Simon Property Group Announces Fourth Quarter Results and Quarterly Dividends and Provides 2009 Guidance
INDIANAPOLIS, Jan. 30 /PRNewswire-FirstCall/ -- Simon Property Group, Inc. (the "Company" or "Simon") (NYSE: SPG) today announced results for the quarter and twelve months ended December 31, 2008:
-- Funds from operations ("FFO") for the quarter increased 6.5% to $540.5 million from $507.7 million in the fourth quarter of 2007. On a diluted per share basis the increase was 5.7% to $1.86 from $1.76 in 2007. Included in fourth quarter 2008 FFO was an impairment charge of $21.2 million, or $0.07 per share, related to the write-off of certain predevelopment projects that have been abandoned and the write-down of an operating asset to its estimated net realizable value.
-- FFO for the twelve months increased 9.5% to $1.852 billion from $1.692 billion in 2007. On a diluted per share basis the increase was 8.8% to $6.42 from $5.90 in 2007.
-- Net income available to common stockholders for the quarter increased 28.6% to $145.2 million from $112.9 million in the fourth quarter of 2007. On a diluted per share basis the increase was 25.5% to $0.64 from $0.51 in 2007.
-- Net income available to common stockholders for the twelve months decreased 3.1% to $422.5 million from $436.2 million in 2007. On a diluted per share basis the decrease was 4.1% to $1.87 from $1.95 in 2007.
U.S. Portfolio Statistics(1)
As of As of
December 31, 2008 December 31, 2007 Change
Occupancy
Regional Malls(2) 92.4 % 93.5 % 110 basis point
decrease
Premium Outlet
Centers(R) (3) 98.9 % 99.7 % 80 basis point
decrease
Comparable Sales per
Sq. Ft.
Regional Malls(4) $470 $491 4.3% decrease
Premium Outlet
Centers(3) $513 $504 1.8% increase
Average Rent per Sq.
Ft.
Regional Malls(2) $39.49 $37.09 6.5% increase
Premium Outlet
Centers(3) $27.65 $25.67 7.7% increase
(1) Statistics do not include the community/lifestyle center properties or
the Mills portfolio of assets.
(2) For mall stores.
(3) For all owned gross leasable area (GLA).
(4) For mall stores with less than 10,000 square feet.
"We are very pleased to report such strong performance, especially in these difficult economic times. It is a testament to our high quality portfolio and strong balance sheet that we delivered FFO growth of 8.8% for the year," said
Our Board of Directors has made the prudent decision to pay our quarterly dividend of
Dividends
Today the Company announced that its Board of Directors approved the declaration of a quarterly common stock dividend of
Paying 90% of the 2009 dividend in shares of SPG common stock allows SPG to satisfy its REIT taxable income distribution requirement while enhancing its already considerable financial flexibility and balance sheet strength.
In accordance with the provisions of
The Company expects the dividend to be a taxable dividend to its stockholders, without regard to whether a particular stockholder receives the dividend in the form of cash or shares, and reserves the right to pay the dividend entirely in cash.
The number of shares issued as a result of the dividend will be calculated based on the volume weighted average trading prices of the Company's common stock on
An information letter and election form will be mailed to stockholders of record promptly after
The Company also declared dividends on its two outstanding public issues of preferred stock:
-- 6% Series I Convertible Perpetual Preferred (NYSE: SPGPrI) dividend of
-- 8 3/8% Series J Cumulative Redeemable Preferred (NYSE: SPGPrJ) dividend of
2009 Guidance
After giving effect to the estimated impact of paying up to 90% of the Company's 2009 common stock dividends in common stock, the Company estimates that diluted FFO will be within a range of
The Company's 2009 guidance estimates are based upon its internal budgeting and planning process and management's view of current market and economic conditions, including those in the retail real estate business. The Company's expectations also reflect the weaker retail environment and weakened state of the U.S. economy, as well as the current dislocation in the U.S. capital markets.
The 2009 guidance assumes comparable property NOI growth for the following operating portfolios:
Regional Malls Flat to 1.0%
Premium Outlet Centers 3.0% to 5.0%
The 2009 guidance assumes an interest rate environment that is consistent with the current forward yield curves for one month LIBOR and the 10 Year U.S. Treasury note and makes certain assumptions on debt spreads. The guidance assumes no future acquisition or disposition activities other than the impact in 2009 from 2008 activity.
This guidance is a forward-looking statement and is subject to the risks and other factors described elsewhere in this release.
The following table provides the reconciliation of the range of estimated diluted net income available to common stockholders per share to estimated diluted FFO per share.
For the year ending December 31, 2009
Low High
End End
Estimated diluted net income available to
common stockholders per share $1.95 $2.15
Depreciation and amortization including our
share of joint ventures 4.56 4.56
Impact of additional dilutive securities (0.11) (0.11)
Estimated diluted FFO per share $6.40 $6.60
During the fourth quarter, the Company completed seven asset financings, generating
As of
U.S. New Development and Redevelopment Activity
On
The Company continues construction on the following development projects:
-- Cincinnati Premium Outlets, a 400,000 square foot upscale manufacturers' outlet center serving the greater
-- A 600,000 square foot Phase II expansion of The Domain in
During the fourth quarter, the Company completed significant redevelopment projects at Northshore Mall in the
Construction continues on two significant redevelopment projects:
-- Camarillo Premium Outlets-The Promenade - 220,000 square foot expansion of the upscale outlet center to be anchored by Saks Fifth Avenue Off 5th and Neiman
-- South Shore Plaza - Addition of Nordstrom opening in March of 2010.
International Activity
On
Construction continues on the following international development projects:
-- Ami Premium Outlets - an upscale manufacturers' outlet center located approximately 34 miles northeast of central
-- Argine (
-- Catania (Sicily,
-- Three projects in
Conference Call
The Company will provide an online simulcast of its quarterly conference call at www.simon.com (Investor Relations tab), www.earnings.com, and www.streetevents.com. To listen to the live call, please go to any of these websites at least fifteen minutes prior to the call to register, download and install any necessary audio software. The call will begin at
Supplemental Materials
The Company will publish a supplemental information package which will be available at www.simon.com in the Investor Relations section, Financial Information tab. It will also be furnished to the SEC as part of a current report on Form 8-K. If you wish to receive a copy via mail or email, please call 800-461-3439.
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 our expectations will be attained, and it is possible that 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: the Company's ability to meet debt service requirements, the availability and terms of financing, changes in the Company's credit rating, changes in market rates of interest and foreign exchange rates for foreign currencies, the ability to hedge interest rate risk, risks associated with the acquisition, development, expansion, leasing and management of properties, general risks related to retail real estate, the liquidity of real estate investments, environmental liabilities, international, national, regional and local economic climates, changes in market rental rates, trends in the retail industry, relationships with anchor tenants, the inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise, risks relating to joint venture properties, costs of common area maintenance, competitive market forces, risks related to international activities, insurance costs and coverage, terrorist activities, changes in economic and market conditions and maintenance of our status as a real estate investment trust. 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 otherwise 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.
Funds from Operations ("FFO")
The Company considers FFO a key measure of its operating performance that is not specifically defined by accounting principles generally accepted in the
About
SIMON
Consolidated Statements of Operations
Unaudited
(In thousands)
For the Three Months Ended For the Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
REVENUE:
Minimum rent $607,100 $585,385 $2,291,919 $2,154,713
Overage rent 39,440 46,428 100,222 110,003
Tenant reimbursements 289,290 292,384 1,065,957 1,023,164
Management fees and
other revenues 31,222 40,371 132,471 113,740
Other income 62,264 71,013 192,586 249,179
Total revenue 1,029,316 1,035,581 3,783,155 3,650,799
EXPENSES:
Property operating 103,687 111,463 455,874 454,510
Depreciation and
amortization 268,902 235,092 969,477 905,636
Real estate taxes 80,586 77,127 334,657 313,311
Repairs and maintenance 32,621 36,151 107,879 120,224
Advertising and
promotion 32,729 32,854 96,783 94,340
Provision for credit
losses 6,668 4,462 24,035 9,562
Home and regional
office costs 36,099 40,665 144,865 136,610
General and
administrative 5,555 4,682 20,987 19,587
Other 16,651 19,236 67,721 61,954
Total operating
expenses 583,498 561,732 2,222,278 2,115,734
OPERATING INCOME 445,818 473,849 1,560,877 1,535,065
Interest expense (244,933) (241,565) (947,140) (945,852)
Loss on extinguishment
of debt - - (20,330) -
Minority interest in
income of consolidated
entities (3,986) (4,838) (12,431) (13,936)
Income tax (expense)
benefit of taxable REIT
subsidiaries (2,005) 12,727 (3,581) 11,322
Income from
unconsolidated entities 19,186 397 32,246 38,120
Impairment charge (21,172) (55,061) (21,172) (55,061)
Gain on sale of assets
and interests in
unconsolidated entities - 409 - 92,044
Limited partners'
interest in the
Operating Partnership (36,345) (34,749) (107,214) (120,818)
Preferred distributions
of the Operating
Partnership (4,201) (5,362) (17,599) (21,580)
Income from continuing
operations 152,362 145,807 463,656 519,304
Discontinued operations,
net of limited partners'
interest (20) 78 (20) (93)
Loss on sale of
discontinued operations,
net of limited partners'
interest - (20,880) - (27,972)
NET INCOME 152,342 125,005 463,636 491,239
Preferred dividends (7,139) (12,076) (41,119) (55,075)
NET INCOME AVAILABLE TO
COMMON STOCKHOLDERS $145,203 $112,929 $422,517 $436,164
SIMON
Per Share Data
Unaudited
For the Three For the Twelve
Months Ended Months Ended
December 31, December 31,
2008 2007 2008 2007
Basic Earnings Per Common Share:
Income from continuing operations $0.64 $0.60 $1.88 $2.09
Discontinued operations - (0.09) - (0.13)
Net income available to common
stockholders $0.64 $0.51 $1.88 $1.96
Percentage Change 25.5% -4.1%
Diluted Earnings Per Common Share:
Income from continuing operations $0.64 $0.60 $1.87 $2.08
Discontinued operations - (0.09) - (0.13)
Net income available to common
stockholders $0.64 $0.51 $1.87 $1.95
Percentage Change 25.5% -4.1%
SIMON
Consolidated Balance Sheets
Unaudited
(In thousands, except as noted)
December 31, December 31,
2008 2007
ASSETS:
Investment properties, at cost $25,205,715 $24,415,025
Less - accumulated depreciation 6,184,285 5,312,095
19,021,430 19,102,930
Cash and cash equivalents 773,544 501,982
Tenant receivables and accrued
revenue, net 414,856 447,224
Investment in unconsolidated
entities, at equity 1,663,886 1,886,891
Deferred costs and other assets 1,202,256 1,118,635
Note receivable from related party 520,700 548,000
Total assets $23,596,672 $23,605,662
LIABILITIES:
Mortgages and other indebtedness $18,042,532 $17,218,674
Accounts payable, accrued expenses,
intangibles, and deferred revenues 1,086,248 1,251,044
Cash distributions and losses in
partnerships and joint ventures, at
equity 380,730 352,798
Other liabilities, minority interest
and accrued dividends 179,970 180,644
Total liabilities 19,689,480 19,003,160
COMMITMENTS AND CONTINGENCIES
LIMITED PARTNERS' INTEREST IN THE
OPERATING PARTNERSHIP 637,140 731,406
LIMITED PARTNERS' PREFERRED INTEREST
IN THE OPERATING PARTNERSHIP 229,869 307,713
STOCKHOLDERS' EQUITY
CAPITAL STOCK OF SIMON PROPERTY
GROUP, INC. (750,000,000 total
shares authorized, $.0001 par
value, 237,996,000 shares of
excess common stock):
All series of preferred stock,
100,000,000 shares authorized,
8,387,212 and 14,801,884 issued
and outstanding, respectively,
and with liquidation values of
$419,361 and $740,094, respectively 425,545 746,608
Common stock, $.0001 par value,
400,000,000 shares authorized,
235,691,040 and 227,719,614 issued
and outstanding, respectively 24 23
Class B common stock, $.0001 par
value, 12,000,000 shares authorized,
8,000 issued and outstanding - -
Class C common stock, $.0001 par
value, 0 and 4,000 shares authorized,
issued and outstanding - -
Capital in excess of par value 5,410,147 5,067,718
Accumulated deficit (2,444,257) (2,055,447)
Accumulated other comprehensive income (165,066) 18,087
Common stock held in treasury at cost,
4,379,396 and 4,697,332 shares,
respectively (186,210) (213,606)
Total stockholders' equity 3,040,183 3,563,383
Total liabilities and stockholders'
equity $23,596,672 $23,605,662
SIMON
Joint Venture Statements of Operations
Unaudited
(In thousands)
For the Three Months Ended For the Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
Revenue:
Minimum rent $521,062 $498,463 $1,956,129 $1,682,671
Overage rent 58,110 55,044 130,549 119,134
Tenant reimbursements 275,041 279,492 1,005,638 852,312
Other income 54,394 64,368 199,774 201,075
Total revenue 908,607 897,367 3,292,090 2,855,192
Operating Expenses:
Property operating 176,770 173,889 671,268 580,910
Depreciation and
amortization 203,631 227,695 775,887 627,929
Real estate taxes 67,427 59,485 263,054 220,474
Repairs and maintenance 35,187 35,826 124,272 113,517
Advertising and
promotion 25,184 24,145 70,425 62,182
Provision for credit
losses 9,981 8,309 24,053 22,448
Other 54,053 58,717 177,298 162,570
Total operating
expenses 572,233 588,066 2,106,257 1,790,030
Operating Income 336,374 309,301 1,185,833 1,065,162
Interest expense (242,141) (259,214) (969,420) (853,307)
(Loss) income from
unconsolidated entities (1,340) 207 (5,123) 665
Loss on sale of assets - (823) - (6,399)
Income from Continuing
Operations 92,893 49,471 211,290 206,121
Income from consolidated
joint venture interests (A) - - - 2,562
Income from discontinued
joint venture interests (B) - 26 47 202
(Loss) gain on disposal or
sale of discontinued
operations, net - (15) - 198,956
Net Income $92,893 $49,482 $211,337 $407,841
Third-Party Investors'
Share of Net Income $60,708 $38,209 $132,111 $232,586
Our Share of Net Income 32,185 11,273 79,226 175,255
Amortization of Excess
Investment (12,999) (10,467) (46,980) (46,503)
Our Share of Net Gain
Related to Properties Sold - (409) - (90,632)
Income from Unconsolidated
Entities, Net $19,186 $397 $32,246 $38,120
SIMON
Joint Venture Balance Sheets
Unaudited
(In thousands)
December 31, December 31,
2008 2007
Assets:
Investment properties, at cost $21,472,490 $21,009,416
Less - accumulated depreciation 3,892,956 3,217,446
17,579,534 17,791,970
Cash and cash equivalents 805,411 747,575
Tenant receivables and accrued
revenue, net 428,322 435,093
Investment in unconsolidated
entities, at equity 230,497 258,633
Deferred costs and other assets 594,578 713,180
Total assets $19,638,342 $19,946,451
Liabilities and Partners' Equity:
Mortgages and other indebtedness $16,686,701 $16,507,076
Accounts payable, accrued expenses,
intangibles and deferred revenue 1,070,958 972,699
Other liabilities 982,254 825,279
Total liabilities 18,739,913 18,305,054
Preferred units 67,450 67,450
Partners' equity 830,979 1,573,947
Total liabilities and partners'
equity $19,638,342 $19,946,451
Our Share of:
Total assets $8,056,873 $8,040,987
Partners' equity $533,929 $776,857
Add: Excess Investment (C) 749,227 757,236
Our net Investment in Joint Ventures 1,283,156 1,534,093
Mortgages and other indebtedness $6,632,419 $6,568,403
SIMON
Footnotes to Financial Statements
Unaudited
Notes:
(A) Consolidation occurs when the Company acquires an additional ownership interest in a joint venture and, as a result, gains control of the joint venture. These interests have been separated from operational interests to present comparative results of operations.
(B) Discontinued joint venture interests represent assets and partnership interests that have been sold.
(C) Excess investment represents the unamortized difference of the
Company's investment over equity in the underlying net assets of the
partnerships and joint ventures. The Company generally amortizes excess
investment over the life of the related properties, typically no greater than
40 years, and the amortization is included in income from unconsolidated
entities.
SIMON
Reconciliation of Net Income to FFO (1)
Unaudited
(In thousands, except as noted)
For the Three Months For the Twelve Months
Ended Ended
December 31, December 31,
2008 2007 2008 2007
Net Income(2)(3)(4)(5) $152,342 $125,005 $463,636 $491,239
Adjustments to Net Income to
Arrive at FFO:
Limited partners' interest
in the Operating Partnership
and preferred distributions
of the Operating
Partnership 40,546 40,111 124,813 142,398
Limited partners' interest
in discontinued operations (5) 20 (5) (24)
Depreciation and amortization
from consolidated properties
and discontinued operations 264,465 232,162 954,494 892,488
Simon's share of depreciation
and amortization from
unconsolidated entities 96,631 109,462 376,670 315,159
Loss (gain) on sales of
assets and interests in
unconsolidated entities,
net of limited partners'
interest - 20,471 - (64,072)
Minority interest portion
of depreciation and
amortization (2,112) (2,051) (8,559) (8,646)
Preferred distributions and
dividends (11,340) (17,438) (58,718) (76,655)
FFO of the Operating
Partnership $540,527 $507,742 $1,852,331 $1,691,887
Per Share Reconciliation:
Diluted net income available
to common stockholders per
share $0.64 $0.51 $1.87 $1.95
Adjustments to net income to
arrive at FFO:
Depreciation and amortization
from consolidated properties
and Simon's share of
depreciation and amortization
from unconsolidated entities,
net of minority interest
portion of depreciation and
amortization 1.26 1.21 4.69 4.27
Loss (gain) on sales of
assets and interests in
unconsolidated entities, net
of limited partners' interest - 0.09 - (0.20)
Impact of additional
dilutive securities for
FFO per share (0.04) (0.05) (0.14) (0.12)
Diluted FFO per share $1.86 $1.76 $6.42 $5.90
Details for per share
calculations:
FFO of the Operating
Partnership $540,527 $507,742 $1,852,331 $1,691,887
Adjustments for dilution
calculation:
Impact of preferred stock and
preferred unit conversions
and option exercises (6) 7,513 12,836 43,350 51,567
Diluted FFO of the Operating
Partnership 548,040 520,578 1,895,681 1,743,454
Diluted FFO allocable to
unitholders (104,845) (102,155) (366,868) (342,434)
Diluted FFO allocable to
common stockholders $443,195 $418,423 $1,528,813 $1,401,020
Basic weighted average shares
outstanding 227,512 223,015 225,333 222,998
Adjustments for dilution
calculation:
Effect of stock options 397 673 551 778
Impact of Series C
preferred unit conversion 71 78 75 122
Impact of Series I
preferred unit conversion 1,254 2,408 1,531 2,485
Impact of Series I
preferred stock conversion 9,657 11,102 10,773 11,065
Diluted weighted average
shares outstanding 238,891 237,276 238,263 237,448
Weighted average limited
partnership units outstanding 56,514 57,929 57,175 58,036
Diluted weighted average
shares and units outstanding 295,405 295,205 295,438 295,484
Basic FFO per share $1.90 $1.81 $6.56 $6.02
Percent Increase 5.0% 9.0%
Diluted FFO per share $1.86 $1.76 $6.42 $5.90
Percent Increase 5.7% 8.8%
SIMON
Footnotes to Reconciliation of Net Income to FFO
Unaudited
Notes:
(1) The Company considers FFO a key measure of its operating performance that is not specifically defined by GAAP and believes that FFO is helpful to investors because it is a widely recognized measure of the performance of REITs and provides a relevant basis for comparison among REITs. The Company also uses this measure internally to measure the operating performance of the portfolio. The Company's computation of FFO may not be comparable to FFO reported by other REITs.
The Company determines FFO based upon the definition set forth by the
The Company has 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 of previously depreciated operating properties. We include in FFO gains and losses realized from the sale of land, outlot buildings, marketable and non-marketable securities, 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.
(2) Includes the Company's share of gains upon the sale of land and other non-retail real estate investments of
(3) Includes the Company's share of straight-line adjustments to minimum rent of
(4) Includes the Company's share of the fair market value of leases from acquisitions of
(5) Includes the Company's share of debt premium amortization of
(6) Includes dividends and distributions of Series I preferred stock and Series C and Series I preferred units.
SOURCE
CONTACT: Investors,
/Web site: http://www.simon.com
