Simon Property Group Reports Third Quarter 2014 Results And Raises Full Year 2014 Guidance

Oct 22, 2014, 07:00 ET from Simon Property Group, Inc.

INDIANAPOLIS, Oct. 22, 2014 /PRNewswire/ -- Simon, a leading global retail real estate company, today reported results for the quarter and nine months ended September 30, 2014.

Results for the Quarter

  • Funds from Operations ("FFO") was $689.4 million, or $1.90 per diluted share, as compared to $802.8 million, or $2.21 per diluted share, in the prior year period. Included in the third quarter 2014 results is a loss on the extinguishment of debt of $127.6 million, or $0.35 per diluted share, related to the successful September cash tender offers and the redemption of a series of notes of Simon Property Group L.P. ("SPGLP") unsecured debt totaling $1.572 billion.    
  • Net income attributable to common stockholders was $252.0 million, or $0.81 per diluted share, as compared to $311.7 million, or $1.00 per diluted share, in the prior year period.  Net income in the third quarter of 2014 includes the $0.35 per diluted share loss on the extinguishment of debt described above. 

Results for the Nine Months

  • Funds from Operations ("FFO") was $2.339 billion, or $6.43 per diluted share, as compared to $2.311 billion, or $6.38 per diluted share, in the prior year period.   
  • Net income attributable to common stockholders was $1.0 billion, or $3.22 per diluted share, as compared to $934.7 million, or $3.01 per diluted share, in the prior year period.

Effect of Cash Tender Offers and Early Notes Redemption Charge and Washington Prime Group Inc. Spin-Off

  • Results for the three and nine months ended September 30, 2014 reflect the $0.35 charge related to the cash tender offers and early notes redemption mentioned above.  Results for the three months ended September 30, 2013 include FFO per diluted share of $0.24 from the Washington Prime Group Inc. ("WPG") properties.  Results for the nine months ended September 30, 2014 and 2013 include FFO per diluted share of $0.30 ($0.40 of FFO from the WPG properties' operations net of $0.10 of spin-off related transaction expenses) and $0.72, respectively, from the WPG properties.
  • Growth in FFO per diluted share for the three and nine month periods in 2014 was 14.2% and 14.5%, respectively, excluding both the loss on the extinguishment of debt related to the cash tender offers and early notes redemption and the WPG properties and transaction costs related to the May 28, 2014 spin-off, as detailed in the table below.

Three Months Ended

September 30,


Nine Months Ended

September 30,


2014


2013


2014


2013

Reported FFO per share

$1.90


$2.21


$6.43


$6.38

   Add: Loss on extinguishment of debt

0.35


--


0.35


--

   Add: Spin-off transaction expenses

--


--


0.10


--

   Less: FFO from WPG properties

--


(0.24)


(0.40)


(0.72)

Comparable FFO per share

$2.25


$1.97


$6.48


$5.66

Comparable FFO per share growth

14.2%




14.5%











Reported earnings per share

$0.81


$1.00


$3.22


$3.01

Comparable earnings per share(1)

$1.16


$0.89


$3.49


$2.64


(1) For a reconciliation of Reported EPS to Comparable EPS, please see Footnote H of the Footnotes to Unaudited Reconciliation of Non-GAAP Financial Measures.

 

"I am very pleased with our quarterly results that once again beat consensus," said David Simon, Chairman and CEO.  "We continue to demonstrate our ability to grow our core business and allocate capital to generate growth in cash flow and FFO per share."

Comparable Property Net Operating Income

Comparable property NOI growth for the three months ended September 30, 2014 was 5.3%.  The year-to-date growth for the nine months ended September 30, 2014 was 5.4%.  Comparable properties include U.S. Malls, Premium Outlets and The Mills, and excludes the WPG properties. 


U.S. Malls and Premium Outlets Operating Statistics



As of




September 30,


Year-over-Year



2014(1)


2013


Change

Occupancy(2)


96.9%


95.5%


+140 bps

Base Minimum Rent







      per sq. ft. (2)


$46.29


$41.73


+10.9%

Releasing Spread







      per sq. ft. (2)(3)


$9.67


$8.05


+$1.62

Releasing Spread







     (percentage change)(2)(3)


17.3%


15.2%


+210 bps

Total Sales per sq. ft.(4)


$613


$579


+5.9%


(1)   Excludes WPG properties.

(2)   Represents mall stores in Malls and all owned square footage in Premium Outlets.

(3)   Same space measure that compares opening and closing rates on individual spaces leased during trailing 12-month period.

(4)   Trailing 12-month sales per square foot for mall stores less than 10,000 square feet in Malls and all owned square footage in Premium Outlets.

 

Total sales from the U.S. Malls (less anchors) and Premium Outlets increased 2.6% on a trailing 12-month basis.  The increase in total sales in the third quarter of 2014 compared to the third quarter of 2013 was 2.8%.

Dividends

Today Simon's Board of Directors declared a quarterly common stock dividend of $1.30 per share.  This is a year-over-year increase of 8.3%.  The dividend will be payable on November 28, 2014 to stockholders of record on November 14, 2014. 

Simon's Board of Directors also declared the quarterly dividend on its 8 3/8% Series J Cumulative Redeemable Preferred Stock (NYSE: SPGPrJ) of $1.046875 per share, payable on December 31, 2014 to stockholders of record on December 17, 2014. 

Development Activity

Two new Premium Outlets opened during the quarter:

  • July 31st – Charlotte Premium Outlets is a 399,000 square foot center with 100 outlet stores featuring high-quality designer and name brands.  The center opened fully leased and Simon owns a 50% interest in this asset. 
  • August 14th – Twin Cities Premium Outlets is a 409,000 square foot center serving the greater Minneapolis-St. Paul metropolitan area.  The center opened fully leased and Simon owns a 35% interest in this asset.

Premium Outlets Montreal in Mirabel, Quebec, Canada will open on October 30, 2014.  The center will serve the greater Montreal metropolitan market with 360,000 square feet of high-quality, name brand stores.  Simon owns a 50% interest in this project.

During the third quarter, construction started on two significant expansion projects:

  • Livermore Premium Outlets in Livermore (San Francisco), California – 185,000 square foot expansion
  • The Colonnade at Sawgrass in Sunrise (Miami), Florida – 56,000 square foot expansion

Construction continues on other significant expansion projects including Roosevelt Field Mall, Del Amo Fashion Center, Woodbury Common Premium Outlets, Las Vegas Premium Outlets-North and Chicago Premium Outlets. 

Redevelopment and expansion projects, including the addition of new anchors, are underway at 31 properties in the U.S., Asia and Mexico. 

Construction continues on two new Premium Outlets opening in 2015:

  • Vancouver Designer Outlet in Vancouver, British Columbia, Canada is a 242,000 square foot center scheduled to open in May of 2015.  Simon owns a 45% interest in this project.
  • Gloucester Premium Outlets in Gloucester, New Jersey, serving the greater Philadelphia metropolitan area, is a 375,000 square foot center scheduled to open in August of 2015.  Simon owns a 50% interest in this project. 

Construction began during the third quarter on two new Premium Outlets expected to open in October of 2015:

  • Tucson Premium Outlets is a 366,000 square foot center.  Simon owns 100% of this project.
  • Tampa Premium Outlets is a 441,000 square foot center.  Simon owns 100% of this project.    

Simon's share of the costs of all development and redevelopment projects currently under construction is approximately $2.2 billion

Financing Activity

In September, Simon completed a cash tender offer for five outstanding tranches of senior unsecured notes maturing in 2015, 2016 and 2017. Approximately $1.322 billion of notes were tendered and accepted for purchase. These notes had a weighted average remaining duration of 1.7 years and a weighted average coupon rate of 5.60%. Also in September, Simon redeemed all of its $250.0 million 7.875% notes due 2016.  A $127.6 million or $0.35 per diluted share, loss on the extinguishment of debt was recorded in September of 2014 in connection with the tender offers and redemption. 

In September, Simon issued $1.30 billion of senior unsecured notes in an underwritten public offering. The offering consisted of $900 million of 3.375% notes due 2024 and $400 million of 4.25% notes due 2044. Net proceeds from the offering and cash on hand were used to fund the cash purchase of the senior unsecured notes tendered and the redemption.

The aggregate result of the tender offers and redemption, combined with the sale of unsecured notes, was an extension of the duration of our senior notes portfolio from 6.3 years to 7.6 years and a decrease in the weighted average interest rate on that portfolio from 4.64% to 4.40%.

As of September 30, 2014, Simon had approximately $1.175 billion of cash on hand, including its share of joint venture cash, and $5.2 billion of available revolving credit capacity.

2014 Guidance

Today we raised FFO guidance to a range of $8.84 to $8.88 per diluted share for the year ending December 31, 2014, and also raised guidance for net income to a range of $4.45 to $4.49 per diluted share.  This represents an increase of $0.15 per diluted share from the midpoint of the range provided on July 23, 2014, after giving effect to the loss on extinguishment of debt from the successful tender offers and redemption. 

The following table provides the reconciliation for the expected range of estimated net income available to common stockholders per diluted share to estimated FFO per diluted share:

For the year ending December 31, 2014







Low


High



End


End

Estimated net income available to common stockholders





     per diluted share


$4.45


$4.49

Depreciation and amortization including Simon's share





     of unconsolidated entities


4.82


4.82

Gain upon acquisition of controlling interests, sale or disposal





     of assets and interests in unconsolidated entities, net


(0.43)


(0.43)






Estimated FFO per diluted share


$8.84


$8.88

 

Conference Call

Simon will hold a conference call to discuss the quarterly financial results today at 11:00 a.m. Eastern Time, Wednesday, October 22, 2014.  Live streaming audio of the conference call will be accessible at investors.simon.com.  An online replay will be available until November 5, 2014 at investors.simon.com. 

Supplemental Materials and Website

Supplemental information on our third quarter 2014 performance is available at investors.simon.com. This information has also been furnished to the SEC in a current report on Form 8-K.

We routinely post important information online at our investor relations website, investors.simon.com. We use this website, press releases, SEC filings, quarterly conference calls, presentations and webcasts to disclose material, non-public information in accordance with Regulation FD. We encourage members of the investment community to monitor these distribution channels for material disclosures.  Any information accessed through our website is not incorporated by reference into, and is not a part of, this document.

Non-GAAP Financial Measures

This press release includes FFO, FFO per share, comparable FFO per share, comparable earnings per share and comparable property net operating income growth, which are financial performance measures not defined by generally accepted accounting principles in the United States ("GAAP"). Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in this press release and in Simon's supplemental information for the quarter. FFO and comparable property net operating income growth are financial performance measures widely used in the REIT industry. Our definitions of these non-GAAP measures may not be the same as similar measures reported by other REITs.

Forward-Looking Statements

Certain statements made in this press release may be deemed "forward‑looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company believes the expectations reflected in any forward‑looking statements are based on reasonable assumptions, the Company can give no assurance that its expectations will be attained, and it is possible that actual results may differ materially from those indicated by these forward‑looking statements due to a variety of risks, uncertainties and other factors. Such factors include, but are not limited to: the Company's ability to meet debt service requirements, the availability and terms of financing, changes in the Company's credit rating, changes in market rates of interest and foreign exchange rates for foreign currencies, changes in value of investments in foreign entities, the ability to hedge interest rate and currency risk, risks associated with the acquisition, development, expansion, leasing and management of properties, general risks related to retail real estate, the liquidity of real estate investments, environmental liabilities, international, national, regional and local economic conditions, changes in market rental rates, trends in the retail industry, relationships with anchor tenants, the inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise, risks relating to joint venture properties, costs of common area maintenance, and the intensely competitive market environment in the retail industry, risks related to international activities, insurance costs and coverage, terrorist activities, changes in economic and market conditions and maintenance of our status as a real estate investment trust. The Company discusses these and other risks and uncertainties under the heading "Risk Factors" in our annual and quarterly reports filed with the SEC.  The Company undertakes no duty or obligation to update or revise these forward‑looking statements, whether as a result of new information, future developments, or otherwise unless required by law.

About Simon

Simon is a global leader in retail real estate ownership, management and development and a S&P100 company (Simon Property Group, NYSE: SPG). Our industry-leading retail properties and investments across North America, Europe and Asia provide shopping experiences for millions of consumers every day and generate billions in annual retail sales. For more information, visit simon.com.

Simon Property Group, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)




For the Three Months


For the Nine Months


Ended September 30,


Ended September 30,


2014

2013


2014

2013







REVENUE:






Minimum rent

$ 740,214

$ 690,904


$ 2,190,983

$ 2,038,486

Overage rent

52,502

55,115


123,336

129,458

Tenant reimbursements

350,595

320,179


1,018,316

921,136

Management fees and other revenues

36,396

33,613


101,145

95,156

Other income

54,987

47,066


139,918

108,457

Total revenue

1,234,694

1,146,877


3,573,698

3,292,693







EXPENSES:






Property operating

106,742

98,993


294,318

276,561

Depreciation and amortization

281,661

279,302


849,369

824,173

Real estate taxes

97,359

93,001


291,058

273,758

Repairs and maintenance

21,416

22,746


72,838

68,689

Advertising and promotion

38,359

28,455


99,128

75,128

Provision for credit losses

1,769

2,398


8,635

3,947

Home and regional office costs

40,753

34,171


120,999

106,021

General and administrative

14,388

14,546


44,842

44,476

Other

24,690

24,787


62,457

59,040

Total operating expenses

627,137

598,399


1,843,644

1,731,793







OPERATING INCOME

607,557

548,478


1,730,054

1,560,900







Interest expense

(249,780)

(270,700)


(758,945)

(808,235)

Loss on extinguishment of debt

(127,573)

-


(127,573)

-

Income and other taxes

(6,589)

(7,700)


(20,078)

(29,773)

Income from unconsolidated entities

55,631

47,563


168,473

157,811

Gain upon acquisition of controlling interests and sale or disposal of assets






  and interests in unconsolidated entities, net

17,717

11,071


154,242

85,754







Consolidated income from continuing operations

296,963

328,712


1,146,173

966,457

Discontinued operations 

-

38,581


67,524

135,830

Discontinued operations transaction expenses

-

-


(38,163)

-







CONSOLIDATED NET INCOME

296,963

367,293


1,175,534

1,102,287







Net income attributable to noncontrolling interests 

44,161

54,784


172,828

165,035

Preferred dividends

834

834


2,503

2,503







NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS

$ 251,968

$ 311,675


$ 1,000,203

$ 934,749













BASIC EARNINGS PER COMMON SHARE:






Income from continuing operations

$ 0.81

$ 0.89


$ 3.14

$ 2.64

Discontinued operations

-

0.11


0.08

0.37

Net income attributable to common stockholders

$ 0.81

$ 1.00


$ 3.22

$ 3.01







DILUTED EARNINGS PER COMMON SHARE:






Income from continuing operations

$ 0.81

$ 0.89


$ 3.14

$ 2.64

Discontinued operations

-

0.11


0.08

0.37

Net income attributable to common stockholders

$ 0.81

$ 1.00


$ 3.22

$ 3.01

 

Simon Property Group, Inc. and Subsidiaries
Unaudited Consolidated Balance Sheets
(Dollars in thousands, except share amounts)




September 30,

December 31,


2014

2013

ASSETS:



Investment properties at cost

$ 31,022,776

$ 30,336,639

Less - accumulated depreciation

8,728,977

8,092,794


22,293,799

22,243,845

Cash and cash equivalents

817,998

1,691,006

Tenant receivables and accrued revenue, net

516,857

520,361

Investment in unconsolidated entities, at equity

2,458,704

2,429,845

Investment in Klepierre, at equity

1,868,461

2,014,415

Deferred costs and other assets

1,716,346

1,422,788

Total assets of discontinued operations

-

3,002,314

Total assets

$ 29,672,165

$ 33,324,574




LIABILITIES:



Mortgages and unsecured indebtedness

$ 21,202,360

$ 22,669,917

Accounts payable, accrued expenses, intangibles, and deferred revenues

1,150,900

1,223,102

Cash distributions and losses in partnerships and joint ventures, at equity

1,166,887

1,050,278

Other liabilities

259,824

250,371

Total liabilities of discontinued operations

-

1,117,789

Total liabilities

23,779,971

26,311,457




Commitments and contingencies



Limited partners' preferred interest in the Operating Partnership and noncontrolling



redeemable interests in properties

25,537

190,485




EQUITY:



Stockholders' Equity



Capital stock (850,000,000 total shares authorized,  $ 0.0001 par value, 238,000,000



shares of excess common stock, 100,000,000 authorized shares of preferred stock):






Series J 8 3/8% cumulative redeemable preferred stock, 1,000,000 shares authorized,



796,948 issued and outstanding with a liquidation value of $ 39,847

44,144

44,390




Common stock, $ 0.0001 par value, 511,990,000 shares authorized, 314,314,502 and



314,251,245 issued and outstanding, respectively

31

31




Class B common stock, $ 0.0001 par value, 10,000 shares authorized, 8,000



issued and outstanding

-

-




Capital in excess of par value

9,406,656

9,217,363

Accumulated deficit

(4,200,226)

(3,218,686)

Accumulated other comprehensive loss

(125,414)

(75,795)

Common stock held in treasury at cost, 3,540,427 and 3,650,680 shares, respectively

(103,870)

(117,897)

Total stockholders' equity

5,021,321

5,849,406

Noncontrolling interests

845,336

973,226

Total equity

5,866,657

6,822,632

Total liabilities and equity

$ 29,672,165

$ 33,324,574

 

Simon Property Group, Inc. and Subsidiaries
Unaudited Joint Venture Statements of Operations
(Dollars in thousands)




For the Three Months


For the Nine Months


Ended September 30,


Ended September 30,


2014


2013


2014


2013









Revenue:








Minimum rent

$ 436,580


$ 396,539


$ 1,289,263


$ 1,165,611

Overage rent

42,760


40,707


133,146


128,320

Tenant reimbursements

202,973


193,288


588,772


555,681

Other income

54,157


40,760


228,793


122,152

Total revenue

736,470


671,294


2,239,974


1,971,764









Operating Expenses:








Property operating

141,083


122,550


434,147


356,089

Depreciation and amortization

147,946


131,689


442,141


378,284

Real estate taxes

59,934


53,593


167,523


154,271

Repairs and maintenance

16,289


15,172


51,874


46,290

Advertising and promotion

18,535


13,977


54,458


43,638

Provision for credit losses

210


311


4,288


1,823

Other

43,760


37,819


141,243


109,602

Total operating expenses

427,757


375,111


1,295,674


1,089,997









Operating Income

308,713


296,183


944,300


881,767









Interest expense

(147,817)


(147,928)


(449,512)


(442,620)

Income from Continuing Operations

160,896


148,255


494,788


439,147









Income from operations of discontinued joint venture interests

-


3,464


5,079


10,093

Gain on disposal of discontinued operations, net

-


6,580


-


24,936

Net Income

$ 160,896


$ 158,299


$ 499,867


$ 474,176









Third-Party Investors' Share of Net Income

$ 81,810


$ 85,211


$ 259,340


$ 263,926









Our Share of Net Income

79,086


73,088


240,527


210,250

Amortization of Excess Investment (A)

(26,187)


(25,733)


(76,168)


(75,415)

Our Share of Income from Unconsolidated Discontinued Operations

-


(353)


(652)


(852)

Income from Unconsolidated Entities (B)

$ 52,899


$ 47,002


$ 163,707


$ 133,983


Note: The above financial presentation does not include any information related to our investment in  Klepierre S.A. ("Klepierre").
      For additional information, see footnote B.

 

Simon Property Group, Inc. and Subsidiaries
Unaudited Joint Venture Balance Sheets
(Dollars in thousands)




September 30,


December 31,


2014


2013

Assets:




Investment properties, at cost

$ 15,854,182


$ 15,355,700

Less - accumulated depreciation

5,358,302


5,080,832


10,495,880


10,274,868

Cash and cash equivalents

753,133


781,554

Tenant receivables and accrued revenue, net

353,619


302,902

Investment in unconsolidated entities, at equity

11,701


38,352

Deferred costs and other assets

575,776


579,480

Total assets of discontinued operations

-


281,000

Total assets

$ 12,190,109


$ 12,258,156





Liabilities and Partners' Deficit:




Mortgages

$ 12,900,691


$ 12,753,139

Accounts payable, accrued expenses, intangibles, and deferred revenue

979,723


834,898

Other liabilities

491,959


513,897

Total liabilities of discontinued operations

-


286,252

Total liabilities

14,372,373


14,388,186





Preferred units

67,450


67,450

Partners' deficit

(2,249,714)


(2,197,480)

Total liabilities and partners' deficit

$ 12,190,109


$ 12,258,156





Our Share of:




Partners' deficit

$ (615,394)


$ (717,776)

Add: Excess Investment (A)

1,907,211


2,059,584

Add: Our Share of investment in discontinued unconsolidated entities, at equity

-


37,759

Our net Investment in unconsolidated entities, at equity

$ 1,291,817


$ 1,379,567


Note: The above financial presentation does not include any information related to our investment in Klepierre.
          For additional information, see footnote B attached hereto.

 

Simon Property Group, Inc. and Subsidiaries


Unaudited Reconciliation of Non-GAAP Financial Measures (C)


(Amounts in thousands, except per share amounts)















Reconciliation of Consolidated Net Income to FFO 
















For the Three Months Ended


For the Nine Months Ended







September 30,


September 30,







2014


2013


2014


2013















Consolidated Net Income (D)


$    296,963


$    367,293


$ 1,175,534


$       1,102,287


Adjustments to Arrive at FFO:
























Depreciation and amortization from consolidated 










     properties 



277,936


321,962


915,040


949,169



Our share of depreciation and amortization from










     unconsolidated entities, including Klepierre

135,131


130,055


410,848


376,432



Gain upon acquisition of controlling interests and sale or disposal










     of assets and interests in unconsolidated entities, net

(17,717)


(11,071)


(154,484)


(99,906)



Net income attributable to noncontrolling interest holders in










     properties



(750)


(1,958)


(1,720)


(6,517)



Noncontrolling interests portion of depreciation and amortization

(869)


(2,218)


(2,729)


(6,595)



Preferred distributions and dividends

(1,313)


(1,313)


(3,939)


(3,939)


FFO of the Operating Partnership (E)

$    689,381


$    802,750


$ 2,338,550


$       2,310,931




























Diluted net income per share to diluted FFO per share reconciliation:









Diluted net income per share


$         0.81


$         1.00


$         3.22


$               3.01



Depreciation and amortization from consolidated properties










     and our share of depreciation and amortization from 










     unconsolidated entities, including Klepierre, net of noncontrolling 










     interests portion of depreciation and amortization

1.14


1.24


3.64


3.65



Gain upon acquisition of controlling interests and sale or disposal










     of assets and interests in unconsolidated entities, net

(0.05)


(0.03)


(0.43)


(0.28)


Diluted FFO per share (F)


$         1.90


$         2.21


$         6.43


$               6.38















Details for per share calculations:























FFO of the Operating Partnership (E)

$    689,381


$    802,750


$ 2,338,550


$       2,310,931


Diluted FFO allocable to unitholders

(100,286)


(115,440)


(339,171)


(332,474)


Diluted FFO allocable to common stockholders (G)

$    589,095


$    687,310


$ 1,999,379


$       1,978,457















Basic and Diluted weighted average shares outstanding

310,772


310,333


310,713


310,195


Weighted average limited partnership units outstanding

52,873


52,122


52,709


52,127















Basic and Diluted weighted average shares and units outstanding

363,645


362,455


363,422


362,322















Basic and Diluted FFO per Share (F)

$         1.90


$         2.21


$         6.43


$               6.38


    Percent Change



-14.0%




0.8%

















 

Simon Property Group, Inc. and Subsidiaries

Footnotes to Unaudited Reconciliation of Non-GAAP Financial Measures












Notes:  





















(A)

Excess investment represents the unamortized difference of our investment over equity in the underlying net assets of the related partnerships and joint ventures shown therein.  The Company generally amortizes excess investment over the life of the related properties.












(B)

The Unaudited Joint Venture Statements of Operations do not include any operations or our share of net income or excess investment amortization related to our investment in Klepierre.  Amounts included in Footnotes D below exclude our share of related activity for our investment in Klepierre.  For further information, reference should be made to financial information in Klepierre's public filings and additional discussion and analysis in our Form 10-Q.












(C)

This report contains measures of financial or operating performance that are not specifically defined by GAAP, including FFO, FFO per share, comparable FFO per share and comparable earnings per share.  FFO is a performance measure that is standard in the REIT business.  We believe FFO provides investors with additional information concerning our operating performance and a basis to compare our performance with those of other REITs.  We also use these measures internally to monitor the operating performance of our portfolio. Our computation of these non-GAAP measures may not be the same as similar measures reported by other REITs.













We determine FFO based upon the definition set forth by the National Association of Real Estate Investment Trusts ("NAREIT"). We determine FFO to be our share of consolidated net income computed in accordance with GAAP, excluding real estate related depreciation and amortization, excluding gains and losses from extraordinary items, excluding gains and losses from the sales or disposals of, or any impairment charges related to, previously depreciated retail operating properties, plus the allocable portion of FFO of unconsolidated joint ventures based upon economic ownership interest, and all determined on a consistent basis in accordance with GAAP. 













We have adopted NAREIT's clarification of the definition of FFO that requires it to include the effects of nonrecurring items not classified as extraordinary, cumulative effect of accounting changes, or a gain or loss resulting from the sale or disposal of, or any impairment charges relating to, previously depreciated retail operating properties. We include in FFO gains and losses realized from the sale of land, outlot buildings, marketable and non-marketable securities, and investment holdings of non-retail real estate. However, you should understand that FFO does not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to net income determined in accordance with GAAP as a measure of operating performance, and is not an alternative to cash flows as a measure of liquidity.












(D)

Includes our share of: 



















-

Gains on land sales of $2.0 million and $4.2 million for the three months ended September 30, 2014 and 2013, respectively, $14.4 million and $5.4 million for the nine months ended September 30, 2014 and 2013, respectively.












-

Straight-line adjustments to minimum rent of $17.6 million and $13.6 million for the three months ended September 30, 2014 and 2013, respectively (including $0.0 million and $0.1 million related to WPG), and $44.9 million and $39.7 million for the nine months ended September 30, 2014 and 2013, respectively (including $0.3 million and ($0.1) million related to WPG).












-

Amortization of fair market value of leases from acquisitions of $3.7 million and $5.6 million for the three months ended September 30, 2014 and 2013 respectively (including $0.0 million and $0.3 million related to WPG), and $12.2 million and $21.9 million for the nine months ended September 30, 2014 and 2013, respectively (including $0.3 million and $1.1 million related to WPG).



-

Debt premium amortization of $5.2 million and $10.1 million for the three months ended September 30, 2014 and 2013, respectively (including $0.0 million and $0.1 million related to WPG), and $26.6 million and $32.3 million for the nine months ended September 30, 2014 and 2013, respectively (including $0.2 million and $0.3 million related to WPG). 



(E)

Includes FFO of the operating partnership and 2014 transaction expenses related to WPG of $86.4 million for the three months ended September 30, 2013, and $108.0 million and $262.1 million for the nine months ended September 30, 2014 and 2013, respectively. 












(F)

Includes Basic and Diluted FFO per share related to WPG operations and 2014 transaction expenses of $0.24 for the three months ended September 30, 2013, and $0.30 and $0.72 for the nine months ended September 30, 2014 and 2013, respectively.  












(G)

Includes Diluted FFO allocable to common stockholders and 2014 transaction expenses related to WPG of $74.0 million for the three months ended September 30, 2013, and $92.4 million and $224.4 million for the nine months ended September 30, 2014 and 2013, respectively.












(H)

Reconciliation of reported earnings per share to comparable earnings per share









Three Months Ended


Nine Months Ended







September 30, 


September 30, 







2014

2013


2014

2013



Reported earnings per share


$0.81

$1.00


$3.22

$3.01



Add: Loss on extinguishment of debt

0.35

--


0.35

--



Add: WPG spin-off transaction expenses

--

--


0.10

--



Less: Earnings per share from WPG properties 

--

(0.11)


(0.18)

(0.37)



Comparable earnings per share


$1.16

$0.89


$3.49

$2.64



Comparable earnings per share growth

30.3%



32.2%



 

SOURCE Simon Property Group, Inc.



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