10-QPeriod: Q2 FY2014

SIMON PROPERTY GROUP INC. Quarterly Report for Q2 Ended Jun 30, 2014

Filed August 7, 2014For Securities:SPGSPG-PJ

Summary

Simon Property Group, Inc. (SPG) reported its financial results for the quarter and six months ended June 30, 2014. The company demonstrated solid revenue growth, driven by increases in minimum rent and tenant reimbursements. Diluted earnings per share saw a notable increase year-over-year, reflecting improved operating performance, strategic acquisitions, and reduced interest expenses. A significant event during the period was the spin-off of 98 properties to Washington Prime Group Inc. on May 28, 2014. While this transaction resulted in transaction costs, the remaining core business showed improved fundamentals, with portfolio Net Operating Income (NOI) growth and increased occupancy rates. The company also actively managed its debt, redeeming or repaying a substantial amount of senior unsecured notes.

Financial Highlights

28 data points
Beta

Revenue

$1.18B

Net Income

$406.59M

34.4% Net Margin

EPS (Diluted)

$1.31

Total Assets

$30.59B

Cash & Equivalents

$1.67B

Free Cash Flow

$609.69M

Financial Statements
Beta
Revenue$1.18B
Operating Expenses$620.45M
Operating Income$561.53M
Interest Expense$254.93M
Net Income$406.59M
EPS (Basic)$1.31
EPS (Diluted)$1.31
Shares Outstanding (Basic)310.74M
Shares Outstanding (Diluted)310.74M

Key Highlights

  • 1Total revenue increased to $1.18 billion for the three months ended June 30, 2014, up from $1.08 billion in the prior year period.
  • 2Diluted earnings per common share rose to $1.31 for the three months ended June 30, 2014, compared to $1.10 in the same period last year.
  • 3The company completed the spin-off of 98 properties to Washington Prime Group Inc. on May 28, 2014, presenting these as discontinued operations.
  • 4Total assets decreased to $30.59 billion as of June 30, 2014, from $33.32 billion as of December 31, 2013, largely due to the spin-off.
  • 5Total liabilities also decreased to $24.45 billion from $26.31 billion, reflecting the spin-off and debt repayments.
  • 6Capital expenditures for the six months ended June 30, 2014, amounted to $366 million, supporting ongoing development and redevelopment projects.
  • 7The company maintained strong occupancy rates, with U.S. Malls and Premium Outlets at 96.5% at June 30, 2014.

Frequently Asked Questions

The spin-off of 98 properties to Washington Prime Group Inc. on May 28, 2014, resulted in these properties being presented as discontinued operations in the financial statements. This led to a decrease in total assets and liabilities, and incurred transaction costs of $38.2 million during the six months ended June 30, 2014.

For the three months ended June 30, 2014, total revenue increased to $1.18 billion from $1.08 billion in the prior year. Diluted earnings per common share grew to $1.31 from $1.10 year-over-year. For the six months ended June 30, 2014, diluted earnings per common share increased to $2.41 from $2.01 in the comparable period.

SPG's financing strategy relies on long-term fixed-rate debt. During the six months ended June 30, 2014, the company redeemed or repaid $716.1 million of senior unsecured notes and also repaid $1.1 billion in mortgage notes. The company also utilizes revolving credit facilities for liquidity and has amended and extended its Credit Facility and Supplemental Facility.

Occupancy for U.S. Malls and Premium Outlets improved to 96.5% as of June 30, 2014, from 96.1% a year prior. The average base minimum rent per square foot for U.S. Malls and Premium Outlets increased by 4.3% to $45.83 psf. Total sales per square foot for these properties slightly decreased by 0.6% to $608 psf, primarily due to the addition of new square footage.