10-QPeriod: Q3 FY2013

SIMON PROPERTY GROUP INC. Quarterly Report for Q3 Ended Sep 30, 2013

Filed November 6, 2013For Securities:SPGSPG-PJ

Summary

Simon Property Group, Inc. (SPG) reported solid financial performance for the nine months ended September 30, 2013. Total revenue increased to $3.75 billion compared to $3.54 billion in the prior year period, driven by growth in minimum rents, overage rents, and tenant reimbursements. Operating income also saw an increase, reaching $1.72 billion, up from $1.61 billion in the same period last year. Diluted earnings per share for the nine months stood at $3.01, a decrease from $3.71 in the prior year, primarily due to a significant one-time gain recorded in 2012 related to asset acquisitions and disposals, partially offset by improved operating performance and core business fundamentals in 2013. The company's balance sheet shows total assets of $32.11 billion and total liabilities of $25.13 billion as of September 30, 2013. While debt levels remain substantial, the company highlighted improvements in its core business fundamentals, including higher tenant sales, strong leasing activity, increased portfolio Net Operating Income (NOI), and a rise in average base minimum rent per square foot. Occupancy rates across its U.S. malls and Premium Outlets also improved. Simon Property Group continues its strategic focus on acquiring, developing, and managing high-quality retail real estate. The company expanded its portfolio through strategic acquisitions and development projects, including international ventures. Management emphasized a strong capital strategy focused on funding growth, maintaining access to capital, and preserving investment-grade credit ratings. The company remains committed to returning capital to shareholders through dividends, with a declared dividend of $1.20 per share for the quarter.

Financial Highlights

28 data points
Beta

Revenue

$1.15B

Net Income

$311.68M

27.2% Net Margin

EPS (Diluted)

$1.00

Total Assets

$32.11B

Cash & Equivalents

$1.10B

Free Cash Flow

$695.94M

Financial Statements
Beta
Revenue$1.15B
Operating Expenses$598.40M
Operating Income$548.48M
Interest Expense$270.70M
Net Income$311.68M
EPS (Basic)$1.00
EPS (Diluted)$1.00
Shares Outstanding (Basic)310.33M
Shares Outstanding (Diluted)310.33M

Key Highlights

  • 1Total revenue for the nine months ended September 30, 2013, increased to $3.75 billion, up from $3.54 billion in the prior year period.
  • 2Operating income for the nine months rose to $1.72 billion, an increase from $1.61 billion in the comparable period of 2012.
  • 3Diluted earnings per share for the nine months were $3.01, down from $3.71 in 2012, largely due to a significant one-time gain in the prior year.
  • 4Portfolio Net Operating Income (NOI) grew by 10.3% for the nine-month period, with comparable property NOI for U.S. malls and Premium Outlets increasing by 5.2%.
  • 5Total sales per square foot for U.S. malls and Premium Outlets increased by 3.0% to $579.
  • 6Ending occupancy for U.S. malls and Premium Outlets improved to 95.5% as of September 30, 2013, from 94.6% in the prior year.
  • 7The company made significant strategic acquisitions and development activities, including international ventures, and maintained a strong liquidity position with $1.1 billion in cash and cash equivalents and substantial borrowing capacity.

Frequently Asked Questions

The primary driver for the decrease in diluted earnings per share from $3.71 in the first nine months of 2012 to $3.01 in the first nine months of 2013 was a significant one-time gain of $491.9 million recorded in 2012 related to the acquisition of a controlling interest, sale or disposal of assets, and impairment charges on investments in unconsolidated entities. This was partially offset by improved operating performance and core business fundamentals in 2013.

Operational performance showed positive trends. Portfolio Net Operating Income (NOI) grew by 10.3% for the nine-month period. Comparable property NOI for U.S. malls and Premium Outlets increased by 5.2%. Tenant sales per square foot for these properties rose by 3.0% to $579, and average base minimum rent increased by 3.5% to $41.73 per square foot. Occupancy also improved to 95.5%.

As of September 30, 2013, Simon Property Group had $1.1 billion in cash and cash equivalents. The company also has significant borrowing capacity under its revolving credit facilities. Management expects that cash generated from operations and distributions from unconsolidated entities will be sufficient to meet operational needs, debt service, and recurring capital expenditures. For non-recurring capital expenditures like acquisitions and major developments, the company anticipates using cash flow reserves, credit facilities, additional debt financing, or equity markets.

During the first nine months of 2013, Simon Property Group acquired an outlet center near Portland, Oregon, and made investments related to European designer outlets. The company also disposed of interests in several consolidated and unconsolidated retail properties and an office building, recognizing a significant aggregate gain. In 2012, there were major transactions including the acquisition of additional interests in 26 joint venture properties (The Mills transaction), the acquisition of a stake in Klépierre, and the formation of a joint venture for The Shops at Mission Viejo and Woodfield Mall.