10-QPeriod: Q1 FY2009

SIMON PROPERTY GROUP INC. Quarterly Report for Q1 Ended Mar 31, 2009

Filed May 1, 2009For Securities:SPGSPG-PJ

Summary

Simon Property Group, Inc. (SPG) reported its first quarter 2009 results, demonstrating resilience amidst a challenging economic environment. The company saw a notable increase in diluted earnings per share, rising by 15.4% to $0.45 compared to $0.39 in the prior year period. This growth was driven by lease termination income, reduced interest expenses due to lower debt levels and declining LIBOR rates, and successful cost-saving measures across property operations and administrative functions. Despite a 7.3% decline in regional mall comparable sales per square foot, the company successfully increased average base rents by 6.8% and achieved a strong leasing spread of 25.0%, indicating effective lease management and strong tenant demand for its prime locations. Financially, SPG maintained a strong liquidity position, with cash and cash equivalents increasing to $898.3 million. The company actively managed its debt, repaying $700 million in unsecured notes and issuing $650 million in new notes to optimize its capital structure. While the retail landscape presented headwinds, evidenced by a slight decrease in regional mall occupancy to 90.8%, SPG's Premium Outlet centers continued to perform well with 96.9% occupancy and only a marginal decrease in comparable sales, underscoring the appeal of value-oriented shopping. The company also emphasized its ongoing cost control measures and strategic development pipeline, projecting sufficient resources to meet its obligations through 2010.

Financial Statements
Beta
Revenue$918.49M
Operating Expenses$554.28M
Operating Income$364.22M
Interest Expense$226.04M
Net Income$106.77M
EPS (Basic)$0.45
EPS (Diluted)$0.45
Shares Outstanding (Basic)235.91M
Shares Outstanding (Diluted)236.13M

Key Highlights

  • 1Diluted earnings per share increased by 15.4% to $0.45 in Q1 2009, up from $0.39 in Q1 2008.
  • 2Total revenue grew to $918.5 million from $895.3 million year-over-year, indicating top-line resilience.
  • 3Regional mall comparable sales per square foot decreased by 7.3%, but average base rents increased by 6.8% with a strong leasing spread of 25.0%.
  • 4Premium Outlet centers demonstrated strong performance with 96.9% occupancy and a modest 0.8% decrease in comparable sales per square foot.
  • 5Cash and cash equivalents increased to $898.3 million as of March 31, 2009, up from $773.5 million at the end of 2008.
  • 6The company repaid $700 million in unsecured notes and issued $650 million in new notes, actively managing its debt structure.
  • 7Despite economic pressures, the company reported a 13.5% increase in Funds from Operations (FFO) to $476.8 million.

Frequently Asked Questions

SPG reported a significant increase in diluted earnings per share, rising by 15.4% to $0.45 for the first quarter of 2009, compared to $0.39 in the same period of 2008. This improvement was attributed to lease termination income, lower interest expenses, and effective cost-reduction measures.

Performance differed notably. Regional malls experienced a 7.3% decrease in comparable sales per square foot, and occupancy slightly declined to 90.8%. In contrast, Premium Outlet centers showed resilience with 96.9% occupancy and only a minor 0.8% decrease in comparable sales per square foot, benefiting from consumer preference for value.

SPG maintained a strong liquidity position, with cash and cash equivalents increasing to $898.3 million. The company actively managed its debt by repaying $700 million in unsecured notes and issuing $650 million in new notes. Approximately 11% of its total consolidated debt was variable rate, with interest rate protection agreements in place. SPG believes it has sufficient cash and credit facility availability to meet its obligations through 2010.

The filing acknowledges the unfavorable economic environment impacting core business fundamentals, particularly for regional malls, leading to decreased comparable sales and higher bankruptcies. Other risks mentioned include potential difficulties in accessing capital markets, changes in interest rates and foreign exchange rates, tenant insolvencies, and general risks associated with the retail real estate sector.