10-QPeriod: Q2 FY2012

SIMON PROPERTY GROUP INC. Quarterly Report for Q2 Ended Jun 30, 2012

Filed August 8, 2012For Securities:SPGSPG-PJ

Summary

Simon Property Group, Inc. (SPG) reported strong financial performance for the six months ended June 30, 2012. The company saw a significant increase in diluted earnings per common share, rising to $2.87 from $1.31 in the prior year period. This growth was driven by improved operating fundamentals, successful acquisition and expansion activities, and a substantial gain of $494.8 million related to property transactions, notably the consolidation of nine previously unconsolidated properties in the Mills transaction. Total revenue for the six months increased to $2.31 billion from $2.06 billion in the prior year. Net income attributable to common stockholders also saw a significant jump, reaching $860.9 million compared to $384.5 million in the same period last year. The company's strategic investments, including the acquisition of a significant stake in Klépierre, contributed to its expanding global presence and potential for future growth. SPG's balance sheet reflects substantial growth in investment properties and increased debt to finance these strategic moves.

Financial Highlights

29 data points
Beta

Revenue

$1.19B

Net Income

$215.44M

18.1% Net Margin

EPS (Diluted)

$0.71

Total Assets

$31.99B

Cash & Equivalents

$638.50M

Free Cash Flow

$626.24M

Financial Statements
Beta
Revenue$1.19B
Operating Expenses$663.74M
Operating Income$524.33M
Interest Expense$288.56M
Net Income$215.44M
EPS (Basic)$0.71
EPS (Diluted)$0.71
Shares Outstanding (Basic)303.25M
Shares Outstanding (Diluted)303.25M

Key Highlights

  • 1Diluted earnings per share (EPS) more than doubled, increasing to $2.87 for the first six months of 2012 from $1.31 in the same period of 2011.
  • 2Net income attributable to common stockholders increased significantly to $860.9 million for the first six months of 2012, up from $384.5 million in the prior year.
  • 3Total revenue grew to $2.31 billion for the first six months of 2012, compared to $2.06 billion in the prior year.
  • 4A substantial gain of $494.8 million was recognized related to the acquisition of controlling interests, sale, or disposal of assets and interests in unconsolidated entities, primarily from consolidating nine properties in the Mills transaction.
  • 5The company expanded its international presence with the acquisition of a 28.9% equity stake in Klépierre, a European real estate company.
  • 6U.S. Malls and Premium Outlets portfolio saw improved operating metrics, with ending occupancy at 94.2%, average base minimum rent per square foot at $39.99, and total sales per square foot at $554.
  • 7Total assets grew substantially to $31.99 billion as of June 30, 2012, from $26.22 billion as of December 31, 2011, largely due to increased investment properties and investments in unconsolidated entities.

Frequently Asked Questions

The primary drivers were improved operating fundamentals in the core business, successful acquisition and expansion activities, and a significant non-cash gain of $488.7 million recognized from the remeasurement of previously held interests in nine properties consolidated as part of the Mills transaction. Additionally, improved tenant sales and occupancy rates contributed positively.

The company has increased its total debt to finance strategic acquisitions and development activities. Total debt rose to $22.47 billion at June 30, 2012, from $18.45 billion at December 31, 2011. This includes increased secured and unsecured debt. The company issued new senior unsecured notes totaling $1.75 billion in early 2012 to fund acquisitions like Klépierre and the Mills transaction. While debt has increased, the company has also focused on managing its interest expenses and extending debt maturities.

Simon Property Group's international strategy involves partnering with established local real estate companies and financing investments in local currencies to mitigate foreign exchange risk. The acquisition of a significant stake (28.9%) in Klépierre, a publicly traded European real estate company, represents a major step in expanding its international footprint, particularly in Europe. This investment provides access to a substantial portfolio of shopping centers across 13 European countries and offers opportunities for future growth and diversification.

The company continues to achieve strong results in its U.S. malls and Premium Outlets. Occupancy rates remained high at 94.2% for the total portfolio. Average base minimum rent per square foot increased by 3.7% to $39.99. Releasing spreads were positive, indicating that new leases were signed at higher rental rates than expiring leases, demonstrating effective leasing strategies and tenant demand.