0001063761 false 0001063761 2022-11-01 2022-11-01 0001063761 us-gaap:CommonStockMember 2022-11-01 2022-11-01 0001063761 spg:SeriesJPreferredStockMember 2022-11-01 2022-11-01 iso4217:USD xbrli:shares iso4217:USD xbrli:shares

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): November 1, 2022

 

SIMON PROPERTY GROUP, INC.

 

(Exact name of registrant as specified in its charter)

 

Delaware 001-14469 04-6268599
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)

 

 

225 WEST WASHINGTON STREET

INDIANAPOLIS, Indiana

46204
  (Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: 317. 636.1600

 

Not Applicable

 

 (Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company  ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbols   Name of each exchange on which registered
         
Common stock, $0.0001 par value   SPG   New York Stock Exchange
8⅜% Series J Cumulative Redeemable Preferred Stock, $0.0001 par value   SPGJ   New York Stock Exchange

 

 

 

 

 

 

Item 2.02.Results of Operations and Financial Condition

 

On November 1, 2022, Simon Property Group, Inc. issued a press release containing information on earnings for the quarter ended September 30, 2022 and other matters. A copy of the press release is furnished with this report as Exhibit 99.1 and is incorporated by reference into this report.

 

Item 7.01.Regulation FD Disclosure

 

Exhibit 99.1 also includes supplemental financial and operating information for the quarter ended September 30, 2022.

 

Item 9.01. Financial Statements and Exhibits

 

Financial Statements:

 

None

 

Exhibits:

 

Exhibit No.Description
  
99.1Earnings Release dated November 1, 2022 and supplemental information
104The cover page from this Current Report on Form 8-K formatted in Inline XBRL (included as Exhibit 101)

 

The exhibit filed with this report contains measures of financial or operating performance that are not specifically defined by generally accepted accounting principles (“GAAP”) in the United States, including funds from operations (“FFO”), FFO per share, comparable FFO, comparable FFO per share, funds available for distribution, net operating income (“NOI”), domestic property NOI and portfolio NOI. FFO and NOI are performance measures that are standard in the REIT business. We believe FFO and NOI provide investors with additional information concerning our operating performance and a basis to compare our performance with the performance 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.

 

These non-GAAP financial measures should not be considered as alternatives to net income as a measure of our operating performance or to cash flows computed in accordance with GAAP as a measure of liquidity nor are they indicative of cash flows from operating and financial activities.

 

Reconciliations of each of these non-GAAP measures to the most-directly comparable GAAP measure are included in the exhibit.

 

The information in this report and the exhibit filed herewith is being furnished, not filed, for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and pursuant to Items 2.02 and 7.01 of Form 8-K, will not be incorporated by reference into any filing under the Securities Act of 1933, as amended.

 

Page 2

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Dated: November 1, 2022

 

  SIMON PROPERTY GROUP, INC.
   
  By: /s/ BRIAN J. MCDADE
    Brian J. McDade,
Executive Vice President, Chief Financial Officer and Treasurer

 

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EARNINGS RELEASE AND SUPPLEMENTAL INFORMATION
FOR THE QUARTER ENDED SEPTEMBER 30, 2022
PAGE
Earnings Release(1)
211
Overview
12
13
Financial Data
14
15
16
17
17
18
19
Operational Data
20
21
22
Development Activity
23
24
Balance Sheet Information
25
25
25
26
27
28
29
Property and Debt Information
Other
4043
(1)
Includes reconciliation of consolidated net income to funds from operations and comparable FFO.
 
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Contacts:
Tom Ward
317-685-7330 Investors
Nicole Kennon
704-804-1960 Media
Simon® Reports Third Quarter 2022 Results and
Increases Full Year 2022 Guidance and Raises Quarterly Dividend
INDIANAPOLIS, November 1, 2022 − Simon®, a real estate investment trust engaged in the ownership of premier shopping, dining, entertainment and mixed-use destinations, today reported results for the quarter ended September 30, 2022.
“This was an excellent quarter for our Company with strong financial and operational performance,” said David Simon, Chairman, Chief Executive Officer and President. “Based upon our results to date and our expectations for the remainder of 2022, we are once again increasing full-year 2022 guidance and raising our quarterly dividend.”
Results for the Quarter

Net income attributable to common stockholders was $539.0 million, or $1.65 per diluted share, as compared to $679.9 million, or $2.07 per diluted share in 2021.

Net income for the third quarter of 2022 includes a non-cash unrealized loss of  $14.6 million, or $0.04 per diluted share, from a mark-to-market in fair value of equity instruments.

Net income in the prior year period included both a gain of  $0.29 per diluted share primarily related to retail real estate disposition activity and other activity which resulted in a net gain of  $0.21 per diluted share.

Comparable FFO was $1.113 billion, or $2.97 per diluted share as compared to $1.098 billion, or $2.92 per diluted share in the prior year period. Please see the accompanying reconciliation of consolidated net income to FFO and Comparable FFO.

Domestic property Net Operating Income (“NOI”) increased 2.3% and portfolio NOI increased 3.2%, in each case, compared to the prior year period.
Results for the Nine Months

Net income attributable to common stockholders was $1.462 billion, or $4.46 per diluted share, as compared to $1.743 billion, or $5.30 per diluted share in 2021.
 
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Net income for the first nine months of 2022 includes a non-cash unrealized loss of  $63.4 million, or $0.17 per diluted share, from a mark-to-market in fair value of equity instruments.

Net income in the prior year period included both gains of  $0.54 per diluted share primarily related to retail real estate disposition activity and other activity which resulted in a net gain of  $0.53 per diluted share.

Comparable FFO was $3.270 billion, or $8.71 per diluted share as compared to $3.133 billion, or $8.32 per diluted share in the prior year period, growth of 4.7%.

Domestic property NOI increased 4.4% and portfolio NOI increased 5.5%, in each case, compared to the prior year period.
U.S. Malls and Premium Outlets Operating Statistics

Occupancy was 94.5% at September 30, 2022, compared to 92.8% at September 30, 2021, an increase of 1.7%.

Base minimum rent per square foot was $54.80 at September 30, 2022, compared to $53.91 at September 30, 2021, an increase of 1.7%.
Development Activity
On October 20, 2022, Fukaya-Hanazono Premium Outlets® (Fukaya City, Tokyo, Japan) opened with 296,300 square feet of high-quality, name brand stores. Fukaya-Hanazono Premium Outlets is the tenth Premium Outlet® Center in Japan.
During the third quarter, construction started on a significant expansion at Busan Premium Outlets (Busan, South Korea). Construction continues on Paris-Giverny Designer Outlet, a new international development project in Normandy, France projected to open in the first quarter of 2023.
Construction also continues on other redevelopment projects, including The Falls (Miami, FL), Northgate Station (Seattle, WA), Phipps Plaza (Atlanta, GA), Roosevelt Field (Garden City, NY), Stanford Shopping Center (Palo Alto, CA) and Towne East Square (Wichita, KS).
Capital Markets and Balance Sheet Liquidity
The Company was active in the credit markets through the first nine months of the year.
The Company completed 16 non-recourse mortgage loans totaling approximately $1.8 billion (U.S. dollar equivalent), of which Simon’s share was $1.1 billion. The weighted average interest rate on these loans was 4.78%.
As of September 30, 2022, Simon had approximately $8.6 billion of liquidity consisting of  $1.2 billion of cash on hand, including its share of joint venture cash, and $7.4 billion of available capacity under its revolving credit facilities.
Dividends
Simon’s Board of Directors declared a quarterly common stock dividend of  $1.80 on November 1, 2022, for the fourth quarter of 2022. This is an increase of  $0.15, or 9.1% year-over-year and an increase of  $0.05, or 2.9%, from the previous quarter. The dividend will be payable on December 30, 2022 to shareholders of record on December 9, 2022.
 
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Simon’s Board of Directors 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 30, 2022 to shareholders of record on December 16, 2022.
Common Stock Repurchase Program
During the quarter ended September 30, 2022, the Company repurchased 405,926 shares of its common stock under its $2.0 billion share repurchase plan.
2022 Guidance
The Company currently estimates net income to be within a range of  $6.16 to $6.21 per diluted share and Comparable FFO to be within a range of  $11.83 to $11.88 per diluted share for the year ending December 31, 2022. The Comparable FFO range represents an increase of  $0.12 and $0.26 per diluted share at the mid-point when compared to the ranges provided on August 1, 2022 and February 7, 2022, respectively.
The following table provides the GAAP to non-GAAP reconciliation for the expected range of estimated net income attributable to common stockholders per diluted share to estimated FFO per diluted share and Comparable FFO per diluted share:
For the year ending December 31, 2022
Low
End
High
End
Estimated net income attributable to common stockholders per diluted share $ 6.16 $ 6.21
Depreciation and amortization including Simon’s share of unconsolidated entities 5.50 5.50
Estimated FFO per diluted share $ 11.66 $ 11.71
First nine months of 2022 actual unrealized losses in fair value of publicly traded equity instruments of non-retail real estate
0.17 0.17
Estimated Comparable FFO per diluted share $ 11.83 $ 11.88
Conference Call
Simon will hold a conference call to discuss the quarterly financial results today from 8:30 a.m. to 9:30 a.m. Eastern Time, Tuesday, November 1, 2022. 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 8, 2022. To access the audio replay, dial 1-844-512-2921 (international 1-412-317-6671) passcode 13733063.
Supplemental Materials and Website
Supplemental information on our third quarter 2022 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
 
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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, Comparable FFO per share and portfolio 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 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 inability to renew leases and relet vacant space at existing properties on favorable terms; an increase in vacant space at our properties; the potential loss of anchor stores or major tenants; the inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise; the intensely competitive market environment in the retail industry, including e-commerce; the inability to lease newly developed properties on favorable terms; our international activities subjecting us to risks that are different from or greater than those associated with our domestic operations, including changes in foreign exchange rates; changes in market rates of interest; 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, including covenants in the governing agreements that impose restrictions on us that may affect our ability to operate freely; 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; the continuing transition of LIBOR to SOFR; 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, including guarantees of certain joint venture indebtedness; environmental liabilities; the conflict in Ukraine; natural disasters; the availability of comprehensive insurance coverage; the potential for terrorist activities; security breaches that could compromise our information technology or infrastructure; uncertainties regarding the impact of pandemics, epidemics or public health crises, and the associated governmental restrictions on our business, financial condition, results of operations, cash flow and liquidity; 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 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 real estate investment trust engaged 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.
 
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EARNINGS RELEASE
Simon Property Group, Inc.
Unaudited Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2022
2021
2022
2021
REVENUE:
Lease income
$
1,215,470
$ 1,207,923
$
3,618,035
$ 3,511,806
Management fees and other revenues
28,654
27,024
85,051
78,381
Other income
71,662
61,607
188,464
200,465
Total revenue
1,315,786
1,296,554
3,891,550
3,790,652
EXPENSES:
Property operating
120,858
108,556
336,929
291,248
Depreciation and amortization
301,754
311,381
910,190
942,851
Real estate taxes
109,932
117,094
333,611
347,800
Repairs and maintenance
21,639
21,735
63,993
62,126
Advertising and promotion
27,102
38,635
72,429
87,685
Home and regional office costs
43,711
48,667
143,424
132,365
General and administrative
7,784
6,909
24,977
20,739
Other
30,810
31,253
106,649
84,180
Total operating expenses
663,590
684,230
1,992,202
1,968,994
OPERATING INCOME BEFORE OTHER ITEMS
652,196
612,324
1,899,348
1,821,658
Interest expense
(187,878)
(199,772)
(560,353)
(602,207)
Loss on extinguishment of debt
(28,593)
(31,552)
Gain on exchange of equity interests
159,828
159,828
Income and other tax expense
(8,256)
(67,262)
(31,168)
(108,367)
Income from unconsolidated entities
163,086
198,524
434,343
562,138
Unrealized losses in fair value of equity instruments
(14,563)
(4,944)
(63,412)
(8,121)
Gain on acquisition of controlling interest, sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net
17,262
108,543
879
201,600
CONSOLIDATED NET INCOME
621,847
778,648
1,679,637
1,994,977
Net income attributable to noncontrolling interests
81,975
97,878
214,722
249,421
Preferred dividends
834
834
2,503
2,503
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS
$
539,038
$ 679,936
$
1,462,412
$ 1,743,053
BASIC AND DILUTED EARNINGS PER COMMON SHARE:
Net income attributable to common stockholders
$
1.65
$ 2.07
$
4.46
$ 5.30
 
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Simon Property Group, Inc.
Unaudited Consolidated Balance Sheets
(Dollars in thousands, except share amounts)
September 30,
2022
December 31,
2021
ASSETS:
Investment properties, at cost
$
37,982,665
$ 37,932,366
Less – accumulated depreciation
16,245,409
15,621,127
21,737,256
22,311,239
Cash and cash equivalents
601,520
533,936
Tenant receivables and accrued revenue, net
794,599
919,654
Investment in TRG, at equity
3,150,169
3,305,102
Investment in Klépierre, at equity
1,378,050
1,661,943
Investment in other unconsolidated entities, at equity
3,116,422
3,075,375
Right-of-use assets, net
497,490
504,119
Investments held in trust – special purpose acquisition company
345,000
345,000
Deferred costs and other assets
1,174,857
1,121,011
Total assets
$
32,795,363
$ 33,777,379
LIABILITIES:
Mortgages and unsecured indebtedness
$
24,640,370
$ 25,321,022
Accounts payable, accrued expenses, intangibles, and deferred revenues
1,421,443
1,433,216
Cash distributions and losses in unconsolidated entities, at equity
1,698,917
1,573,105
Dividend payable
2,733
1,468
Lease liabilities
500,197
506,931
Other liabilities
495,142
540,912
Total liabilities
28,758,802
29,376,654
Commitments and contingencies
Limited partners’ preferred interest in the Operating Partnership and noncontrolling redeemable interests
559,482
547,740
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
41,517
41,763
Common stock, $0.0001 par value, 511,990,000 shares authorized, 342,905,419 and 342,907,608 issued and outstanding, respectively
34
34
Class B common stock, $0.0001 par value, 10,000 shares authorized, 8,000 issued and outstanding
Capital in excess of par value
11,231,483
11,212,990
Accumulated deficit
(6,046,981)
(5,823,708)
Accumulated other comprehensive loss
(160,549)
(185,186)
Common stock held in treasury, at cost, 15,959,628 and 14,295,983 shares, respectively
(2,043,979)
(1,884,441)
Total stockholders’ equity
3,021,525
3,361,452
Noncontrolling interests
455,554
491,533
Total equity
3,477,079
3,852,985
Total liabilities and equity
$
32,795,363
$ 33,777,379
 
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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,
2022
2021
2022
2021
REVENUE:
Lease income
$
710,084
$ 719,723
$
2,142,068
$ 2,053,826
Other income
72,355
67,630
258,446
204,923
Total revenue
782,439
787,353
2,400,514
2,258,749
OPERATING EXPENSES:
Property operating
153,002
151,008
445,214
420,174
Depreciation and amortization
169,453
170,568
504,926
512,165
Real estate taxes
59,008
66,221
187,697
203,242
Repairs and maintenance
17,632
18,274
58,322
53,625
Advertising and promotion
17,153
18,238
52,718
52,479
Other
48,866
43,400
146,595
113,042
Total operating expenses
465,114
467,709
1,395,472
1,354,727
OPERATING INCOME BEFORE OTHER ITEMS
317,325
319,644
1,005,042
904,022
Interest expense
(147,539)
(154,501)
(438,559)
(453,145)
Gain on sale or disposal of, or recovery on, assets and interests in unconsolidated entities, net
4,522
4,522
33,371
NET INCOME
$
174,308
$ 165,143
$
571,005
$ 484,248
Third-Party Investors’ Share of Net Income
$
83,222
$ 82,639
$
280,919
$ 243,525
Our Share of Net Income
91,086
82,504
290,086
240,723
Amortization of Excess Investment (A)
(14,928)
(15,199)
(45,153)
(49,794)
Our Share of Gain on Sale or Disposal of Assets and Interests in Other Income in the Consolidated
Financial Statements
(14,941)
Our Share of Gain on Sale or Disposal of Assets and Interests in Unconsolidated Entities, net
(2,532)
(2,532)
Income from Unconsolidated Entities (B)
$
73,626
$ 67,305
$
242,401
$ 175,988
Note:
The above financial presentation does not include any information related to our investments in Klépierre S.A.
(“Klépierre”), The Taubman Realty Group (“TRG”) and other platform investments. For additional information, see footnote B.
 
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Simon Property Group, Inc.
Unaudited Joint Venture Combined Balance Sheets
(Dollars in thousands)
September 30,
2022
December 31,
2021
Assets:
Investment properties, at cost
$
18,889,882
$ 19,724,242
Less – accumulated depreciation
8,315,951
8,330,891
10,573,931
11,393,351
Cash and cash equivalents
1,375,947
1,481,287
Tenant receivables and accrued revenue, net
493,643
591,369
Right-of-use assets, net
132,665
154,561
Deferred costs and other assets
451,414
394,691
Total assets
$
13,027,600
$ 14,015,259
Liabilities and Partners’ Deficit:
Mortgages
$
14,455,676
$ 15,223,710
Accounts payable, accrued expenses, intangibles, and deferred revenue
870,351
995,392
Lease liabilities
121,668
158,372
Other liabilities
363,615
383,018
Total liabilities
15,811,310
16,760,492
Preferred units
67,450
67,450
Partners’ deficit
(2,851,160)
(2,812,683)
Total liabilities and partners’ deficit
$
13,027,600
$ 14,015,259
Our Share of:
Partners’ deficit
$
(1,238,149)
$ (1,207,396)
Add: Excess Investment
1,228,164
1,283,645
Our net (deficit) investment in unconsolidated entities, at equity
$
(9,985)
$ 76,249
Note:
The above financial presentation does not include any information related to our investments in Klépierre,
TRG and other platform investments. For additional information, see footnote B.
 
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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 and Comparable FFO
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2022
2021
2022
2021
Consolidated Net Income (D)
$
621,847
$ 778,648
$
1,679,637
$ 1,994,977
Adjustments to Arrive at FFO:
Depreciation and amortization from consolidated properties
299,202
309,199
903,137
936,346
Our share of depreciation and amortization from unconsolidated entities, including Klépierre, TRG and other corporate investments
204,428
202,519
645,130
609,271
Gain on acquisition of controlling interest, sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net
(17,262)
(108,543)
(879)
(201,600)
Unrealized losses excluded from FFO (E)
3,177
Net (income) loss attributable to noncontrolling interest holders in properties
(3,616)
405
(2,498)
2,875
Noncontrolling interests portion of depreciation and amortization, gain on consolidation of properties, and loss (gain) on disposal of properties
(4,396)
(5,005)
(13,640)
(14,354)
Preferred distributions and dividends
(1,313)
(1,313)
(3,939)
(3,939)
FFO of the Operating Partnership
$
1,098,890
$ 1,175,910
$
3,206,948
$ 3,326,753
Unrealized losses included in FFO (E)
14,563
4,944
63,412
4,944
Non-cash gain related to the reversal of a deferred tax liability within an international investment
(118,428)
Gain on sale or exchange of equity interests, net of tax
(111,880)
(111,880)
Debt related charges
28,593
31,552
Comparable FFO of the Operating Partnership
$
1,113,453
$ 1,097,567
$
3,270,360
$ 3,132,941
Diluted net income per share to diluted FFO per share reconciliation:
Diluted net income per share
$
1.65
$ 2.07
$
4.46
$ 5.30
Depreciation and amortization from consolidated properties and our share of depreciation and amortization from unconsolidated entities, including Klépierre, TRG and other corporate investments, net of noncontrolling interests portion of depreciation and amortization
1.33
1.35
4.08
4.08
Gain on acquisition of controlling interest, sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net
(0.05)
(0.29)
(0.54)
Unrealized losses excluded from FFO (E)
0.01
Diluted FFO per share
$
2.93
$ 3.13
$
8.54
$ 8.85
Unrealized losses included in FFO (E)
0.04
0.01
0.17
0.01
Non-cash gain related to the reversal of a deferred tax liability within an international investment
(0.32)
Gain on sale or exchange of equity interests, net of tax
(0.30)
(0.30)
Debt related charges
0.08
0.08
Comparable FFO per share
$
2.97
$ 2.92
$
8.71
$ 8.32
Details for per share calculations:
FFO of the Operating Partnership
$
1,098,890
$ 1,175,910
$
3,206,948
$ 3,326,753
Diluted FFO allocable to unitholders
(138,760)
(147,864)
(404,008)
(418,548)
Diluted FFO allocable to common stockholders
$
960,130
$ 1,028,046
$
2,802,940
$ 2,908,205
Basic and Diluted weighted average shares outstanding
327,286
328,619
328,107
328,576
Weighted average limited partnership units outstanding
47,304
47,263
47,293
47,289
Basic and Diluted weighted average shares and units outstanding
374,590
375,882
375,400
375,865
Basic and Diluted FFO per Share
$
2.93
$ 3.13
$
8.54
$ 8.85
Percent Change
-6.4%
-3.5%
Comparable FFO per share
$
2.97
$ 2.92
$
8.71
$ 8.32
Percent Change
1.7%
4.7%
 
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EARNINGS RELEASE
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, TRG and other platform investments. Amounts included in Footnote D below exclude our share of related activity for our investments in Klépierre, TRG and other platform investments. 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, FFO per share, Comparable FFO and Comparable 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 retail 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:
 – 
Gain on land sales of  $9.6 million and $4.8 million for the three months ended September 30, 2022 and 2021, respectively, and $15.6 million and $6.4 million for the nine months ended September 30, 2022, and 2021, respectively.
 – 
Straight-line adjustments decreased income by ($6.8) million and ($5.7) million for the three months ended September 30, 2022 and 2021, respectively, and ($22.9) million and ($20.7) million for the nine months ended September 30, 2022 and 2021 respectively.
 – 
Amortization of fair market value of leases decreased income by $0.0 million and ($0.2) million for the three months ended September 30, 2022 and 2021, respectively, and ($0.3) million and ($0.6) million for the nine months ended September 30, 2022 and 2021, respectively.
(E)
Unrealized (gains) losses excluded from FFO relate to mark-to-market fair value adjustments of publicly traded equity instruments of retail real estate.
Unrealized (gains) losses included in FFO relate to mark-to-market fair value adjustments of publicly traded equity instruments of non-retail real estate.
 
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OVERVIEW
THE COMPANY
Simon Property Group, Inc. (NYSE:SPG) is a self-administered and self-managed real estate investment trust (“REIT”). Simon Property Group, L.P., or the Operating Partnership, is our majority-owned partnership subsidiary that owns all of our real estate properties and other assets. In this package, the terms Simon, we, our, or the Company refer to Simon Property Group, Inc., the Operating Partnership, and its subsidiaries. We own, develop and manage premier shopping, dining, entertainment and mixed-use destinations, which consist primarily of malls, Premium Outlets®, The Mills®, and International Properties. At September 30, 2022, we owned or had an interest in 230 properties comprising 184 million square feet in North America, Asia and Europe. We also owned an 80% interest in The Taubman Realty Group, or TRG, which owns 24 regional, super-regional, and outlet malls in the U.S. and Asia. Additionally, at September 30, 2022, we had a 22.4% ownership interest in Klépierre, a publicly traded, Paris-based real estate company, which owns shopping centers in 14 European countries.
This package was prepared to provide operational and balance sheet information as of September 30, 2022 for the Company and the Operating Partnership.
Certain statements made in this Supplemental Package may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained, and it is possible that our 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 inability to renew leases and relet vacant space at existing properties on favorable terms; an increase in vacant space at our properties; the potential loss of anchor stores or major tenants; the inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise; the intensely competitive market environment in the retail industry, including e-commerce; the inability to lease newly developed properties on favorable terms; our international activities subjecting us to risks that are different from or greater than those associated with our domestic operations, including changes in foreign exchange rates; changes in market rates of interest; 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, including covenants in the governing agreements that impose restrictions on us that may affect our ability to operate freely; 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; the continuing transition of LIBOR to SOFR; 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, including guarantees of certain joint venture indebtedness; environmental liabilities; the conflict in Ukraine; natural disasters; the availability of comprehensive insurance coverage; the potential for terrorist activities; security breaches that could compromise our information technology or infrastructure; uncertainties regarding the impact of pandemics, epidemics or public health crises, and the associated governmental restrictions on our business, financial condition, results of operations, cash flow and liquidity; and the loss of key management personnel. We discuss these and other risks and uncertainties under the heading “Risk Factors” in our annual and quarterly periodic reports filed with the SEC. We may update that discussion in subsequent other periodic reports, but, except as required by law, we undertake no duty or obligation to update or revise these forward-looking statements, whether as a result of new information, future developments, or otherwise.
Any questions, comments or suggestions regarding this Supplemental Information should be directed to Tom Ward, Senior Vice President of Investor Relations (tom.ward@simon.com or 317.685.7330).
 
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OVERVIEW
STOCK INFORMATION
The Company’s common stock and one series of preferred stock are traded on the New York Stock Exchange under the following symbols:
Common Stock SPG
8.375% Series J Cumulative
Redeemable Preferred
   
SPGPrJ
CREDIT RATINGS
Standard & Poor’s
Corporate A- (Stable Outlook)
Senior Unsecured A- (Stable Outlook)
Commercial Paper A2 (Stable Outlook)
Preferred Stock BBB (Stable Outlook)
Moody’s
Senior Unsecured A3 (Stable Outlook)
Commercial Paper P2 (Stable Outlook)
Preferred Stock Baa1 (Stable Outlook)
SENIOR UNSECURED DEBT COVENANTS (1)
Required
Actual
Compliance
Total Debt to Total Assets (1)
≤65%
42%
Yes
Total Secured Debt to Total Assets (1)
≤50%
19%
Yes
Fixed Charge Coverage Ratio
>1.5X
5.0X
Yes
Total Unencumbered Assets to Unsecured Debt
≥125%
248%
Yes
(1)
Covenants for indentures dated June 7, 2005 and later. Total Assets are calculated in accordance with the indenture and essentially represent net operating income (NOI) divided by a 7.0% capitalization rate plus the value of other assets at cost.
 
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SELECTED FINANCIAL AND EQUITY INFORMATION
(In thousands, except as noted)
THREE MONTHS ENDED
SEPTEMBER 30,
NINE MONTHS ENDED
SEPTEMBER 30,
2022
2021
2022
2021
Financial Highlights
Total Revenue – Consolidated Properties $ 1,315,786 $ 1,296,554 $ 3,891,550 $ 3,790,652
Consolidated Net Income (1) $ 621,847 $ 778,648 $ 1,679,637 $ 1,994,977
Net Income Attributable to Common Stockholders (1) $ 539,038 $ 679,936 $ 1,462,412 $ 1,743,053
Basic and Diluted Earnings per Common Share (EPS) (1) $ 1.65 $ 2.07 $ 4.46 $ 5.30
Funds from Operations (FFO) of the Operating Partnership $ 1,098,890 $ 1,175,910 $ 3,206,948 $ 3,326,753
Basic and Diluted FFO per Share (FFOPS) $ 2.93 $ 3.13 $ 8.54 $ 8.85
Comparable FFO of the Operating Partnership (2) $ 1,113,453 $ 1,097,567 $ 3,270,360 $ 3,132,941
Basic and Diluted Comparable FFO per Share (2) $ 2.97 $ 2.92 $ 8.71 $ 8.32
Declared Dividends/Distributions per Share/Unit $ 1.75 $ 1.50 $ 5.10 $ 4.20
AS OF
SEPTEMBER 30,
2022
AS OF
DECEMBER 31,
2021
Stockholders’ Equity Information
Limited Partners’ Units Outstanding at end of period 47,304 47,248
Common Shares Outstanding at end of period 326,954 328,620
Total Common Shares and Limited Partnership Units Outstanding at end of period 374,258 375,868
Weighted Average Limited Partnership Units Outstanding 47,293 47,280
Weighted Average Common Shares Outstanding:
Basic and Diluted – for purposes of EPS and FFOPS
328,107 328,587
Equity Market Capitalization
Common Stock Price at end of period $ 89.75 $ 159.77
Common Equity Capitalization, including Limited Partnership Units $ 33,589,616 $ 60,052,360
Preferred Equity Capitalization, including Limited Partnership Preferred Units 76,120 80,535
Total Equity Market Capitalization $ 33,665,736 $ 60,132,895
(1)
Includes retail real estate disposition gains of  $108.5 million and $201.6 million, or $0.29 and $0.54 per diluted share, for the three and nine months ended September 30, 2021, respectively.
(2)
Comparable FFO does not include a non-cash unrealized loss of  $14.6 million and $63.4 million, or $0.04 and $0.17 per diluted share, for the three and nine months ended September 30, 2022, respectively, from a mark-to-market in fair value of equity instruments and net gains of  $78.3 million and $193.8 million, or $0.21 and $0.53 per diluted share, for the three and nine months ended September 30, 2021, respectively, all of which are included in net income and funds from operations.
 
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NET OPERATING INCOME (NOI) COMPOSITION (1)
For the Nine Months Ended September 30, 2022
[MISSING IMAGE: tm2228483d2-pc_netoperpn.jpg]
(1)
Based on our beneficial interest of NOI.
(2)
Includes TRG U.S. assets.
(3)
Includes Klépierre, international Premium Outlets, international Designer Outlets and international TRG assets.
 
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NET OPERATING INCOME OVERVIEW (AT SHARE)
(In thousands)
FOR THE THREE MONTHS
ENDED SEPTEMBER 30,
% GROWTH
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
% GROWTH
2022
2021
2022
2021
Domestic Property NOI (1) $ 1,242,903 $ 1,215,280 2.3 % $ 3,713,661 $ 3,556,015 4.4 %
International Properties (2) 75,580 62,194 219,889 172,591
Portfolio NOI $ 1,318,483 $ 1,277,474 3.2 % $ 3,933,550 $ 3,728,606 5.5 %
NOI from Other Platform Investments (3) 87,537 140,374 229,960 339,731
NOI from Investments (4) 62,101 42,643 167,250 120,446
Corporate and Other NOI Sources (5) 30,921 43,501 123,917 173,309
Beneficial interest of Combined NOI $ 1,499,042 $ 1,503,992 -0.3 % $ 4,454,677 $ 4,362,092 2.1 %
(1)
All properties in North America (including TRG’s 20 in the U.S., 4 in Canada and 2 in Mexico).
(2)
International properties outside of North America at constant currency (including TRG’s 4 international properties).
(3)
Includes investments in retail operations (J.C. Penney and SPARC Group); intellectual property and licensing ventures (Authentic Brands Group, LLC, or ABG, and Eddie Bauer Ipco); and an e-commerce company (Rue Gilt Groupe, or RGG).
(4)
NOI of Klépierre at constant currency and HBS.
(5)
Includes income components excluded from Domestic Property NOI and Portfolio NOI including domestic lease termination income, interest income, land sale gains, straight line lease income, above/below market lease adjustments, Simon management company revenues, foreign exchange impact, and other assets.
 
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RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(In thousands, except as noted)
RECONCILIATION OF NET INCOME TO NOI
THREE MONTHS ENDED
SEPTEMBER 30,
NINE MONTHS ENDED
SEPTEMBER 30,
2022
2021
2022
2021
Reconciliation of NOI of consolidated entities:
Consolidated Net Income
$
621,847
$ 778,648
$
1,679,637
$ 1,994,977
Income and other tax expense
8,256
67,262
31,168
108,367
Gain on sale or exchange of equity interests
(159,828)
(159,828)
Interest expense
187,878
199,772
560,353
602,207
Loss on extinguishment of debt
28,593
31,552
Income from unconsolidated entities
(163,086)
(198,524)
(434,343)
(562,138)
Unrealized losses in fair value of equity instruments
14,563
4,944
63,412
8,121
Gain on acquisition of controlling interest, sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net
(17,262)
(108,543)
(879)
(201,600)
Operating Income Before Other Items
652,196
612,324
1,899,348
1,821,658
Depreciation and amortization
301,754
311,381
910,190
942,851
Home and regional office costs
43,711
48,667
143,424
132,365
General and administrative
7,784
6,909
24,977
20,739
Other expenses (1)
1,018
13,413
NOI of consolidated entities
$
1,006,463
$ 979,281
$
2,991,352
$ 2,917,613
Less: Noncontrolling interest partners share of NOI
(9,484)
(5,638)
(21,062)
(15,178)
Beneficial NOI of consolidated entities
$
996,979
$ 973,643
$
2,970,290
$ 2,902,435
Reconciliation of NOI of unconsolidated entities:
Net Income
$
174,308
$ 165,143
$
571,005
$ 484,248
Interest expense
147,539
154,501
438,559
453,145
Gain on sale or disposal of, or recovery on, assets and interests in unconsolidated entities, net
(4,522)
(4,522)
(33,371)
Operating Income Before Other Items
317,325
319,644
1,005,042
904,022
Depreciation and amortization
169,453
170,568
504,926
512,165
NOI of unconsolidated entities
$
486,778
$ 490,212
$
1,509,968
$ 1,416,187
Less: Joint Venture partners share of NOI
(255,856)
(257,729)
(788,737)
(744,186)
Beneficial NOI of unconsolidated entities
$
230,922
$ 232,483
$
721,231
$ 672,001
Add: Beneficial interest of NOI from TRG
121,503
108,301
347,199
307,848
Add: Beneficial interest of NOI from Other Platform Investments and Investments (2)
149,638
189,565
415,957
479,808
Beneficial interest of Combined NOI
$
1,499,042
$ 1,503,992
$
4,454,677
$ 4,362,092
(1)
Represents the write-off of pre-development costs.
(2)
See footnotes 3 and 4 on prior page.
 
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RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(In thousands, except as noted)
RECONCILIATION OF FFO OF THE OPERATING PARTNERSHIP TO FUNDS AVAILABLE FOR DISTRIBUTION (OUR SHARE)
THREE
MONTHS ENDED
SEPTEMBER 30, 2022
NINE
MONTHS ENDED
SEPTEMBER 30, 2022
FFO of the Operating Partnership
$ 1,098,890 $ 3,206,948
Non-cash impacts to FFO (1) 36,955 142,480
FFO of the Operating Partnership excluding non-cash impacts
1,135,845 3,349,428
Tenant allowances (68,907) (172,832)
Operational capital expenditures (27,275) (62,700)
Funds available for distribution $ 1,039,663 $ 3,113,896
(1)
Non-cash impacts to FFO of the Operating Partnership include:
THREE
MONTHS ENDED
SEPTEMBER 30, 2022
NINE
MONTHS ENDED
SEPTEMBER 30, 2022
Deductions:
Fair value of debt amortization
(137) (393)
Additions:
Straight-line lease loss
6,834 22,946
Fair market value of lease amortization
8 303
Stock based compensation expense
7,376 21,941
Unrealized losses in fair value of equity instruments
14,563 63,412
Write-off of pre-development costs and other
780 11,293
Mortgage, financing fee and terminated swap amortization expense
7,531 22,978
$ 36,955 $ 142,480
This report contains measures of financial or operating performance that are not specifically defined by generally accepted accounting principles (GAAP) in the United States, including FFO, FFO per share, comparable FFO, comparable FFO per share, funds available for distribution, net operating income (NOI), domestic portfolio NOI and portfolio NOI. FFO and NOI are performance measures that are standard in the REIT business. We believe FFO and NOI provide investors with additional information concerning our operating performance and a basis to compare our performance with the performance 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.
The non-GAAP financial measures used in this report should not be considered as alternatives to net income as a measure of our operating performance or to cash flows computed in accordance with GAAP as a measure of liquidity nor are they indicative of cash flows from operating and financial activities. Reconciliations of other non-GAAP measures used in this report to the most-directly comparable GAAP measure are included in the tables on Reconciliations of Non-GAAP Financial Measures and in the Earnings Release for the latest period.
 
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LEASE INCOME, OTHER INCOME, OTHER EXPENSE, INCOME FROM
UNCONSOLIDATED ENTITIES, AND CAPITALIZED INTEREST
(In thousands)
THREE MONTHS ENDED
SEPTEMBER 30,
NINE MONTHS ENDED
SEPTEMBER 30,
Consolidated Properties
2022
2021
2022
2021
Lease Income
Fixed lease income (1) $ 952,615 $ 921,521 $ 2,874,484 $ 2,783,459
Variable lease income (2) 262,855 286,402 743,551 728,347
Total Lease Income $ 1,215,470 $ 1,207,923 $ 3,618,035 $ 3,511,806
Other Income
Interest, dividend and distribution income (3)
$ 6,727 $ 3,538 $ 11,754 $ 10,246
Lease settlement income 1,480 8,932 28,356 57,974
Gains on land sales 10,792 4,850 16,046 6,487
Other (4)
52,663 44,287 132,308 125,758
Total Other Income $ 71,662 $ 61,607 $ 188,464 $ 200,465
Other Expense
Ground leases $ 11,541 $ 11,148 $ 35,103 $ 33,176
Professional fees and other (5)
19,269 20,105 71,546 51,004
Total Other Expense $ 30,810 $ 31,253 $ 106,649 $ 84,180
Income from Unconsolidated Entities
Share of Joint Ventures (6)
$ 73,626 $ 67,305 $ 242,401 $ 175,988
Share of Klépierre net income, net of amortization of excess investment (7) 27,573 8,947 55,329 115,874
Share of Other Platform Investments net income, net of amortization of excess investment, pre-tax
77,840 133,749 181,187 320,219
Share of TRG net (loss) including amortization of excess investment (15,953) (11,477) (44,574) (49,943)
Total Income from Unconsolidated Entities $ 163,086 $ 198,524 $ 434,343 $ 562,138
Capitalized Interest
Our Share of Consolidated Properties $ 13,544 $ 8,931 $ 28,219 $ 24,952
Our Share of Joint Venture Properties $ 99 $ 138 $ 281 $ 994
(1)
Fixed lease income under our operating leases includes fixed minimum lease consideration and fixed CAM reimbursements recorded on a straight-line basis.
(2)
Variable lease income primarily includes consideration based on sales, as well as reimbursements for real estate taxes, utilities, and marketing.
(3)
Includes distributions from other international investments and preferred unit distributions from TRG.
(4)
Includes ancillary property revenues, gift cards, marketing, media, parking and sponsorship revenues, gains on sale of non-retail real estate investments, non-real estate investments, insurance proceeds from business interruption and other miscellaneous income items.
(5)
The nine months ended September 30, 2022 includes $12.4 million of write-off of costs related to an international outlet development project in Germany we no longer intend to pursue.
(6)
Includes U.S. joint venture operations and international outlet joint ventures.
(7)
Includes $118.4 million for the nine months ended September 30, 2021 from a non-cash gain related to the reversal of a deferred tax liability.
 
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OPERATING INFORMATION
AS OF SEPTEMBER 30,
2022
2021
U.S. Malls and Premium Outlets
Total Number of Properties
163
164
Total Square Footage of Properties (in millions)
137.3
138.8
Ending Occupancy(1):
Consolidated Assets
94.5% 92.9%
Unconsolidated Assets
94.5% 92.4%
Total Portfolio
94.5%
92.8%
Base Minimum Rent PSF(2):
Consolidated Assets
$ 53.58 $ 52.51
Unconsolidated Assets
$ 58.12 $ 57.81
Total Portfolio
$
54.80
$ 53.91
U.S. TRG
Total Number of Properties
20
20
Total Square Footage of Properties (in millions)
20.4
20.4
Ending Occupancy(1)
94.5%
90.3%
Base Minimum Rent PSF(2)
$
61.11
$ 58.18
AS OF SEPTEMBER 30,
2022
2021
The Mills
Total Number of Properties
14
14
Total Square Footage of Properties (in millions)
21.3
21.3
Ending Occupancy(3)
97.8%
97.0%
Base Minimum Rent PSF(2)
$
34.69
$ 33.68
International Properties(4)
Premium Outlets
Total Number of Properties
22
21
Total Square Footage of Properties (in millions)
8.4
8.3
Designer Outlets
Total Number of Properties
11