10-QPeriod: Q3 FY2018

SIMON PROPERTY GROUP INC. Quarterly Report for Q3 Ended Sep 30, 2018

Filed November 2, 2018For Securities:SPGSPG-PJ

Summary

Simon Property Group (SPG) reported strong performance for the nine months ended September 30, 2018, with diluted earnings per share (EPS) increasing to $5.57 from $4.41 in the prior year. This growth was driven by improved operating fundamentals, successful acquisition and development activities, and notable gains from property dispositions. The company's core U.S. mall and Premium Outlet portfolio demonstrated resilience with a 2.3% increase in comparable property Net Operating Income (NOI) and a 4.5% rise in total sales per square foot, indicating healthy tenant sales and rental growth. Ending occupancy remained high at 95.5% for the U.S. Malls and Premium Outlets. Financially, SPG maintained a strong liquidity position with substantial borrowing capacity under its credit facilities. The company also executed strategic financing activities, including debt repayments and refinancing. Despite a slight increase in the overall borrowing rate, the company's capital structure remained robust, with a weighted average maturity of 6.6 years on its consolidated indebtedness. Management expects operating cash flow to sufficiently cover operating expenses, debt service, and dividends, supporting its REIT status and ongoing capital projects.

Financial Highlights

28 data points
Beta

Revenue

$1.40B

Net Income

$556.27M

39.6% Net Margin

EPS (Diluted)

$1.80

Total Assets

$31.08B

Cash & Equivalents

$695.72M

Free Cash Flow

$914.38M

Financial Statements
Beta
Revenue$1.40B
Operating Expenses$681.18M
Operating Income$722.84M
Interest Expense$199.47M
Net Income$556.27M
EPS (Basic)$1.80
Shares Outstanding (Basic)309.29M

Key Highlights

  • 1Diluted EPS for the first nine months of 2018 rose to $5.57 from $4.41 in the prior year, driven by improved operations and strategic gains.
  • 2Comparable U.S. Malls and Premium Outlets NOI grew by 2.3%, reflecting strong core business fundamentals.
  • 3Total sales per square foot for U.S. Malls and Premium Outlets increased by 4.5% to $650, indicating robust tenant performance.
  • 4Ending occupancy for U.S. Malls and Premium Outlets remained strong at 95.5%, up from 95.3% in the prior year.
  • 5The company completed strategic acquisitions and opened new developments, including Denver Premium Outlets, and acquired full ownership of The Outlets at Orange.
  • 6Simon Property Group maintained strong liquidity with approximately $6.4 billion in aggregate available borrowing capacity under its credit facilities.
  • 7The company declared a quarterly cash dividend of $2.00 per share for the fourth quarter of 2018, demonstrating a commitment to returning value to shareholders.

Frequently Asked Questions

The increase in diluted EPS from $4.41 to $5.57 was primarily driven by improved operating performance and solid core business fundamentals, gains from property dispositions totaling $144.9 million ($0.41 per diluted share/unit), a non-cash investment gain of $35.6 million ($0.10 per diluted share/unit), and business interruption insurance proceeds from Puerto Rico hurricane damages of $17.0 million ($0.05 per diluted share/unit). These were partially offset by certain charges and increased interest expenses in 2018.

The U.S. Malls and Premium Outlets portfolio shows strong performance. Ending occupancy increased slightly to 95.5% from 95.3% in the prior year. Total sales per square foot increased by 4.5% to $650, and average base minimum rent per square foot rose by 2.8% to $53.88, indicating healthy tenant sales and pricing power.

Simon Property Group maintains a strong liquidity position with approximately $6.4 billion in available borrowing capacity under its credit facilities as of September 30, 2018. The company anticipates that cash generated from operations will be sufficient to meet operating expenses, debt service, recurring capital expenditures, and dividends. For non-recurring capital expenditures such as acquisitions and major redevelopments, they plan to utilize excess cash flow, borrowing capacity, additional debt or equity financing.

Yes, during the nine months ended September 30, 2018, the company opened Denver Premium Outlets, acquired the remaining 50% interest in The Outlets at Orange, and disposed of one retail property. The company also recognized significant gains from disposition activities, amounting to $144.9 million.