Simon Property Group Reports Third Quarter Results, Announces Increase In Quarterly Dividend And Raises 2012 Guidance PR Newswire INDIANAPOLIS, Oct. 25, 2012 INDIANAPOLIS, Oct. 25, 2012 /PRNewswire-FirstCall/ -- Simon Property Group, Inc. (the "Company" or "Simon") (NYSE:SPG) today reported results for the quarter and nine months ended September 30, 2012. Results for the Quarter oFunds from Operations ("FFO") was $720.1 million, or $1.99 per diluted share, as compared to $606.2 million, or $1.71 per diluted share, in the prior year period. The increase on a per share basis was 16.4%. oNet income attributable to common stockholders was $254.9 million, or $0.84 per diluted share, as compared to $274.0 million, or $0.93 per diluted share, in the prior year period. 2011 results included a net gain from acquisition and disposition activities of $0.22 per share. Results for the Nine Months oFunds from Operations ("FFO") was $2.057 billion, or $5.70 per diluted share, as compared to $1.760 billion, or $4.97 per diluted share, in the prior year period. The increase on a per share basis was 14.7%. oNet income attributable to common stockholders was $1.116 billion, or $3.71 per diluted share, as compared to $658.5 million, or $2.24 per diluted share, in the prior year period. "It was an excellent quarter for our Company," said David Simon, Chairman and Chief Executive Officer. "We generated 16.4% growth in FFO and continued to strengthen our retail real estate platform through significant development activities. The quality of our Mall and Premium Outlet portfolio is evident with continued increases in occupancy and sales and 4.7% growth in quarterly comparable property net operating income. We are pleased to raise our dividend for the fifth consecutive quarter and once again increase guidance for 2012." U.S. Operational Statistics^(^1) As of As of % September 30, September 30, 2011 Increase 2012 Occupancy^(2) 94.6% 93.8% + 80 basis points Total Sales per Sq. Ft. $562 $514 9.3% ^ (3) Base Minimum Rent per $40.33 $38.84 3.8% Sq. Ft. ^ (2) (1) Combined information for U.S. Malls and Premium Outlets. 2011 statistics have been restated to include Malls previously owned by The Mills Limited Partnership, now owned by Simon Property Group, L.P., and Premium Outlets acquired in the 2010 acquisition of Prime Outlets Acquisition Company. (2) Represents mall stores in Malls and all owned square footage in Premium Outlets. (3) Rolling 12 month sales per square foot for mall stores less than 10,000 square feet in Malls and all owned square footage in Premium Outlets. Dividends Today the Company announced that the Board of Directors declared a quarterly common stock dividend of $1.10 per share, an increase of 4.8% from the previous quarter and an increase of 22.2% from the year earlier period. The dividend is payable on November 30, 2012 to stockholders of record on November 16, 2012. The Company 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, 2012 to stockholders of record on December 17, 2012. Development Activity On October 19^th, the Company opened a 350,000 square foot upscale outlet center owned in a 50/50 joint venture with Tanger Factory Outlet Centers, Inc. in Texas City, Texas. The center, which was 97% leased at opening, is located approximately 30 miles south of downtown Houston and 20 miles north of Galveston on highly-traveled Interstate 45 at Exit 17 at Holland Road. The Company started construction on St. Louis Premium Outlets on July 11th. The project is located in Chesterfield, Missouri and is a part of Chesterfield Blue Valley, a mixed-use development to include office space, hotel, restaurant and entertainment venues. Located on the south side of I-64/US Highway 40 east of the Daniel Boone Bridge, the center's first phase of 350,000 square feet and 85 stores will open in September of 2013. The Company owns a 60% interest in this project, which is a joint venture with Woodmont Outlets. Construction is expected to commence shortly on the Company's first outlet center in Brazil. The project is located northwest of Sao Paulo, Brazil and is being developed in a 50/50 joint venture with BR Malls Participacoes S.A. The 310,000 square foot center is scheduled to open in November of 2013. Construction continues on several new Premium Outlets: oIn Shisui (Chiba), Japan – a 230,000 square foot upscale outlet center located one hour from central Tokyo and 15 minutes from Narita International Airport. The center is scheduled to open in April of 2013 with approximately 110 stores, including international brands, Japanese brands and restaurants. The Company owns a 40% interest in this project, its ninth Premium Outlet Center in Japan. oIn Chandler (Phoenix), Arizona – an upscale outlet center adjacent to the Wild Horse Pass Hotel & Casino located on Interstate 10. Phase I of the project will be comprised of 360,000 square feet housing approximately 90 outlet stores featuring high-quality designer and name brands. The Company owns 100% of this project which is scheduled to open in April of 2013. oIn Halton Hills (Toronto), Canada – a 360,000 square foot upscale outlet center that will house over 100 high quality outlet stores. Toronto Premium Outlets is expected to be the Canadian entry point for selected upscale, U.S. retailers and designer brands. The Company owns a 50% interest in this project which is scheduled to open in August of 2013. oIn Busan, Korea – a 340,000 square foot upscale outlet center that will serve southeastern Korea, including the cities of Busan, Ulsan and Daegu, as well as local and overseas visitors. The center is scheduled to open in September of 2013. The Company owns a 50% interest in this project, which will be its third Premium Outlet Center in Korea. Redevelopment and expansion projects are underway at 24 properties in the U.S. and one property in Japan. During the first nine months of 2012, 34 new anchor and big box tenants opened in the Company's U.S. portfolio and more than 40 are currently scheduled to open in the fourth quarter of 2012 and 2013. Capital Markets On July 20^th, the Company redeemed 2.0 million limited partnership units of its majority-owned operating partnership subsidiary, Simon Property Group, L.P. (the "Operating Partnership"), owned by an affiliate of JCPenney for $124.00 per unit in cash. Sale of Investment in Marketable Securities On October 23^rd, the Company completed the sale of its entire investment in the marketable securities of Capital Shopping Centres Group PLC (35.4 million shares) and Capital & Counties Properties PLC (38.9 million shares) generating proceeds of approximately $327 million. 2012 Guidance Today the Company updated and raised its guidance for 2012, stating that it expects FFO, excluding activity related to investments in marketable securities, will be within a range of $7.80 to $7.85 per diluted share for the year ending December 31, 2012, and diluted net income will be within a range of $4.61 to $4.66 per share. The following table provides a reconciliation of estimated diluted net income available to common stockholders per share to estimated diluted FFO per share. For the year ending December 31, 2012 Low High End End Estimated diluted net income available to common stockholders per share $4.61 $4.66 Gain upon acquisition of controlling interests, sale or disposal of assets and interests in unconsolidated entities, and impairment charge on investment in unconsolidated entities, (1.36) (1.36) net Depreciation and amortization including the Company's share of equity method investments 4.55 4.55 Estimated diluted FFO per $7.80 $7.85 share Conference Call The Company will provide an online simulcast of its quarterly conference call at www.simon.com (Investors tab), www.earnings.com, and www.streetevents.com. To listen to the live call, please go to any of these websites at least fifteen minutes prior to the call to register, download and install any necessary audio software. The call will begin at 11:00 a.m. Eastern Time (New York time) today, October 25, 2012. An online replay will be available for approximately 90 days at www.simon.com, www.earnings.com, and www.streetevents.com. A fully searchable podcast of the conference call will also be available at www.REITcafe.com. Supplemental Materials and Website The Company has prepared a supplemental information package which is available at www.simon.com in the Investors section, Financial Information tab. It has also been furnished to the SEC as part of a current report on Form 8-K. If you wish to receive a copy via mail or email, please call 800-461-3439. We routinely post important information for investors on our website, www.simon.com, in the "Investors" section. We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be 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 and comparable property net operating income growth, which are adjusted from financial performance measures defined by accounting principles generally accepted in the United States ("GAAP"). Reconciliations of these measures to the most directly comparable GAAP measures are included within this press release or the Company's supplemental information package. FFO and comparable property net operating income growth are financial performance measures widely used in the REIT industry. Forward-Looking Statements Certain statements made in this press release may be deemed "forward‑looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company believes the expectations reflected in any forward‑looking statements are based on reasonable assumptions, the Company can give no assurance that our expectations will be attained, and it is possible that actual results may differ materially from those indicated by these forward‑looking statements due to a variety of risks, uncertainties and other factors. Such factors include, but are not limited to: the Company's ability to meet debt service requirements, the availability and terms of financing, changes in the Company's credit rating, changes in market rates of interest and foreign exchange rates for foreign currencies, changes in value of investments in foreign entities, the ability to hedge interest rate and currency risk, risks associated with the acquisition, development, expansion, leasing and management of properties, general risks related to retail real estate, the liquidity of real estate investments, environ-mental liabilities, international, national, regional and local economic climates, changes in market rental rates, trends in the retail industry, relationships with anchor tenants, the inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise, risks relating to joint venture properties, costs of common area maintenance, intensely competitive market environment in the retail industry, risks related to international activities, insurance costs and coverage, terrorist activities, changes in economic and market conditions and maintenance of our status as a real estate investment trust. The Company discusses these and other risks and uncertainties under the heading "Risk Factors" in its annual and quarterly periodic reports filed with the SEC. The Company may update that discussion in its periodic reports, but otherwise the Company undertakes no duty or obligation to update or revise these forward‑looking statements, whether as a result of new information, future developments, or otherwise. Simon Property Group Simon Property Group, Inc. (NYSE:SPG) is an S&P 100 company and the largest real estate company in the world. The Company currently owns or has an interest in 333 retail real estate properties in North America and Asia comprising 242 million square feet. We are headquartered in Indianapolis, Indiana and employ approximately 5,500 people in the U.S. For more information, visit the Simon Property Group website at www.simon.com. Simon Property Group, Inc. and Subsidiaries 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, 2012 2011 2012 2011 REVENUE: Minimum rent $ 759,039 $ 664,724 $2,207,334 $1,958,626 Overage rent 51,170 36,653 110,277 75,774 Tenant reimbursements 342,443 294,305 979,300 861,352 Management fees and other 32,294 31,249 92,928 93,001 revenues Other income 43,671 47,429 145,813 146,341 Total revenue 1,228,617 1,074,360 3,535,652 3,135,094 EXPENSES: Property operating 132,378 122,446 353,136 331,013 Depreciation and amortization 310,244 260,802 907,217 788,410 Real estate taxes 105,694 87,264 311,173 273,952 Repairs and maintenance 26,556 24,465 78,862 79,957 Advertising and promotion 28,114 25,773 77,762 72,619 (Recovery of) provision for (1,180) 1,501 5,271 3,180 credit losses Home and regional office costs 27,057 30,525 95,019 91,035 General and administrative 14,165 14,974 42,787 31,614 Other 24,637 23,012 66,510 61,254 Total operating expenses 667,665 590,762 1,937,737 1,733,034 OPERATING INCOME 560,952 483,598 1,597,915 1,402,060 Interest expense (288,896) (244,384) (835,532) (737,018) Income tax benefit (expense) of 97 (860) (1,786) (2,706) taxable REIT subsidiaries Income from unconsolidated 37,129 17,120 96,613 49,561 entities (Loss) gain upon acquisition of controlling interests, sale or disposal of assets and interests in unconsolidated entities, and impairment charge on investment in unconsolidated entities, net (2,911) 78,307 491,926 92,072 (A) CONSOLIDATED NET INCOME 306,371 333,781 1,349,136 803,969 Net income attributable to 50,616 58,947 230,857 142,934 noncontrolling interests Preferred dividends 834 834 2,503 2,503 NET INCOME ATTRIBUTABLE TO COMMON $ 254,921 $ 274,000 $1,115,776 $ 658,532 STOCKHOLDERS BASIC EARNINGS PER COMMON SHARE: Net income attributable to $ 0.84 $ 0.93 $ 3.71 $ 2.24 common stockholders DILUTED EARNINGS PER COMMON SHARE: Net income attributable to $ 0.84 $ 0.93 $ 3.71 $ 2.24 common stockholders Simon Property Group, Inc. and Subsidiaries Unaudited Consolidated Balance Sheets (Dollars in thousands, except share amounts) September 30, December 31, 2012 2011 ASSETS: Investment properties at cost $ 34,366,668 $29,657,046 Less - accumulated depreciation 9,101,007 8,388,130 25,265,661 21,268,916 Cash and cash equivalents 452,712 798,650 Tenant receivables and accrued revenue, net 456,397 486,731 Investment in unconsolidated entities, at 2,013,651 1,378,084 equity Investment in Klepierre, at equity 1,945,128 - Deferred costs and other assets 1,844,428 1,633,544 Notes receivable from related party - 651,000 Total assets $ 31,977,977 $26,216,925 LIABILITIES: Mortgages and other indebtedness $ 22,569,634 $18,446,440 Accounts payable, accrued expenses, 1,204,438 1,091,712 intangibles, and deferred revenues Cash distributions and losses in partnerships 728,470 695,569 and joint ventures, at equity Other liabilities 300,388 170,971 Total liabilities 24,802,930 20,404,692 Commitments and contingencies Limited partners' preferred interest in the Operating Partnership and noncontrolling redeemable interests in properties 354,006 267,945 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 44,801 45,047 liquidation value of $ 39,847 Common stock, $ 0.0001 par value, 511,990,000 shares authorized, 313,103,803 and 297,725,698 issued and outstanding, 31 30 respectively Class B common stock, $ 0.0001 par value, 10,000 shares authorized, 8,000 issued and outstanding - - Capital in excess of par value 9,054,730 8,103,133 Accumulated deficit (3,057,328) (3,251,740) Accumulated other comprehensive loss (64,776) (94,263) Common stock held in treasury at cost, (135,781) (152,541) 3,762,595 and 3,877,448 shares, respectively Total stockholders' equity 5,841,677 4,649,666 Noncontrolling interests 979,364 894,622 Total equity 6,821,041 5,544,288 Total liabilities and equity $ 31,977,977 $26,216,925 Simon Property Group, Inc. and Subsidiaries Unaudited Joint Venture Statements of Operations (Dollars in thousands) For the Three Months For the Nine Months Ended September 30, Ended September 30, 2012 2011 2012 2011 Revenue: Minimum rent $ 370,183 $ 356,155 $ 1,091,701 $ 1,046,992 Overage rent 44,002 36,923 128,622 94,114 Tenant reimbursements 176,544 169,911 508,698 490,276 Other income 34,754 36,041 121,686 107,449 Total revenue 625,483 599,030 1,850,707 1,738,831 Operating Expenses: Property operating 125,162 123,506 351,963 339,699 Depreciation and amortization 125,512 125,260 374,333 361,345 Real estate taxes 45,068 40,897 132,618 127,831 Repairs and maintenance 15,418 14,954 45,269 46,005 Advertising and promotion 11,706 12,632 39,600 37,123 (Recovery of) provision for (646) 1,411 (247) 3,624 credit losses Other 36,089 37,100 128,134 109,765 Total operating expenses 358,309 355,760 1,071,670 1,025,392 Operating Income 267,174 243,270 779,037 713,439 Interest expense (148,891) (149,839) (451,581) (441,396) Loss from unconsolidated (316) (596) (947) (1,054) entities Income from Continuing 117,967 92,835 326,509 270,989 Operations Loss from operations of discontinued joint venture (1,978) (17,431) (20,769) (39,646) interests (Loss) gain on disposal of (4,904) 78 (4,904) 15,583 discontinued operations, net Net Income $ 111,085 $ 75,482 $ 300,836 $ 246,926 Third-Party Investors' Share of $ 66,308 $ 45,271 $ 163,108 $ 151,741 Net Income Our Share of Net Income 44,777 30,211 137,728 95,185 Amortization of Excess (21,726) (13,052) (55,059) (37,832) Investment (B) Our Share of Loss (Gain) on Sale or Disposal of Assets and Interests in Unconsolidated 9,245 (39) 9,245 (7,792) Entities, net Income from Unconsolidated $ 32,296 $ 17,120 $ 91,914 $ 49,561 Entities (C) Note: The above financial presentation does not include any information related to our investment in Klepierre. For additional information, see footnote C attached hereto. Simon Property Group, Inc. and Subsidiaries Unaudited Joint Venture Balance Sheets (Dollars in thousands) September 30, December 31, 2012 2011 Assets: Investment properties, at cost $ 14,128,861 $ 20,481,657 Less - accumulated depreciation 4,680,199 5,264,565 9,448,662 15,217,092 Cash and cash equivalents 554,116 806,895 Tenant receivables and accrued revenue, net 235,507 359,208 Investment in unconsolidated entities, at equity 39,539 133,576 Deferred costs and other assets 352,392 526,101 Total assets $ 10,630,216 $ 17,042,872 Liabilities and Partners' Deficit: Mortgages and other indebtedness $ 11,106,661 $ 15,582,321 Accounts payable, accrued expenses, intangibles, 607,805 775,733 and deferred revenue Other liabilities 326,564 981,711 Total liabilities 12,041,030 17,339,765 Preferred units 67,450 67,450 Partners' deficit (1,478,264) (364,343) Total liabilities and partners' deficit $ 10,630,216 $ 17,042,872 Our Share of: Partners' deficit $ (675,359) $ (32,000) Add: Excess Investment (B) 1,960,540 714,515 Our net Investment in unconsolidated entities $ 1,285,181 $ 682,515 Note: The above financial presentation does not include any information related to our investment in Klepierre. For additional information, see footnote C attached hereto. Simon Property Group, Inc. and Subsidiaries Unaudited Reconciliation of Non-GAAP Financial Measures (D) (Amounts in thousands, except per share amounts) Reconciliation of Consolidated Net Income to FFO For the Three Months For the Nine Months Ended Ended September 30, September 30, 2012 2011 2012 2011 Consolidated Net Income (E) (F) $ $ $ $ (G) (H) 306,371 333,781 1,349,136 803,969 Adjustments to Consolidated Net Income to Arrive at FFO: Depreciation and amortization from consolidated properties 306,612 257,172 896,147 777,489 Simon's share of depreciation and amortization from unconsolidated entities, including 110,188 98,601 321,318 286,358 Klepierre Loss (gain) upon acquisition of controlling interests, sale or disposal of assets and interests in unconsolidated entities, and impairment charge on investment in 2,911 (78,307) (491,926) (92,072) unconsolidated entities, net Net income attributable to noncontrolling interest holders in properties (2,464) (1,829) (6,427) (5,879) Noncontrolling interests portion of depreciation and (2,253) (1,870) (6,835) (6,080) amortization Preferred distributions and (1,313) (1,313) (3,939) (3,939) dividends FFO of the Operating $ $ $ $ Partnership 720,052 606,235 2,057,474 1,759,846 Diluted net income per share to diluted FFO per share reconciliation: Diluted net income per share $ $ $ $ 0.84 0.93 3.71 2.24 Depreciation and amortization from consolidated properties and Simon's share of depreciation and amortization from unconsolidated entities, including Klepierre, net of noncontrolling interests portion of depreciation and 1.14 1.00 3.35 2.99 amortization Loss (gain) upon acquisition of controlling interests, sale or disposal of assets and interests in unconsolidated entities, and impairment charge on investment in 0.01 (0.22) (1.36) (0.26) unconsolidated entities, net Diluted FFO per share $ $ $ $ 1.99 1.71 5.70 4.97 Details for per share calculations: FFO of the Operating $ $ $ $ Partnership 720,052 606,235 2,057,474 1,759,846 Adjustments for dilution calculation: Diluted FFO of the Operating 720,052 606,235 2,057,474 1,759,846 Partnership Diluted FFO allocable to (116,207) (103,971) (342,704) (300,458) unitholders Diluted FFO allocable to common $ $ $ $ stockholders 603,845 502,264 1,714,770 1,459,388 Basic weighted average shares 304,108 293,736 301,029 293,397 outstanding Adjustments for dilution calculation: Effect of stock options 1 22 1 88 Diluted weighted average shares 304,109 293,758 301,030 293,485 outstanding Weighted average limited 58,524 60,809 60,162 60,423 partnership units outstanding Diluted weighted average shares 362,633 354,567 361,192 353,908 and units outstanding Basic FFO per Share $ $ $ $ 1.99 1.71 5.70 4.97 Percent Change 16.4% 14.7% Diluted FFO per Share $ $ $ $ 1.99 1.71 5.70 4.97 Percent Change 16.4% 14.7% Simon Property Group, Inc. and Subsidiaries Footnotes to Unaudited Reconciliation of Non-GAAP Financial Measures Notes: Primarily consists of 2012 and 2011 non-cash gains resulting from our (A) acquisition activity and the remeasurement of our previously held interest to fair value for those properties in which we now have a controlling interest. Excess investment represents the unamortized difference of the Company's (B) investment over equity in the underlying net assets of the related partnerships and joint ventures shown therein. The Company generally amortizes excess investment over the life of the related properties. The Unaudited Joint Venture Statements of Operations do not include any operations or our share of net income or excess investment amortization related to our investment in Klepierre. Amounts included in Footnotes E (C) - H below exclude our share of related activity for our investment in Klepierre. For further information, reference should be made to financial information in Klepierre's public filings and additional discussion and analysis in our Form 10-Q. 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 (D) 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. The Company determines FFO based upon the definition set forth by the National Association of Real Estate Investment Trusts ("NAREIT"). The Company determines 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 sales of, or any impairment charges related to, previously depreciated 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. The Company has adopted NAREIT's clarification of the definition of FFO that requires it to include the effects of nonrecurring items not classified as extraordinary, cumulative effect of accounting changes, or a gain or loss resulting from the sale of, or any impairment charges relating to, previously depreciated operating properties. We include in FFO gains and losses realized from the sale of land, outlot buildings, marketable and non-marketable securities, and investment holdings of non-retail real estate. However, you should understand that FFO does not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to net income determined in accordance with GAAP as a measure of operating performance, and is not an alternative to cash flows as a measure of liquidity. Includes the Company's share of gains on land sales of $1.9 million and (E) $0.1 million for the three months ended September 30, 2012 and 2011, respectively, and $11.7 million and $4.5 million for the nine months ended September 30, 2012 and 2011, respectively. Includes the Company's share of straight-line adjustments to minimum rent of $11.5 million and $10.8 million for the three monthsended (F) September 30, 2012 and 2011, respectively, and $31.7 million and $26.2 million for the nine months ended September 30, 2012 and 2011, respectively. Includes the Company's share of the amortization of fair market value of leases from acquisitions of $5.5 million and $6.0 millionfor the three (G) months ended September 30, 2012 and 2011, respectively, and $16.2 million and $17.7 million for the nine monthsended September 30, 2012 and 2011, respectively. Includes the Company's share of debt premium amortization of $9.6 (H) million and $2.3 million for the three months endedSeptember 30, 2012 and 2011, respectively, and $29.7 million and $7.0 million for the nine months ended September 30, 2012 and 2011, respectively. SOURCE Simon Property Group, Inc. Website: http://www.simon.com Contact: Investors: Shelly Doran, +1-317-685-7330 or Media: Les Morris, +1- 317-263-7711
Simon Property Group Reports Third Quarter Results, Announces Increase In Quarterly Dividend And Raises 2012 Guidance
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