10-QPeriod: Q1 FY2016

SIMON PROPERTY GROUP INC. Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 5, 2016For Securities:SPGSPG-PJ

Summary

Simon Property Group, Inc. (SPG) reported its first quarter 2016 financial results, showcasing continued operational strength and strategic financial management. The company maintained robust revenue streams from its extensive portfolio of malls, Premium Outlets, and The Mills properties. Despite a year-over-year decrease in diluted EPS, largely due to a significant non-cash gain in the prior year from an investment, the core business demonstrated improvement with a notable increase in Net Operating Income (NOI) growth and positive releasing spreads. Financially, SPG actively managed its debt, issuing new unsecured notes and repaying existing ones, while also strategically reducing mortgage debt. The company maintained a strong liquidity position with substantial available borrowing capacity under its credit facilities. Management expressed confidence in the company's ability to meet its financial obligations and fund future growth through a combination of operating cash flow, debt, and equity markets. The report highlights a focus on expanding and re-tenanting existing high-quality assets and selectively pursuing acquisitions and developments to drive future returns.

Financial Highlights

28 data points
Beta

Revenue

$1.34B

Net Income

$481.00M

36.0% Net Margin

EPS (Diluted)

$1.55

Total Assets

$31.40B

Cash & Equivalents

$805.08M

Free Cash Flow

$720.46M

Financial Statements
Beta
Revenue$1.34B
Operating Expenses$651.81M
Operating Income$684.90M
Interest Expense$219.19M
Net Income$481.00M
EPS (Basic)$1.55
Shares Outstanding (Basic)309.42M

Key Highlights

  • 1Total revenue increased to $1.34 billion for the three months ended March 31, 2016, compared to $1.22 billion for the same period in 2015.
  • 2Diluted EPS decreased to $1.55 from $1.73 year-over-year, primarily impacted by a significant non-cash gain in Q1 2015 from Klépierre's acquisition of Corio.
  • 3Portfolio NOI showed strong growth, increasing by 7.8% year-over-year, with comparable property NOI for U.S. Malls, Premium Outlets, Lifestyle Centers, and The Mills growing by 5.1%.
  • 4Ending occupancy for U.S. Malls and Premium Outlets remained high at 95.6% as of March 31, 2016.
  • 5Average base minimum rent per square foot for U.S. Malls and Premium Outlets increased by 4.4% to $49.70.
  • 6The company actively managed its debt, issuing $1.35 billion in senior unsecured notes and repaying $163.3 million of existing notes, while also repaying $373.1 million in mortgage loans.
  • 7Liquidity remained strong with an aggregate available borrowing capacity of $5.1 billion under its Credit Facilities as of March 31, 2016.

Frequently Asked Questions

The decrease in diluted EPS from $1.73 to $1.55 was primarily due to a significant non-cash gain of $206.9 million (or $0.57 per diluted share/unit) recognized in the first quarter of 2015 related to Klépierre's acquisition of Corio N.V. The core business fundamentals showed improvement in the first quarter of 2016, contributing positively to results.

Simon Property Group actively managed its debt during the quarter by issuing $1.35 billion in senior unsecured notes and repaying $163.3 million of existing notes, alongside repaying $373.1 million in mortgage loans. The company maintained a strong liquidity position with $805.1 million in cash and cash equivalents and had an aggregate available borrowing capacity of $5.1 billion under its Credit Facilities as of March 31, 2016. Management expects current cash on hand and available credit facilities to be sufficient for debt maturities and capital needs through 2016.

Key performance indicators include ending occupancy, average base minimum rent per square foot, and total sales per square foot. For U.S. Malls and Premium Outlets, ending occupancy was 95.6%, average base minimum rent increased 4.4% to $49.70 psf, and total sales per square foot decreased slightly by 1.3% to $613 psf. Releasing spreads remained positive at 17.5%, indicating ability to lease space at higher rents than expiring leases.

Simon's share of income from unconsolidated entities increased significantly, partly due to favorable results from joint venture properties. The investment in Klépierre SA, a European real estate company, contributed to this, with Simon's share of net income from Klépierre being $13.0 million for the first quarter of 2016. The report notes that Klépierre's acquisition of Corio N.V. in the prior year resulted in a substantial non-cash gain.