Press Release

Simon Property Group Reports Third Quarter 2019 Results

INDIANAPOLIS, Oct. 30, 2019 /PRNewswire/ -- Simon, a global leader in premier shopping, dining, entertainment and mixed-use destinations, today reported results for the quarter ended September 30, 2019.

Simon (PRNewsfoto/Simon)

Results for the Quarter

  • Net income attributable to common stockholders was $544.3 million, or $1.77 per diluted share, as compared to $556.3 million, or $1.80 per diluted share in 2018.
  • Funds from Operations ("FFO") was $1.081 billion, or $3.05 per diluted share, as compared to $1.086 billion, or $3.05 per diluted share, in the prior year period. Adjusting the prior year for the impact of expensing internal leasing costs under ASC 842, or approximately $0.03 per diluted share, FFO per diluted share increased 1.0%.

Results for the Nine Months

  • Net income attributable to common stockholders was $1.588 billion, or $5.15 per diluted share, as compared to $1.724 billion, or $5.57 per diluted share in 2018. The prior year period included net gains of $180.5 million, or $0.51 per diluted share, primarily related to disposition activity.
  • Funds from Operations ("FFO") was $3.227 billion, or $9.09 per diluted share, as compared to $3.173 billion, or $8.90 per diluted share, in the prior year period, an increase of 2.1% per diluted share. Adjusting the prior year for a non-cash investment gain, higher income related to distributions from an international investment and the $34.1 million impact of expensing internal leasing costs under ASC 842, or approximately $0.26 per diluted share combined, FFO per diluted share increased 5.2%.

"I am pleased with our quarterly results including our continued cash flow growth and solid operating metrics," said David Simon, Chairman, Chief Executive Officer and President. "We strengthened our balance sheet with a historic notes offering and completed several international expansions."

 U.S. Malls and Premium Outlets Operating Statistics

  • Reported retailer sales per square foot was $680, an increase of 4.5%, for the trailing 12-months ended September 30, 2019.
  • Occupancy was 94.7% at September 30, 2019.
  • Base minimum rent per square foot was $54.55 at September 30, 2019. 
  • Leasing spread per square foot for the trailing 12-months ended September 30, 2019 was $12.10, an increase of 22.2%. 

Portfolio Net Operating Income ("NOI") and Comparable Property NOI
Comparable property NOI growth for the nine months ended September 30, 2019 was 1.7% and was 1.6% for the three months ended September 30, 2019.  Total portfolio NOI growth for the nine months ended September 30, 2019 was 1.5% and was 1.3% for the three months ended September 30, 2019.  Total portfolio NOI includes NOI from comparable properties, new developments, redevelopments, expansions, acquisitions, international properties and our share of NOI from investments.    

Dividends
Today, Simon's Board of Directors declared a quarterly common stock dividend of $2.10 per share. This is a 5.0% increase year-over-year.  The dividend will be payable on November 29, 2019 to shareholders of record on November 15, 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 December 31, 2019 to shareholders of record on December 17, 2019. 

Development Activity
During the quarter, construction started on a 338,000 square foot upscale outlet located in Jenks (Tulsa), Oklahoma, projected to open in spring 2021.  Simon owns 100% of this project. 

Construction continues on four new international development projects with three scheduled to open in 2020, including Malaga Designer Outlet (Malaga, Spain), Siam Premium Outlets Bangkok (Bangkok, Thailand) and West Midlands Designer Outlet (Cannock, England) and Normandy Designer Outlet (Vernon (Normandy), France) scheduled to open in 2021. 

Construction also continues on other significant redevelopment, expansion and densification projects including Southdale Center (Edina (Minneapolis), MN), The Shops at Riverside (Hackensack, NJ), Burlington Mall (Burlington (Boston), MA), Phipps Plaza (Atlanta, GA), Gotemba Premium Outlets (Gotemba, Japan) and Rinku Premium Outlets (Izumisano (Osaka), Japan). 

At quarter-end, redevelopment and expansion projects, including the redevelopment of former department store spaces, were underway at more than 30 properties in the U.S., Asia and Europe.  Simon's share of the costs of all new development and redevelopment projects under construction at quarter-end was approximately $1.8 billion

Balance Sheet Activity
During the quarter, the Company completed a three tranche senior notes offering totaling $3.5 billion with a weighted average coupon rate of 2.61% and weighted average term of 15.9 years. 

Subsequent to the end of the quarter, the Company retired all, or a portion of, four series of senior notes totaling approximately $2.6 billion (USD equivalent) with a combined weighted average coupon rate of 3.76%.  The new notes offering had a weighted average coupon rate approximately 115 basis points lower than the notes that were retired. 

After repayment of the senior notes, 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 September 30, 2019, the Company repurchased 1,154,117 shares of its common stock. 

2019 Guidance
The Company currently estimates net income to be within a range of $6.76 to $6.81 per diluted share for the year ending December 31, 2019, after giving effect to the $0.33 per diluted share loss on the extinguishment of debt that will be recorded in the fourth quarter.  The Company also estimates Comparable FFO to be within a range of $12.33 to $12.38 per diluted share, which reflects an increase of $0.03 to the bottom end of the range provided on July 31, 2019.  The Company currently estimates FFO to be within a range of $12.00 to $12.05 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

$6.76

$6.81

Add: Loss on the extinguishment of debt

0.33

0.33

Comparable estimated net income attributable to common



      stockholders per diluted share

7.09

7.14

Depreciation and amortization including Simon's share



     of unconsolidated entities

5.27

5.27

Unrealized losses in fair value of equity instruments

0.01

0.01

Gain on sale or disposal of, or recovery on, assets and



      interests in unconsolidated entities and impairment, net

(0.04)

(0.04)

Estimated comparable FFO per diluted share

12.33

12.38

Less: Loss on the extinguishment of debt

(0.33)

(0.33)

Estimated FFO per diluted share

$12.00

$12.05

Conference Call
Simon will hold a conference call to discuss the quarterly financial results today at 8:30 a.m. Eastern Time, Wednesday, October 30, 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 November 6, 2019.  To access the audio replay, dial 1-855-859-2056 (international 404-537-3406) passcode 4145577. 

Supplemental Materials and Website
Supplemental information on our third quarter 2019 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, Comparable FFO per share, comparable earnings 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; the loss of key management personnel and the transition of LIBOR to an alternative reference rate. 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 subsequent other 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,


2019

2018


2019

2018







REVENUE:






Lease income

$ 1,308,908

$ 1,284,674


$ 3,887,532

$ 3,811,265

Management fees and other revenues

27,976

28,784


83,768

85,506

Other income

79,670

90,563


295,274

286,491

Total revenue

1,416,554

1,404,021


4,266,574

4,183,262







EXPENSES:






Property operating

121,735

119,021


339,404

335,420

Depreciation and amortization

334,944

316,175


1,016,193

953,309

Real estate taxes

118,031

119,315


349,404

344,950

Repairs and maintenance

23,979

23,632


73,752

73,507

Advertising and promotion

36,583

36,688


109,128

107,979

Home and regional office costs

45,865

32,714


144,892

106,093

General and administrative

8,032

12,172


27,528

35,713

Other

22,083

21,461


75,318

70,505

Total operating expenses

711,252

681,178


2,135,619

2,027,476







OPERATING INCOME BEFORE OTHER ITEMS

705,302

722,843


2,130,955

2,155,786







Interest expense

(202,382)

(199,469)


(599,541)

(611,585)

Income and other taxes

(6,197)

(10,118)


(23,309)

(26,475)

Income from unconsolidated entities

119,706

134,408


316,691

325,263

Unrealized gains (losses) in fair value of equity instruments

2,154

(5,452)


(4,846)

1,212

Gain on sale or disposal of, or recovery on,






   assets and interests in unconsolidated entities and impairment, net

10,141

-


12,822

144,949







CONSOLIDATED NET INCOME

628,724

642,212


1,832,772

1,989,150







Net income attributable to noncontrolling interests 

83,636

85,111


242,216

262,722

Preferred dividends

834

834


2,503

2,503







NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS

$ 544,254

$ 556,267


$ 1,588,053

$ 1,723,925













BASIC AND DILUTED EARNINGS PER COMMON SHARE:






Net income attributable to common stockholders

$ 1.77

$ 1.80


$ 5.15

$ 5.57







 

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









September 30,

December 31,


2019

2018

ASSETS:



Investment properties, at cost

$ 37,590,061

$ 37,092,670

Less - accumulated depreciation

13,707,832

12,884,539


23,882,229

24,208,131

Cash and cash equivalents

3,647,230

514,335

Tenant receivables and accrued revenue, net

775,617

763,815

Investment in unconsolidated entities, at equity

2,121,558

2,220,414

Investment in Klépierre, at equity

1,614,109

1,769,488

Deferred costs and other assets

1,803,483

1,210,040

Total assets

$ 33,844,226

$ 30,686,223




LIABILITIES:



Mortgages and unsecured indebtedness

$ 26,643,879

$ 23,305,535

Accounts payable, accrued expenses, intangibles, and deferred revenues

1,324,110

1,316,861

Cash distributions and losses in unconsolidated entities, at equity

1,568,150

1,536,111

Other liabilities

1,001,048

500,597

Total liabilities

30,537,187

26,659,104




Commitments and contingencies



Limited partners' preferred interest in the Operating Partnership and noncontrolling



redeemable interests in properties

226,887

230,163




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

42,502

42,748




Common stock, $ 0.0001 par value, 511,990,000 shares authorized, 320,435,256 and



320,411,571 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

9,748,255

9,700,418

Accumulated deficit

(5,223,093)

(4,893,069)

Accumulated other comprehensive loss

(121,596)

(126,017)

Common stock held in treasury, at cost, 13,574,296 and 11,402,103 shares, respectively

(1,773,571)

(1,427,431)

Total stockholders' equity

2,672,529

3,296,681

Noncontrolling interests

407,623

500,275

Total equity

3,080,152

3,796,956

Total liabilities and equity

$ 33,844,226

$ 30,686,223

 

 

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, 


2019

2018


2019

2018







REVENUE:






Lease income

$ 766,740

$ 756,955


$ 2,285,848

$ 2,259,451

Other income

79,025

73,259


234,337

232,747

Total revenue

845,765

830,214


2,520,185

2,492,198







OPERATING EXPENSES:






Property operating

149,759

151,873


434,742

437,718

Depreciation and amortization

171,407

161,964


512,070

488,098

Real estate taxes

64,172

60,654


200,698

197,497

Repairs and maintenance

20,729

20,035


61,938

63,968

Advertising and promotion

19,831

20,318


63,852

65,425

Other

45,747

43,916


142,806

143,533

Total operating expenses

471,645

458,760


1,416,106

1,396,239







OPERATING INCOME BEFORE OTHER ITEMS

374,120

371,454


1,104,079

1,095,959







Interest expense

(159,971)

(163,855)


(473,914)

(505,540)

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

-

-


21,587

25,792







NET INCOME

$ 214,149

$ 207,599


$ 651,752

$ 616,211







Third-Party Investors' Share of Net Income

$ 108,792

$ 101,750


$ 332,078

$ 304,174







Our Share of Net Income

105,357

105,849


319,674

312,037

Amortization of Excess Investment (A)

(20,846)

(21,526)


(62,413)

(64,447)

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






Other Income in the Consolidated Financial Statements

-

-


(9,156)

-

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)

$ 84,511

$ 84,323


$ 248,105

$ 237,918







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,



2019

2018


Assets:




Investment properties, at cost

$ 19,259,601

$ 18,807,449


Less - accumulated depreciation

7,263,363

6,834,633



11,996,238

11,972,816


Cash and cash equivalents

880,648

1,076,398


Tenant receivables and accrued revenue, net

475,710

445,148


Deferred costs and other assets

581,435

390,818


Total assets

$ 13,934,031

$ 13,885,180






Liabilities and Partners' Deficit:




Mortgages

$ 15,217,266

$ 15,235,415


Accounts payable, accrued expenses, intangibles, and deferred revenue

942,250

976,311


Other liabilities

521,518

344,205


Total liabilities

16,681,034

16,555,931






Preferred units

67,450

67,450


Partners' deficit

(2,814,453)

(2,738,201)


Total liabilities and partners' deficit

$ 13,934,031

$ 13,885,180






Our Share of:




Partners' deficit

$ (1,227,239)

$ (1,168,216)


Add: Excess Investment (A)

1,540,770

1,594,198


Our net Investment in unconsolidated entities, at equity

$ 313,531

$ 425,982



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,







2019


2018


2019


2018















Consolidated Net Income (D)


$           628,724


$           642,212


$         1,832,772


$         1,989,150


Adjustments to Arrive at FFO:
























Depreciation and amortization from consolidated 










     properties 



332,456


313,245


1,008,439


944,615



Our share of depreciation and amortization from










     unconsolidated entities, including Klépierre and HBS

138,116


131,573


412,018


403,777



Gain on sale or disposal of, or recovery on,










 assets and interests in unconsolidated entities and impairment, net

(10,141)


-


(12,822)


(144,949)



Unrealized (gains) losses in fair value of equity instruments

(2,154)


5,452


4,846


(1,212)



Net (income) loss attributable to noncontrolling interest holders in










     properties



(337)


(497)


181


(684)



Noncontrolling interests portion of depreciation and amortization

(4,790)


(4,380)


(14,608)


(13,564)



Preferred distributions and dividends

(1,313)


(1,313)


(3,939)


(3,939)


FFO of the Operating Partnership

$         1,080,561


$         1,086,292


$         3,226,887


$         3,173,194




























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









Diluted net income per share


$                 1.77


$                 1.80


$                 5.15


$                 5.57



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

1.32


1.23


3.97


3.74



Gain on sale or disposal of, or recovery on,










 assets and interests in unconsolidated entities and impairment, net

(0.03)


-


(0.04)


(0.41)



Unrealized (gains) losses in fair value of equity instruments

(0.01)


0.02


0.01


-


Diluted FFO per share 


$                 3.05


$                 3.05


$                 9.09


$                 8.90















Details for per share calculations:























FFO of the Operating Partnership


$         1,080,561


$         1,086,292


$         3,226,887


$         3,173,194


Diluted FFO allocable to unitholders

(142,727)


(142,710)


(425,123)


(416,694)


Diluted FFO allocable to common stockholders

$            937,834


$           943,582


$         2,801,764


$         2,756,500















Basic and Diluted weighted average shares outstanding

307,275


309,294


308,314


309,740


Weighted average limited partnership units outstanding

46,763


46,779


46,782


46,822















Basic and Diluted weighted average shares and units outstanding

354,038


356,073


355,096


356,562















Basic and Diluted FFO per Share


$                 3.05


$                 3.05


$                 9.09


$                 8.90


    Percent Change



0.0%




2.1%

















 

 

 

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 assets.














(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") Funds From Operations White Paper - 2018 Restatement. Our main business includes acquiring, owning, operating, developing, and redeveloping real estate in conjunction with the rental of real estate.  Gains and losses of assets incidental to our main business are included in FFO.  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, depreciable 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. 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 $2.5 million and $1.2 million for the three months ended September 30, 2019 and 2018, respectively, and $14.1 million and $3.9 million for the nine months ended September 30, 2019 and 2018, respectively.














-

Straight-line adjustments increased income by $22.2 million and $6.8 million for the three months ended September 30, 2019 and 2018, respectively, and $66.0 million and $21.8 million for the nine months ended September 30, 2019 and 2018, respectively.














-

Amortization of fair market value of leases from acquisitions increased income by $1.3 million and $0.6 million for the three months ended September 30, 2019 and 2018, respectively, and $4.0 million and $3.0 million for the nine months ended September 30, 2019 and 2018, respectively.

 

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SOURCE Simon

Tom Ward 317-685-7330, Investors; Ali Slocum, 317-264-3079 Media