10-QPeriod: Q1 FY2013

SIMON PROPERTY GROUP INC. Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 8, 2013For Securities:SPGSPG-PJ

Summary

Simon Property Group, Inc. (SPG) reported its first quarter 2013 results, highlighting a period of operational improvement and strategic asset management. While diluted earnings per share saw a decrease compared to the prior year, largely due to a significant one-time gain in Q1 2012 from asset disposals and acquisitions, the company demonstrated robust underlying operational performance. Key metrics such as comparable property Net Operating Income (NOI) for U.S. malls and Premium Outlets increased by 4.8%, and total sales per square foot rose by 5.3%, indicating strong tenant performance and consumer traffic. The company continued its disciplined capital allocation strategy, actively managing its debt portfolio and engaging in both acquisitions and dispositions to optimize its real estate holdings. SPG maintained a strong liquidity position with substantial availability under its credit facilities. Management is focused on enhancing profitability and operational efficiency across its diverse portfolio of retail properties, with ongoing development and expansion initiatives aimed at future growth and value creation.

Financial Highlights

29 data points
Beta

Revenue

$1.06B

Net Income

$283.14M

26.7% Net Margin

EPS (Diluted)

$0.91

Total Assets

$31.89B

Cash & Equivalents

$829.97M

Free Cash Flow

$550.51M

Financial Statements
Beta
Revenue$1.06B
Operating Expenses$657.37M
Operating Income$502.48M
Interest Expense$285.03M
Net Income$283.14M
EPS (Basic)$0.91
EPS (Diluted)$0.91
Shares Outstanding (Basic)309.99M
Shares Outstanding (Diluted)309.99M

Key Highlights

  • 1Diluted EPS decreased to $0.91 from $2.18 in Q1 2012, primarily impacted by a large gain in the prior year related to acquisitions and asset disposals.
  • 2Comparable property NOI for U.S. malls and Premium Outlets increased by 4.8%, indicating solid operational performance of core assets.
  • 3Total sales per square foot for U.S. malls and Premium Outlets increased by 5.3% to $575, reflecting strong tenant performance.
  • 4Ending occupancy for U.S. malls and Premium Outlets improved to 94.7% from 93.6% year-over-year.
  • 5The company maintained a strong liquidity position with $4.6 billion in aggregate available borrowing capacity under its credit facilities.
  • 6Interest expense increased due to property transactions and new borrowings, but overall borrowing rates decreased slightly year-over-year.
  • 7SPG continued to actively manage its portfolio, completing several property dispositions and acquisitions, and advancing development projects.

Frequently Asked Questions

The decrease in diluted earnings per share was primarily due to a substantial one-time gain of $494.8 million recognized in the first quarter of 2012. This gain stemmed from acquisitions, asset disposals, and the remeasurement of previously held interests in certain consolidated properties. Without this prior-year gain, the core operational performance in Q1 2013 showed improvements.

The health of the core portfolio appears strong. Comparable property Net Operating Income (NOI) for U.S. malls and Premium Outlets increased by 4.8%. Tenant sales per square foot rose 5.3% to $575, and occupancy improved to 94.7%. Average base minimum rent also increased by 3.0%.

Simon Property Group maintains a disciplined capital structure. As of March 31, 2013, the company had $4.6 billion in available borrowing capacity under its credit facilities. The weighted average interest rate on its total consolidated debt decreased slightly to 5.02% due to a strategic shift towards fixed-rate debt and lower market rates. The company actively manages its debt maturities and has sufficient liquidity to meet its obligations.

The increase in interest expense was primarily driven by property transactions, which resulted in higher associated debt. Additionally, new borrowings on Euro-denominated tranches and the issuance of unsecured notes in prior periods contributed to the increase. However, these were partially offset by repayments of existing debt, including senior unsecured notes and mortgages.