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Press Release

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

INDIANAPOLIS, Feb. 1, 2019 /PRNewswire/ -- Simon, a global leader in premier shopping, dining and entertainment destinations, today reported results for the quarter and twelve months ended December 31, 2018.

Simon (PRNewsfoto/Simon)

Results for the Year

  • Net income attributable to common stockholders was $2.437 billion, or $7.87 per diluted share, as compared to $1.945 billion, or $6.24 per diluted share in 2017, a 26.1% increase per diluted share.
  • Funds from Operations ("FFO") was $4.325 billion, or $12.13 per diluted share, as compared to $4.021 billion, or $11.21 per diluted share in 2017, an 8.2% increase per diluted share.

Results for the Quarter

  • Net income attributable to common stockholders was $712.8 million, or $2.30 per diluted share, as compared to $571.1 million, or $1.84 per diluted share in 2017, a 25.0% increase per diluted share.
  • FFO was $1.151 billion, or $3.23 per diluted share, as compared to $1.115 billion, or $3.12 per diluted share, in the prior year period, an increase of 3.5% per diluted share.

"This was an excellent quarter and year for Simon Property Group, capped off by our twenty-fifth anniversary as a public company in December.  Over that 25-year period, we are proud to have delivered a total return to shareholders of 2,752%," said David Simon, Chairman and CEO.  "In 2018, we opened two new shopping destinations; delivered five significant property transformations and expansions; started construction on several redevelopments of former department store spaces; and importantly, our reported FFO per share for the year beat the top end of our initial guidance, and our 2018 dividend was 10.5% higher than in 2017."  

U.S. Malls and Premium Outlets Operating Statistics

  • Reported retailer sales per square foot was $661, an increase of 5.3%, for the trailing 12-months ended December 31, 2018.
  • Occupancy was 95.9% at December 31, 2018, compared to 95.6% at December 31, 2017.
  • Base minimum rent per square foot was $54.18 at December 31, 2018.
  • Leasing spread per square foot for the trailing 12-months ended December 31, 2018 was $7.75, an increase of 14.3%.

Portfolio Net Operating Income ("NOI") and Comparable Property NOI
Total portfolio NOI growth for the 12-months ended December 31, 2018 was 3.7%.  Total portfolio NOI includes NOI from comparable properties, new developments, redevelopments, expansions, acquisitions, international properties and our share of NOI from investments.  Comparable property NOI growth for the 12-months ended December 31, 2018 was 2.3%.      

Dividends
Today, Simon's Board of Directors declared a quarterly common stock dividend of $2.05 per share.  This is a 5.1% increase year-over-year.  The dividend will be payable on February 28, 2019 to shareholders of record on February 14, 2019. 

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 March 29, 2019 to shareholders of record on March 15, 2019. 

Development Activity
During the quarter, the 140,000 square-foot expansion of Toronto Premium Outlets opened adding enhanced amenities, elevated food offerings and more than 40 new, exciting brands.  Simon owns 50% of this center.  Also during the quarter, the 45,000 square-foot, phase III expansion of Johor Premium Outlets (Johor, Malaysia) opened.  Simon owns 50% of this center.

Construction continues on three new international development projects including:

  • Queretaro Premium Outlets (Queretaro, Mexico); scheduled to open in summer 2019. Simon owns a 50% interest in this project.
  • Malaga Designer Outlet (Malaga, Spain); scheduled to open in fall 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 other significant redevelopment and expansion projects including The Shops at Riverside (Hackensack, NJ), Southdale Center (Edina (Minneapolis), MN), Northshore Mall (Peabody (Boston), MA) and Paju Premium Outlets (Seoul, South Korea). 

Construction also started on five significant redevelopment projects of former department store spaces at Broadway Square, Cape Cod Mall, Midland Park Mall, Ocean County Mall and Phipps Plaza

Financing Activity
During 2018, the Company closed on 22 mortgage loans totaling approximately $3.2 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 3.69% and 8.1 years, respectively. 

As of December 31, 2018, Simon had more than $7.5 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 December 31, 2018, the Company repurchased 286,947 shares of its common stock.  The Company also redeemed 405,485 Limited Partnership units in cash.

2019 Guidance
The Company currently estimates net income to be within a range of $7.30 to $7.40 per diluted share for the year ending December 31, 2019 and that FFO will be within a range of $12.30 to $12.40 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, 2019





Low


High


End


End

Estimated net income attributable to common stockholders 
     per diluted share

$7.30


$7.40

Depreciation and amortization including Simon's share
     of unconsolidated entities

5.00


5.00





Estimated FFO per diluted share

$12.30


$12.40

Conference Call
Simon will hold a conference call to discuss the quarterly financial results today at 8:30 a.m. Eastern Time, Friday, February 1, 2019.  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 February 8, 2019.  To access the audio replay, dial 1-855-859-2056 (international 404-537-3406) passcode 1675707. 

Supplemental Materials and Website
Supplemental information on our fourth 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 Twelve Months


Ended December 31,


Ended December 31,


2018

2017


2018

2017







REVENUE:






Minimum rent

$ 906,730

$ 880,475


$ 3,488,522

$ 3,440,009

Overage rent

57,656

52,870


162,189

147,471

Tenant reimbursements

381,485

386,767


1,520,340

1,532,923

Management fees and other revenues

30,780

30,400


116,286

121,259

Other income

84,092

77,180


370,582

296,978

Total revenue

1,460,743

1,427,692


5,657,919

5,538,640







EXPENSES:






Property operating

115,216

112,951


450,636

443,177

Depreciation and amortization

329,145

325,187


1,282,454

1,275,452

Real estate taxes

112,790

107,976


457,740

440,003

Repairs and maintenance

26,081

24,247


99,588

96,900

Advertising and promotion

43,262

42,416


151,241

150,865

(Recovery of) provision for credit losses

(1,284)

539


12,631

11,304

Home and regional office costs

30,584

24,243


136,677

135,150

General and administrative

10,830

11,883


46,543

51,972

Other

40,030

28,798


109,322

131,477

Total operating expenses

706,654

678,240


2,746,832

2,736,300







OPERATING INCOME BEFORE OTHER ITEMS

754,089

749,452


2,911,087

2,802,340







Interest expense

(204,341)

(204,986)


(815,923)

(809,393)

Loss on extinguishment of debt

-

-


-

(128,618)

Income and other taxes

(10,422)

(6,362)


(36,898)

(23,343)

Income from unconsolidated entities

149,987

123,059


475,250

400,270

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






assets and interests in unconsolidated entities and impairment, net

143,879

(1,342)


288,827

3,647







CONSOLIDATED NET INCOME

833,192

659,821


2,822,343

2,244,903







Net income attributable to noncontrolling interests 

119,562

87,871


382,285

296,941

Preferred dividends

834

834


3,337

3,337







NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS

$ 712,796

$ 571,116


$ 2,436,721

$ 1,944,625













BASIC AND DILUTED EARNINGS PER COMMON SHARE:






Net income attributable to common stockholders

$ 2.30

$ 1.84


$ 7.87

$ 6.24







 

 

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







December 31,

December 31,


2018

2017

ASSETS:



Investment properties, at cost

$ 37,092,670

$ 36,393,464

Less - accumulated depreciation

12,884,539

11,935,949


24,208,131

24,457,515

Cash and cash equivalents

514,335

1,482,309

Tenant receivables and accrued revenue, net

763,815

742,672

Investment in unconsolidated entities, at equity

2,220,414

2,266,483

Investment in Klépierre, at equity

1,769,488

1,934,676

Deferred costs and other assets

1,210,040

1,373,983

Total assets

$ 30,686,223

$ 32,257,638




LIABILITIES:



Mortgages and unsecured indebtedness

$ 23,305,535

$ 24,632,463

Accounts payable, accrued expenses, intangibles, and deferred revenues

1,316,861

1,269,190

Cash distributions and losses in unconsolidated entities, at equity

1,536,111

1,406,378

Other liabilities

500,597

520,363

Total liabilities

26,659,104

27,828,394




Commitments and contingencies



Limited partners' preferred interest in the Operating Partnership and noncontrolling



redeemable interests in properties

230,163

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

42,748

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

9,700,418

9,614,748

Accumulated deficit

(4,893,069)

(4,782,173)

Accumulated other comprehensive loss

(126,017)

(110,453)

Common stock held in treasury, at cost, 11,402,103 and 9,163,920 shares, respectively

(1,427,431)

(1,079,063)

Total stockholders' equity

3,296,681

3,686,168

Noncontrolling interests

500,275

552,596

Total equity

3,796,956

4,238,764

Total liabilities and equity

$ 30,686,223

$ 32,257,638

 

 

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




















For the Three Months Ended

December 31,


For the Twelve Months Ended

 December 31,


2018

2017


2018

2017







REVENUE:






Minimum rent

$ 505,906

$ 485,253


$ 1,949,523

$ 1,868,613

Overage rent

67,001

60,533


230,145

210,909

Tenant reimbursements

213,974

216,759


880,042

860,778

Other income

93,828

80,225


326,575

290,515

Total revenue

880,709

842,770


3,386,285

3,230,815







OPERATING EXPENSES:






Property operating

153,203

141,584


590,921

551,885

Depreciation and amortization

164,870

170,402


652,968

640,286

Real estate taxes

62,070

60,419


259,567

245,646

Repairs and maintenance

23,441

21,797


87,408

81,309

Advertising and promotion

21,924

22,609


87,349

86,480

Provision for (recovery of) credit losses

664

(984)


14,042

6,645

Other

43,757

50,477


187,292

184,037

Total operating expenses

469,929

466,304


1,879,547

1,796,288







OPERATING INCOME BEFORE OTHER ITEMS

410,780

376,466


1,506,738

1,434,527







Interest expense

(158,154)

(154,669)


(663,693)

(593,062)

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

7,575

(2,239)


33,367

(2,239)







NET INCOME

$ 260,201

$ 219,558


$ 876,412

$ 839,226







Third-Party Investors' Share of Net Income

$ 132,593

$ 110,001


$ 436,767

$ 424,533







Our Share of Net Income

127,608

109,557


439,645

414,693

Amortization of Excess Investment (A)

(20,804)

(21,760)


(85,252)

(89,804)

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






Unconsolidated Entities, net

(2,841)

1,342


(12,513)

1,342

Income from Unconsolidated Entities (B)

$ 103,963

$ 89,139


$ 341,880

$ 326,231







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)





December 31,

December 31,


2018

2017

Assets:



Investment properties, at cost

$ 18,807,449

$ 18,328,747

Less - accumulated depreciation

6,834,633

6,371,363


11,972,816

11,957,384

Cash and cash equivalents

1,076,398

956,084

Tenant receivables and accrued revenue, net

445,148

403,125

Deferred costs and other assets

390,818

355,585

Total assets

$ 13,885,180

$ 13,672,178




Liabilities and Partners' Deficit:



Mortgages

$ 15,235,415

$ 14,784,310

Accounts payable, accrued expenses, intangibles, and deferred revenue

976,311

1,033,674

Other liabilities

344,205

365,857

Total liabilities

16,555,931

16,183,841




Preferred units

67,450

67,450

Partners' deficit

(2,738,201)

(2,579,113)

Total liabilities and partners' deficit

$ 13,885,180

$ 13,672,178




Our Share of:



Partners' deficit

$ (1,168,216)

$ (1,144,620)

Add: Excess Investment (A)

1,594,198

1,733,063

Our net Investment in unconsolidated entities, at equity

$ 425,982

$ 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 Twelve Months Ended






December 31,


December 31,






2018


2017


2018


2017













Consolidated Net Income (D)


$               833,192


$           659,821


$         2,822,343


$      2,244,903

Adjustments to Arrive at FFO:






















Depreciation and amortization from consolidated 









     properties 



326,273


321,397


1,270,888


1,260,865


Our share of depreciation and amortization from









     unconsolidated entities, including Klépierre and HBS

129,818


139,026


533,595


540,718


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









assets and interests in unconsolidated entities and impairment, net (E)

(137,263)


1,342


(282,211)


(3,647)


Unrealized change in fair value of equity instruments

16,423


-


15,212


-


Net income attributable to noncontrolling interest holders in









     properties



(10,642)


(734)


(11,327)


(13)


Noncontrolling interests portion of depreciation and amortization

(5,082)


(4,248)


(18,647)


(17,069)


Preferred distributions and dividends

(1,313)


(1,313)


(5,252)


(5,252)

FFO of the Operating Partnership (G)

$            1,151,406


$        1,115,291


$         4,324,601


$      4,020,505

























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








Diluted net income per share


$                    2.30


$                1.84


$                 7.87


$              6.24


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


1.28


5.01


4.98


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









assets and interests in unconsolidated entities and impairment, net (F)

(0.39)


-


(0.79)


(0.01)


Unrealized change in fair value of equity instruments

0.05


-


0.04


-

Diluted FFO per share (H)


$                    3.23


$                3.12


$               12.13


$            11.21













Details for per share calculations:





















FFO of the Operating Partnership (G)

$            1,151,406


$        1,115,291


$         4,324,601


$      4,020,505

Diluted FFO allocable to unitholders

(152,122)


(146,935)


(568,817)


(529,595)

Diluted FFO allocable to common stockholders (I)

$               999,284


$           968,356


$         3,755,784


$      3,490,910













Basic and Diluted weighted average shares outstanding

309,294


310,856


309,627


311,517

Weighted average limited partnership units outstanding

47,102


47,169


46,893


47,260













Basic and Diluted weighted average shares and units outstanding

356,396


358,025


356,520


358,777













Basic and Diluted FFO per Share (H)

$                    3.23


$                3.12


$               12.13


$            11.21

    Percent Change



3.5%




8.2%



























 

 

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-K.














(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 $2.4 million and $2.2 million for the three months ended December 31, 2018 and 2017, respectively, and $6.3 million and $12.3 million for the twelve months ended December 31, 2018 and 2017, respectively. 














-

Straight-line adjustments increased income by $6.7 million and $7.4 million for the three months ended December 31, 2018 and 2017, respectively, and $28.5 million and $34.5 million for the twelve months ended December 31, 2018 and 2017, respectively. 














-

Amortization of fair market value of leases from acquisitions increased income by $1.4 million and $1.4 million for the three months ended December 31, 2018 and 2017, respectively, and $4.4 million and $6.0 million for the twelve months ended December 31, 2018 and 2017, respectively. 














(E)

Gain upon acquisition of controlling interests, sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment for the three and twelve months ended December 31, 2018 was $143.9 million and $288.8 million, respectively. Noncontrolling interest portion of the gain for the three and twelve months ended December 31, 2018 was $6.6 million.














(F)

Includes noncontrolling interests gain upon acquisition of controlling interests, sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment of $0.02 per share for the three and twelve months ended December 31, 2018.















(G)

Includes a loss on the extinguishment of debt of $128.6 million for the twelve months ended December 31, 2017.



(H)

Includes Basic and Diluted FFO per share related to a loss on the extinguishment of debt of $0.36 for the twelve months ended December 31, 2017.














(I)

Includes Diluted FFO allocable to common stockholders related to a loss on the extinguishment of debt of $111.7 million for the twelve months ended December 31, 2017.

 

 

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SOURCE Simon

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