,178




Liabilities and Partners' Deficit:



Mortgages

$ 15,231,476

$ 14,784,310

Accounts payable, accrued expenses, intangibles, and deferred revenue

903,599

1,033,674

Other liabilities

351,116

365,857

Total liabilities

16,486,191

16,183,841




Preferred units

67,450

67,450

Partners' deficit

(2,782,009)

(2,579,113)

Total liabilities and partners' deficit

$ 13,771,632

$ 13,672,178




Our Share of:



Partners' deficit

$ (1,204,237)

$ (1,144,620)

Add: Excess Investment (A)

1,614,277

1,733,063

Our net Investment in unconsolidated entities, at equity

$ 410,040

$ 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 Nine Months Ended






September 30,


September 30,






2018


2017


2018


2017













Consolidated Net Income (D)


$               642,212


$           592,635


$         1,989,150


$      1,585,082

Adjustments to Arrive at FFO:






















Depreciation and amortization from consolidated 









     properties 



313,245


313,194


944,615


939,468


Our share of depreciation and amortization from









     unconsolidated entities, including Klépierre and HBS

131,573


134,998


403,777


401,692


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









assets and interests in unconsolidated entities and impairment, net

-


-


(144,949)


(4,989)


Unrealized change in fair value of equity instruments

5,452


-


(1,212)


-


Net (income) loss attributable to noncontrolling interest holders in









     properties



(497)


550


(684)


721


Noncontrolling interests portion of depreciation and amortization

(4,380)


(4,605)


(13,564)


(12,821)


Preferred distributions and dividends

(1,313)


(1,313)


(3,939)


(3,939)

FFO of the Operating Partnership (E)

$            1,086,292


$        1,035,459


$         3,173,194


$      2,905,214

























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








Diluted net income per share


$                    1.80


$                1.65


$                 5.57


$              4.41


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

1.23


1.24


3.74


3.69


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









assets and interests in unconsolidated entities and impairment, net

-


-


(0.41)


(0.01)


Unrealized change in fair value of equity instruments

0.02


-


-


-

Diluted FFO per share (F)


$                    3.05


$                2.89


$                 8.90


$              8.09













Details for per share calculations:





















FFO of the Operating Partnership (E)

$            1,086,292


$        1,035,459


$         3,173,194


$      2,905,214

Diluted FFO allocable to unitholders

(142,710)


(136,632)


(416,694)


(382,660)

Diluted FFO allocable to common stockholders (G)

$               943,582


$           898,827


$         2,756,500


$      2,522,554













Basic and Diluted weighted average shares outstanding

309,294


310,853


309,740


311,740

Weighted average limited partnership units outstanding

46,779


47,263


46,822


47,290













Basic and Diluted weighted average shares and units outstanding

356,073


358,116


356,562


359,030













Basic and Diluted FFO per Share (F)

$                    3.05


$                2.89


$                 8.90


$              8.09

    Percent Change



5.5%




10.0%







































 

 

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 Footnote 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 $1.2 million and $2.4 million for the three months ended September 30, 2018 and 2017, respectively, and $3.9 million and $10.1 million for the nine months ended September 30, 2018 and 2017, respectively. 














-

Straight-line adjustments increased income by $6.8 million and $11.8 million for the three months ended September 30, 2018 and 2017, respectively, and $21.8 million and $27.1 million for the nine months ended September 30, 2018 and 2017, respectively. 














-

Amortization of fair market value of leases from acquisitions increased income by $0.6 million and $1.4 million for the three months ended September 30, 2018 and 2017, respectively, and $3.0 million and $4.6 million for the nine months ended September 30, 2018 and 2017, respectively. 














(E)

Includes a loss on the extinguishment of debt of $128.6 million for the nine months ended September 30, 2017.



(F)

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

 

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SOURCE Simon

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