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Simon Property Group Reports Second Quarter 2019 Results And Raises Quarterly Dividend

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INDIANAPOLIS, July 31, 2019 /PRNewswire/ -- Simon, a global leader in premier shopping, dining, entertainment and mixed-use destinations, today reported results for the quarter ended June 30, 2019.

Simon (PRNewsfoto/Simon)

Results for the Quarter

  • Net income attributable to common stockholders was $495.3 million, or $1.60 per diluted share, as compared to $547.0 million, or $1.77 per diluted share in 2018.  The prior year period included a non-cash investment gain of $35.6 million, or $0.10 per diluted share.  The current year period includes a $12.3 million, or $0.03 per diluted share, unrealized loss in fair value of equity instruments compared to a gain of $9.7 million, or $0.03 per diluted share, in the prior year period.         
  • Funds from Operations ("FFO") was $1.064 billion, or $2.99 per diluted share, as compared to $1.061 billion, or $2.98 per diluted share, in the prior year period.  Adjusting the prior year for the non-cash investment gain and the $11.0 million impact from the adoption of ASC 842, or approximately $0.13 per diluted share combined, FFO per diluted share increased 4.9%.

Results for the Six Months

  • Net income attributable to common stockholders was $1.044 billion, or $3.38 per diluted share, as compared to $1.168 billion, or $3.77 per diluted share in 2018.  The prior year period also included net gains of $180.5 million, or $0.51 per diluted share, primarily related to disposition activity.           
  • Funds from Operations ("FFO") was $2.146 billion, or $6.04 per diluted share, as compared to $2.087 billion, or $5.85 per diluted share, in the prior year period, an increase of 3.2% per diluted share.  Adjusting the prior year for the non-cash investment gain, higher income related to distributions from an international investment and the $22.3 million impact from the adoption of ASC 842, or approximately $0.22 per diluted share combined, FFO per diluted share increased 7.3%.

"I am very pleased with our quarterly results including our continued financial and operational performance which resulted in continued cash flow growth," said David Simon, Chairman, Chief Executive Officer and President.  "During the quarter, we broke ground on a new outlet in Normandy, our third outlet in France.  After completing the four new outlets currently under construction, we will have interests in forty-two international outlets, with nine in Japan; four each in Canada and South Korea; three each in England, France, Germany, Italy, and Spain; two each in Malaysia, Mexico and The Netherlands; and one each in Austria, Belgium, Ireland and Thailand.  We continue to strengthen our real estate communities through our development, redevelopment and densification activities as well as capitalizing on our unique, innovative investment opportunities, resulting in cash flow and FFO per share growth."

U.S. Malls and Premium Outlets Operating Statistics

  • Reported retailer sales per square foot was $669, an increase of 3.5%, for the trailing 12-months ended June 30, 2019.
  • Occupancy was 94.4% at June 30, 2019.
  • Base minimum rent per square foot was $54.52 at June 30, 2019. 
  • Leasing spread per square foot for the trailing 12-months ended June 30, 2019 was $16.53, an increase of 32.3%. 

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

Comparable property NOI growth for the three months ended June 30, 2019 was 2.0% and was 1.8% for the six months ended June 30, 2019.  Total portfolio NOI growth for the three months ended June 30, 2019 was 1.6% and was 1.7% for the six months ended June 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 August 30, 2019 to shareholders of record on August 16, 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 September 30, 2019 to shareholders of record on September 16, 2019. 

Development Activity

During the quarter, construction started on a 229,000 square foot upscale outlet located in Normandy, France, projected to open in summer 2021.  Simon owns 81% of this project. 

Construction continues on three new international development projects including:

  • Malaga Designer Outlet (Malaga, Spain); scheduled to open in October 2019.  Simon owns a 46% interest in this project.
  • Siam Premium Outlets Bangkok (Bangkok, Thailand); scheduled to open in February 2020.  Simon owns a 50% interest in this project.
  • West Midlands Designer Outlet (Cannock, England); scheduled to open in October 2020.  Simon owns a 20% interest in this project. 

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), Paju Premium Outlets (Seoul, South Korea) and Gotemba Premium Outlets (Gotemba, 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., Canada, Asia and Europe.  Simon's share of the costs of all new development and redevelopment projects under construction at quarter-end was approximately $1.7 billion

Balance Sheet Activity

As of June 30, 2019, Simon had more than $6.8 billion of liquidity consisting of cash on hand, including its share of joint venture cash, and available capacity under its revolving credit facilities.

The Company ended the second quarter with strong credit profile metrics, including:

  • Net debt to NOI of 5.1X.
  • Fixed charge coverage of 5.1X.

Common Stock Repurchase Program

During the quarter ended June 30, 2019, the Company repurchased 1,046,580 shares of its common stock. 

2019 Guidance

The Company currently estimates net income to be within a range of $7.04 to $7.14 per diluted share for the year ending December 31, 2019 and reaffirms its previous financial guidance that FFO will be within a range of $12.30 to $12.40 per diluted share.        

The following table provides the reconciliation for the expected range of estimated net income attributable to common stockholders per diluted share to estimated FFO per diluted share:

For the year ending December 31, 2019 





Low


High


End


End

Estimated net income attributable to common stockholders




     per diluted share  

$7.04


$7.14

Depreciation and amortization including Simon's share




     of unconsolidated entities  

5.25


5.25

Unrealized losses (gains) in fair value of equity instruments 

0.02


0.02

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




      interests in unconsolidated entities and impairment, net  

(0.01)


(0.01)





Estimated FFO per diluted share 

$12.30


$12.40

Conference Call

Simon will hold a conference call to discuss the quarterly financial results today at 8:30 a.m. Eastern Time, Wednesday, July 31, 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 August 7, 2019.  To access the audio replay, dial 1-855-859-2056 (international 404-537-3406) passcode 1226926. 

Supplemental Materials and Website

Supplemental information on our second 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, portfolio net operating income growth and comparable property net operating income growth, which are financial performance measures not defined by generally accepted accounting principles in the United States ("GAAP"). Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in this press release and in Simon's supplemental information for the quarter. FFO and comparable property net operating income growth are financial performance measures widely used in the REIT industry. Our definitions of these non-GAAP measures may not be the same as similar measures reported by other REITs.

Forward-Looking Statements

Certain statements made in this press release may be deemed "forward‑looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company believes the expectations reflected in any forward‑looking statements are based on reasonable assumptions, the Company can give no assurance that its expectations will be attained, and it is possible that the Company's actual results may differ materially from those indicated by these forward‑looking statements due to a variety of risks, uncertainties and other factors. Such factors include, but are not limited to: changes in economic and market conditions that may adversely affect the general retail environment; the potential loss of anchor stores or major tenants; the inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise; decreases in market rental rates; the intensely competitive market environment in the retail industry; the inability to lease newly developed properties and renew leases and relet space at existing properties on favorable terms; risks related to international activities, including, without limitation, the impact, if any, of the United Kingdom's exit from the European Union; changes to applicable laws or regulations or the interpretation thereof; risks associated with the acquisition, development, redevelopment, expansion, leasing and management of properties; general risks related to real estate investments, including the illiquidity of real estate investments; the impact of our substantial indebtedness on our future operations; any disruption in the financial markets that may adversely affect our ability to access capital for growth and satisfy our ongoing debt service requirements; any change in our credit rating; changes in market rates of interest and foreign exchange rates for foreign currencies; changes in the value of our investments in foreign entities; our ability to hedge interest rate and currency risk; our continued ability to maintain our status as a REIT; changes in tax laws or regulations that result in adverse tax consequences; risks relating to our joint venture properties; environmental liabilities; changes in insurance costs, the availability of comprehensive insurance coverage; security breaches that could compromise our information technology or infrastructure; natural disasters; the potential for terrorist activities; and the loss of key management personnel. The Company discusses these and other risks and uncertainties under the heading "Risk Factors" in its annual and quarterly periodic reports filed with the SEC.  The Company may update that discussion in 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 Six Months


Ended June 30,


Ended June 30,


2019

2018


2019

2018







REVENUE:






Lease income

$ 1,298,567

$ 1,258,698


$ 2,578,623

$ 2,526,590

Management fees and other revenues

28,248

28,541


55,792

56,722

Other income

70,371

97,820


215,604

195,929

Total revenue

1,397,186

1,385,059


2,850,019

2,779,241







EXPENSES:






Property operating

106,119

102,951


217,669

216,400

Depreciation and amortization

352,606

320,198


681,249

637,134

Real estate taxes

115,914

111,449


231,372

225,635

Repairs and maintenance

21,850

22,191


49,772

49,875

Advertising and promotion

35,420

36,491


72,545

71,291

Home and regional office costs

46,467

32,316


99,027

73,380

General and administrative

10,359

10,913


19,496

23,542

Other

27,820

20,567


53,236

49,041

Total operating expenses

716,555

657,076


1,424,366

1,346,298







OPERATING INCOME BEFORE OTHER ITEMS

680,631

727,983


1,425,653

1,432,943







Interest expense

(198,425)

(206,624)


(397,160)

(412,115)

Income and other taxes

(7,010)

(10,137)


(17,112)

(16,357)

Income from unconsolidated entities

106,542

100,828


196,986

190,854

Unrealized (losses) gains in fair value of equity instruments

(12,317)

9,692


(7,000)

6,664

Gain on sale or disposal of, or recovery on,






   assets and interests in unconsolidated entities and impairment, net

2,681

9,672


2,681

144,949







CONSOLIDATED NET INCOME

572,102

631,414


1,204,048

1,346,938







Net income attributable to noncontrolling interests 

75,944

83,576


158,580

177,611

Preferred dividends

834

834


1,669

1,669







NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS

$ 495,324

$ 547,004


$ 1,043,799

$ 1,167,658













BASIC AND DILUTED EARNINGS PER COMMON SHARE:






Net income attributable to common stockholders

$ 1.60

$ 1.77


$ 3.38

$ 3.77

 

 

Simon Property Group, Inc.

Unaudited Consolidated Balance Sheets

(Dollars in thousands, except share amounts)



June 30,

December 31,


2019

2018

ASSETS:



Investment properties, at cost

$ 37,458,909

$ 37,092,670

Less - accumulated depreciation

13,444,275

12,884,539


24,014,634

24,208,131

Cash and cash equivalents

479,776

514,335

Tenant receivables and accrued revenue, net

736,362

763,815

Investment in unconsolidated entities, at equity

2,141,745

2,220,414

Investment in Klépierre, at equity

1,718,402

1,769,488

Deferred costs and other assets

1,641,996

1,210,040

Total assets

$ 30,732,915

$ 30,686,223




LIABILITIES:



Mortgages and unsecured indebtedness

$ 23,324,679

$ 23,305,535

Accounts payable, accrued expenses, intangibles, and deferred revenues

1,227,799

1,316,861

Cash distributions and losses in unconsolidated entities, at equity

1,567,474

1,536,111

Other liabilities

1,017,966

500,597

Total liabilities

27,137,918

26,659,104




Commitments and contingencies



Limited partners' preferred interest in the Operating Partnership and noncontrolling



redeemable interests in properties

231,325

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

42,584

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

9,723,378

9,700,418

Accumulated deficit

(5,122,281)

(4,893,069)

Accumulated other comprehensive loss

(128,743)

(126,017)

Common stock held in treasury, at cost, 12,421,713 and 11,402,103 shares, respectively

(1,595,305)

(1,427,431)

Total stockholders' equity

2,919,665

3,296,681

Noncontrolling interests

444,007

500,275

Total equity

3,363,672

3,796,956

Total liabilities and equity

$ 30,732,915

$ 30,686,223

 

 

Simon Property Group, Inc.

Unaudited Joint Venture Combined Statements of Operations

(Dollars in thousands)






















For the Three Months Ended
June 30,


For the Six Months Ended
June 30,


2019

2018


2019

2018







REVENUE:






Lease income

$ 760,131

$ 749,892


$ 1,519,110

$ 1,502,497

Other income

79,389

78,378


155,311

159,487

Total revenue

839,520

828,270


1,674,421

1,661,984







OPERATING EXPENSES:






Property operating

140,262

139,553


284,983

285,845

Depreciation and amortization

170,407

166,299


340,664

326,134

Real estate taxes

67,809

68,576


136,526

136,843

Repairs and maintenance

18,832

20,736


41,209

43,933

Advertising and promotion

19,695

20,884


44,021

45,108

Other

47,743

49,885


97,058

99,617

Total operating expenses

464,748

465,933


944,461

937,480







OPERATING INCOME BEFORE OTHER ITEMS

374,772

362,337


729,960

724,504







Interest expense

(157,927)

(190,751)


(313,944)

(341,684)

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

-

25,792


21,587

25,792







NET INCOME

$ 216,845

$ 197,378


$ 437,603

$ 408,612







Third-Party Investors' Share of Net Income

$ 110,620

$ 96,240


$ 223,287

$ 202,424







Our Share of Net Income

106,225

101,138


214,316

206,188

Amortization of Excess Investment (A)

(20,774)

(21,395)


(41,567)

(42,921)

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




Other Income in the Consolidated Financial Statements

-

-


(9,155)

-

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




Unconsolidated Entities, net

-

(9,672)


-

(9,672)

Income from Unconsolidated Entities (B)

$ 85,451

$ 70,071


$ 163,594

$ 153,595







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)















June 30,

December 31,


2019

2018

Assets:



Investment properties, at cost

$ 19,124,164

$ 18,807,449

Less - accumulated depreciation

7,119,224

6,834,633


12,004,940

11,972,816

Cash and cash equivalents

882,158

1,076,398

Tenant receivables and accrued revenue, net

425,658

445,148

Deferred costs and other assets

618,538

390,818

Total assets

$ 13,931,294

$ 13,885,180




Liabilities and Partners' Deficit:



Mortgages

$ 15,253,009

$ 15,235,415

Accounts payable, accrued expenses, intangibles, and deferred revenue

881,032

976,311

Other liabilities

554,459

344,205

Total liabilities

16,688,500

16,555,931




Preferred units

67,450

67,450

Partners' deficit

(2,824,656)

(2,738,201)

Total liabilities and partners' deficit

$ 13,931,294

$ 13,885,180




Our Share of:



Partners' deficit

$ (1,227,185)

$ (1,168,216)

Add: Excess Investment (A)

1,564,970

1,594,198

Our net Investment in unconsolidated entities, at equity

$ 337,785

$ 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 Six Months Ended



June 30,


June 30,



2019


2018


2019


2018










Consolidated Net Income (D)

$               572,102


$           631,414


$         1,204,048


$      1,346,938

Adjustments to Arrive at FFO:


















Depreciation and amortization from consolidated 









     properties 

350,045


317,364


675,983


631,370


Our share of depreciation and amortization from









     unconsolidated entities, including Klépierre and HBS

139,271


137,279


273,902


272,204


Gain on sale or disposal of, or recovery on,









   assets and interests in unconsolidated entities and impairment, net

(2,681)


(9,672)


(2,681)


(144,949)


Unrealized losses (gains) in fair value of equity instruments

12,317


(9,692)


7,000


(6,664)


Net (income) loss attributable to noncontrolling interest holders in









     properties

(400)


(279)


518


(186)


Noncontrolling interests portion of depreciation and amortization

(4,935)


(4,537)


(9,818)


(9,185)


Preferred distributions and dividends

(1,313)


(1,313)


(2,626)


(2,626)

FFO of the Operating Partnership

$            1,064,406


$        1,060,564


$         2,146,326


$      2,086,902



















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








Diluted net income per share

$                     1.60


$                 1.77


$                 3.38


$              3.77


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

1.37


1.27


2.65


2.51


Gain on sale or disposal of, or recovery on,









   assets and interests in unconsolidated entities and impairment, net

(0.01)


(0.03)


(0.01)


(0.41)


Unrealized losses (gains) in fair value of equity instruments

0.03


(0.03)


0.02


(0.02)

Diluted FFO per share 

$                     2.99


$                 2.98


$                  6.04


$              5.85










Details for per share calculations:

















FFO of the Operating Partnership

$            1,064,406


$        1,060,564


$         2,146,326


$      2,086,902

Diluted FFO allocable to unitholders

(140,077)


(139,426)


(282,396)


(273,985)

Diluted FFO allocable to common stockholders

$               924,329


$           921,138


$         1,863,930


$      1,812,917










Basic and Diluted weighted average shares outstanding

308,709


309,355


308,843


309,966

Weighted average limited partnership units outstanding

46,783


46,827


46,791


46,845










Basic and Diluted weighted average shares and units outstanding

355,492


356,182


355,634


356,811










Basic and Diluted FFO per Share

$                     2.99


$                 2.98


$                  6.04


$               5.85

    Percent Change

0.3%




3.2%












 

 

Simon Property Group, Inc.

Footnotes to Unaudited Financial Information














Notes:  

























(A)

Excess investment represents the unamortized difference of our investment over equity in the underlying net assets of the related partnerships and joint ventures shown therein.  The Company generally amortizes excess investment over the life of the related 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 $7.2 million and $1.4 million for the three months ended June 30, 2019 and 2018, respectively, and $11.6 million and $2.7 million for the six months ended June 30, 2019 and 2018, respectively.














-

Straight-line adjustments increased income by $27.2 million and $6.4 million for the three months ended June 30, 2019 and 2018, respectively, and $43.8 million and $15.0 million for the six months ended June 30, 2019 and 2018, respectively.














-

Amortization of fair market value of leases from acquisitions increased income by $1.4 million and $1.0 million for the three months ended June 30, 2019 and 2018, respectively, and $2.7 million and $2.4 million for the six months ended June 30, 2019 and 2018, respectively.

 

 

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