10-QPeriod: Q1 FY2019

SIMON PROPERTY GROUP INC. Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 8, 2019For Securities:SPGSPG-PJ

Summary

Simon Property Group (SPG) reported a decrease in diluted earnings per share to $1.78 for the first quarter of 2019, down from $2.00 in the prior year period. This decline was primarily due to significant net gains from property dispositions in 2018 ($135.3 million or $0.38 per share) and decreased income from an international investment. However, the company highlighted strong core business fundamentals driven by robust leasing activity, with comparable U.S. Malls and Premium Outlets NOI increasing by 1.6%. Total sales per square foot for these properties also saw a healthy increase of 3.0%, indicating resilient tenant performance. The company continues to invest in its portfolio through development and redevelopment projects, with approximately $1.4 billion in new development, expansion, and redevelopment projects under construction. SPG also maintained a strong liquidity position with over $6.1 billion in available borrowing capacity under its credit facilities, ensuring flexibility for ongoing capital needs and debt maturities. The company also declared a quarterly dividend of $2.05 per share, underscoring its commitment to returning capital to shareholders.

Financial Highlights

28 data points
Beta

Revenue

$1.45B

Net Income

$548.48M

37.8% Net Margin

EPS (Diluted)

$1.78

Total Assets

$30.84B

Cash & Equivalents

$436.80M

Free Cash Flow

$837.35M

Financial Statements
Beta
Revenue$1.45B
Operating Expenses$707.81M
Operating Income$745.02M
Interest Expense$198.73M
Net Income$548.48M
EPS (Basic)$1.78
Shares Outstanding (Basic)308.98M

Key Highlights

  • 1Comparable U.S. Malls and Premium Outlets Net Operating Income (NOI) increased by 1.6% year-over-year, demonstrating solid core business performance.
  • 2Total sales per square foot for U.S. Malls and Premium Outlets rose by 3.0% to $660 psf, indicating strong tenant sales.
  • 3Ending occupancy for U.S. Malls and Premium Outlets improved to 95.1%, up 50 basis points from the prior year, signifying healthy demand for retail space.
  • 4Leasing spreads on new and renewed leases showed a significant increase of 27.3% ($14.17 psf), reflecting favorable rent growth.
  • 5Simon Property Group maintained a strong liquidity position with approximately $6.1 billion in available borrowing capacity under its credit facilities as of March 31, 2019.
  • 6The company has an active development pipeline with approximately $1.4 billion in new development, redevelopment, and expansion projects underway.
  • 7A quarterly cash dividend of $2.05 per share was declared for the second quarter of 2019, indicating continued commitment to shareholder returns.

Frequently Asked Questions

The primary driver for the decrease in diluted earnings per share was the absence of significant net gains from property dispositions that occurred in the prior year (2018), which amounted to $135.3 million or $0.38 per diluted share. Additionally, decreased consolidated lease settlement activity and lower income from an international investment in 2019 contributed to the decline.

The company's core U.S. Malls and Premium Outlets portfolio demonstrated strong performance. Ending occupancy increased by 50 basis points to 95.1%, and total sales per square foot grew by 3.0% to $660 psf. Average base minimum rent also increased by 1.5% to $54.34 psf, reflecting healthy tenant demand and operational strength.

Simon Property Group focuses on maximizing total financial return through operating cash flows and capital appreciation. Growth is driven by attracting quality tenants, expanding and re-tenanting existing locations, selective acquisitions, generating consumer traffic, and selling non-core assets. The company employs a three-fold capital strategy focused on funding growth, maintaining access to capital, and managing its financial structure to preserve investment-grade credit ratings. They also invest significantly in new development, redevelopment, and expansion projects, with a substantial pipeline of projects underway.

The company maintains a strong liquidity position with approximately $6.1 billion in available borrowing capacity under its credit facilities as of March 31, 2019. Their financing strategy relies primarily on long-term fixed-rate debt, with floating-rate debt representing only 3.5% of total consolidated debt. They repaid $600 million of senior unsecured notes in February 2019 and have substantial debt maturities spread over several years, which they believe they can manage with existing cash flow, credit facilities, and potential access to debt and equity markets.