10-QPeriod: Q2 FY2006

SIMON PROPERTY GROUP INC. Quarterly Report for Q2 Ended Jun 30, 2006

Filed August 7, 2006For Securities:SPGSPG-PJ

Summary

Simon Property Group, Inc. (SPG) reported its financial results for the quarter ended June 30, 2006. The company demonstrated continued revenue growth, with total revenue increasing to $798.7 million for the quarter, up from $752.1 million in the same period last year. This growth was driven by increases in minimum rent, tenant reimbursements, and other income. Despite a challenging interest rate environment, SPG managed its borrowing costs effectively, with its overall borrowing rate increasing only slightly. The company also saw positive trends in key operational metrics for its regional malls and outlet centers, including increased comparable sales per square foot and rising average base rents. Financially, SPG strengthened its balance sheet by repaying significant portions of its debt, including the full repayment of the $1.8 billion facility used for the Chelsea acquisition. Additionally, the company issued $800 million in senior unsecured notes, further optimizing its debt structure and improving its credit rating. While net income available to common stockholders decreased due to significant gains recognized in the prior year from property dispositions, the underlying operational performance remained robust, and the company continued to invest in its development pipeline and strategic renovations. SPG also initiated a share repurchase program, signaling confidence in its future prospects.

Key Highlights

  • 1Total revenue for the second quarter of 2006 increased to $798.7 million, a 6.2% rise year-over-year.
  • 2Comparable sales per square foot for regional malls increased by 5.9% to $468 for the six months ended June 30, 2006.
  • 3SPG repaid $1.0 billion in borrowings on its Credit Facility and made a final $600 million payment on its Chelsea acquisition facility, significantly reducing debt.
  • 4The company issued $800 million in senior unsecured notes, with a weighted average fixed interest rate of 5.93%, to reduce borrowings.
  • 5Standard & Poor's upgraded SPG's corporate credit rating to 'A-' from 'BBB+', leading to lower interest rates on its credit facility.
  • 6Regional mall average base rents increased by 2.8% year-over-year to $35.10 psf as of June 30, 2006.
  • 7The company initiated a new common stock repurchase program, authorizing the purchase of up to 6 million shares.

Frequently Asked Questions

Total revenue for the second quarter of 2006 was $798.7 million, an increase of 6.2% compared to $752.1 million in the same period of 2005. This growth was driven by increases in minimum rent, tenant reimbursements, and other income.

Simon Property Group is actively managing its debt by repaying significant borrowings, such as the Chelsea acquisition facility and credit facility, and issuing new senior unsecured notes at favorable rates. The company also benefited from an upgrade in its corporate credit rating to 'A-' by Standard & Poor's, which lowered its borrowing costs.

Operational performance remains strong. For regional malls, comparable sales per square foot increased by 5.9% for the first six months of 2006, and average base rents rose by 2.8%. Premium Outlet Centers and community/lifestyle centers also showed positive contributions.

SPG is actively engaged in new developments and strategic expansions/renovations across its portfolio, including new retail centers and outlet malls in various US locations, as well as international projects in Europe and Japan. The company expects to fund these with cash flow from operations, credit facility borrowings, or project-specific loans.