10-QPeriod: Q2 FY2009

SIMON PROPERTY GROUP INC. Quarterly Report for Q2 Ended Jun 30, 2009

Filed August 5, 2009For Securities:SPGSPG-PJ

Summary

Simon Property Group, Inc. (SPG) reported its financial results for the second quarter and the first six months of 2009. The company experienced a net loss attributable to common stockholders of $20.8 million for the quarter, contrasting with a net income of $76.6 million in the same period last year. For the first six months, net income attributable to common stockholders decreased to $86.0 million from $164.5 million in the prior year. A significant factor impacting profitability was a non-cash impairment charge of $140.5 million ($0.42 per diluted share) related to an other-than-temporary decline in the fair value of its investment in Liberty International, PLC. Despite the challenging economic environment, which led to a decline in comparable sales per square foot, SPG demonstrated resilience. Average base rents for regional malls increased, and leasing spreads remained positive, indicating strong leasing performance. The company also maintained high occupancy rates, particularly in its Premium Outlet centers.

Financial Highlights

28 data points
Beta

Revenue

$903.61M

Net Income

-$20.76M

-2.3% Net Margin

EPS (Diluted)

$-0.08

Total Assets

$25.01B

Cash & Equivalents

$2.63B

Free Cash Flow

$452.81M

Financial Statements
Beta
Revenue$903.61M
Operating Expenses$678.91M
Operating Income$224.70M
Interest Expense$244.44M
Net Income-$20.76M
EPS (Basic)$-0.08
EPS (Diluted)$-0.08
Shares Outstanding (Basic)268.29M
Shares Outstanding (Diluted)268.29M

Key Highlights

  • 1Reported a net loss attributable to common stockholders of $20.8 million for Q2 2009, compared to a net income of $76.6 million in Q2 2008.
  • 2Recorded a significant $140.5 million non-cash impairment charge related to its investment in Liberty International, PLC.
  • 3Regional mall comparable sales per square foot declined 10.5% for the first six months of 2009, but average base rents increased by 3.8%.
  • 4Maintained strong leasing spreads of 17.0% for regional malls and 34.6% for Premium Outlet centers, indicating effective rent increases on new leases.
  • 5Occupancy remained robust at 90.9% for regional malls and 97.0% for Premium Outlet centers as of June 30, 2009.
  • 6Secured $2.9 billion in public capital markets during the first six months of 2009, demonstrating access to funding despite market turmoil.
  • 7Ended the period with a strong cash and cash equivalents balance of $2.6 billion.

Frequently Asked Questions

The primary reason for the decline in net income was a significant $140.5 million non-cash impairment charge recorded due to an other-than-temporary decline in the fair value of Simon Property Group's investment in Liberty International, PLC. Excluding this charge, the core operating performance showed more stability, with positive leasing spreads despite challenging economic conditions.

Simon Property Group raised approximately $2.9 billion in public capital markets during the first six months of 2009 and ended the period with $2.6 billion in cash and cash equivalents. The company also has availability under its corporate Credit Facility. Management believes it has sufficient liquidity to address debt maturities and capital needs through 2010, and it continues to manage its floating-rate debt to be within a target range of 15-25% of total debt.

While comparable sales per square foot for regional malls declined, average base rents increased, and leasing spreads were positive, indicating that the company is able to secure higher rents on new and renewed leases. Occupancy rates remained strong, especially in Premium Outlet centers, suggesting resilience in demand for prime retail space despite economic headwinds.

The company has scaled back new development spending due to the economic downturn. However, it expects to complete Cincinnati Premium Outlets in the third quarter of 2009. Several renovation and expansion projects are also ongoing, funded by cash flow from operations. International development is continuing, often funded by reinvested net cash flow from those operations.