Simon Property Group Reports Third Quarter Results, Announces Increase In Quarterly Dividend And Raises 2012 Guidance

INDIANAPOLIS, Oct. 25, 2012 /PRNewswire-FirstCall/ -- Simon Property Group, Inc. (the "Company" or "Simon") (NYSE: SPG) today reported results for the quarter and nine months ended September 30, 2012.

Results for the Quarter

  • Funds from Operations ("FFO") was $720.1 million, or $1.99 per diluted share, as compared to $606.2 million, or $1.71 per diluted share, in the prior year period. The increase on a per share basis was 16.4%.
  • Net income attributable to common stockholders was $254.9 million, or $0.84 per diluted share, as compared to $274.0 million, or $0.93 per diluted share, in the prior year period. 2011 results included a net gain from acquisition and disposition activities of $0.22 per share.

Results for the Nine Months

  • Funds from Operations ("FFO") was $2.057 billion, or $5.70 per diluted share, as compared to $1.760 billion, or $4.97 per diluted share, in the prior year period. The increase on a per share basis was 14.7%.
  • Net income attributable to common stockholders was $1.116 billion, or $3.71 per diluted share, as compared to $658.5 million, or $2.24 per diluted share, in the prior year period.

"It was an excellent quarter for our Company," said David Simon, Chairman and Chief Executive Officer.  "We generated 16.4% growth in FFO and continued to strengthen our retail real estate platform through significant development activities. The quality of our Mall and Premium Outlet portfolio is evident with continued increases in occupancy and sales and 4.7% growth in quarterly comparable property net operating income.  We are pleased to raise our dividend for the fifth consecutive quarter and once again increase guidance for 2012."

U.S. Operational Statistics(1)


As of

As of

%


September 30, 2012

September 30, 2011

Increase

Occupancy(2)

94.6%

93.8%

+ 80 basis points

Total Sales per Sq. Ft. (3)

$562

$514

9.3%

Base Minimum Rent per Sq. Ft. (2)

$40.33

$38.84

3.8%






(1) Combined information for U.S. Malls and Premium Outlets. 2011 statistics have been restated to include Malls previously owned by The Mills Limited Partnership, now owned by Simon Property Group, L.P., and Premium Outlets acquired in the 2010 acquisition of Prime Outlets Acquisition Company.

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

(3) Rolling 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.

Dividends

Today the Company announced that the Board of Directors declared a quarterly common stock dividend of $1.10 per share, an increase of 4.8% from the previous quarter and an increase of 22.2% from the year earlier period. The dividend is payable on November 30, 2012 to stockholders of record on November 16, 2012.

The Company 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, 2012 to stockholders of record on December 17, 2012.

Development Activity

On October 19th, the Company opened a 350,000 square foot upscale outlet center owned in a 50/50 joint venture with Tanger Factory Outlet Centers, Inc. in Texas City, Texas. The center, which was 97% leased at opening, is located approximately 30 miles south of downtown Houston and 20 miles north of Galveston on highly-traveled Interstate 45 at Exit 17 at Holland Road.

The Company started construction on St. Louis Premium Outlets on July 11th. The project is located in Chesterfield, Missouri and is a part of Chesterfield Blue Valley, a mixed-use development to include office space, hotel, restaurant and entertainment venues. Located on the south side of I-64/US Highway 40 east of the Daniel Boone Bridge, the center's first phase of 350,000 square feet and 85 stores will open in September of 2013. The Company owns a 60% interest in this project, which is a joint venture with Woodmont Outlets.

Construction is expected to commence shortly on the Company's first outlet center in Brazil. The project is located northwest of Sao Paulo, Brazil and is being developed in a 50/50 joint venture with BR Malls Participacoes S.A. The 310,000 square foot center is scheduled to open in November of 2013.

Construction continues on several new Premium Outlets:

  • In Shisui (Chiba), Japan a 230,000 square foot upscale outlet center located one hour from central Tokyo and 15 minutes from Narita International Airport. The center is scheduled to open in April of 2013 with approximately 110 stores, including international brands, Japanese brands and restaurants. The Company owns a 40% interest in this project, its ninth Premium Outlet Center in Japan.
  • In Chandler (Phoenix), Arizona – an upscale outlet center adjacent to the Wild Horse Pass Hotel & Casino located on Interstate 10. Phase I of the project will be comprised of 360,000 square feet housing approximately 90 outlet stores featuring high-quality designer and name brands. The Company owns 100% of this project which is scheduled to open in April of 2013.
  • In Halton Hills (Toronto), Canada a 360,000 square foot upscale outlet center that will house over 100 high quality outlet stores. Toronto Premium Outlets is expected to be the Canadian entry point for selected upscale, U.S. retailers and designer brands. The Company owns a 50% interest in this project which is scheduled to open in August of 2013.
  • In Busan, Korea – a 340,000 square foot upscale outlet center that will serve southeastern Korea, including the cities of Busan, Ulsan and Daegu, as well as local and overseas visitors. The center is scheduled to open in September of 2013. The Company owns a 50% interest in this project, which will be its third Premium Outlet Center in Korea.

Redevelopment and expansion projects are underway at 24 properties in the U.S. and one property in Japan.  During the first nine months of 2012, 34 new anchor and big box tenants opened in the Company's U.S. portfolio and more than 40 are currently scheduled to open in the fourth quarter of 2012 and 2013.  

Capital Markets

On July 20th, the Company redeemed 2.0 million limited partnership units of its majority-owned operating partnership subsidiary, Simon Property Group, L.P. (the "Operating Partnership"), owned by an affiliate of JCPenney for $124.00 per unit in cash.   

Sale of Investment in Marketable Securities

On October 23rd, the Company completed the sale of its entire investment in the marketable securities of Capital Shopping Centres Group PLC (35.4 million shares) and Capital & Counties Properties PLC (38.9 million shares) generating proceeds of approximately $327 million.   

2012 Guidance

Today the Company updated and raised its guidance for 2012, stating that it expects FFO, excluding activity related to investments in marketable securities, will be within a range of $7.80 to $7.85 per diluted share for the year ending December 31, 2012, and diluted net income will be within a range of $4.61 to $4.66 per share. 

The following table provides a reconciliation of estimated diluted net income available to common stockholders per share to estimated diluted FFO per share.

For the year ending December 31, 2012                                                                         




Low 
End

 High

 End

Estimated diluted net income available to common stockholders per share    

$4.61

$4.66




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



    interests in unconsolidated entities, and impairment charge on investment



    in unconsolidated entities, net                                                

(1.36)

(1.36)

Depreciation and amortization including the Company's share of equity



    method investments                                    

4.55

4.55

Estimated diluted FFO per share                                               

$7.80

$7.85

Conference Call

The Company will provide an online simulcast of its quarterly conference call at www.simon.com (Investors tab), www.earnings.com, and www.streetevents.com. To listen to the live call, please go to any of these websites at least fifteen minutes prior to the call to register, download and install any necessary audio software. The call will begin at 11:00 a.m. Eastern Time (New York time) today, October 25, 2012. An online replay will be available for approximately 90 days at www.simon.com, www.earnings.com, and www.streetevents.com. A fully searchable podcast of the conference call will also be available at www.REITcafe.com.

Supplemental Materials and Website

The Company has prepared a supplemental information package which is available at www.simon.com in the Investors section, Financial Information tab. It has also been furnished to the SEC as part of a current report on Form 8-K. If you wish to receive a copy via mail or email, please call 800-461-3439.

We routinely post important information for investors on our website, www.simon.com, in the "Investors" section. We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be 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 and comparable property net operating income growth, which are adjusted from financial performance measures defined by accounting principles generally accepted in the United States ("GAAP"). Reconciliations of these measures to the most directly comparable GAAP measures are included within this press release or the Company's supplemental information package.  FFO and comparable property net operating income growth are financial performance measures widely used in the REIT industry.

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 our 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, environ-mental liabilities, international, national, regional and local economic climates, 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, 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 its annual and quarterly periodic reports filed with the SEC.  The Company may update that discussion in its periodic reports, but otherwise 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.

Simon Property Group

Simon Property Group, Inc. (NYSE: SPG) is an S&P 100 company and the largest real estate company in the world.  The Company currently owns or has an interest in 333 retail real estate properties in North America and Asia comprising 242 million square feet. We are headquartered in Indianapolis, Indiana and employ approximately 5,500 people in the U.S.  For more information, visit the Simon Property Group website at www.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,


2012


2011


2012


2011









REVENUE:








  Minimum rent

$ 759,039


$ 664,724


$2,207,334


$1,958,626

  Overage rent

51,170


36,653


110,277


75,774

  Tenant reimbursements

342,443


294,305


979,300


861,352

  Management fees and other revenues

32,294


31,249


92,928


93,001

  Other income

43,671


47,429


145,813


146,341

    Total revenue

1,228,617


1,074,360


3,535,652


3,135,094









EXPENSES:








  Property operating

132,378


122,446


353,136


331,013

  Depreciation and amortization

310,244


260,802


907,217


788,410

  Real estate taxes

105,694


87,264


311,173


273,952

  Repairs and maintenance

26,556


24,465


78,862


79,957

  Advertising and promotion

28,114


25,773


77,762


72,619

  (Recovery of) provision for credit losses

(1,180)


1,501


5,271


3,180

  Home and regional office costs

27,057


30,525


95,019


91,035

  General and administrative

14,165


14,974


42,787


31,614

  Other

24,637


23,012


66,510


61,254

    Total operating expenses

667,665


590,762


1,937,737


1,733,034









OPERATING INCOME

560,952


483,598


1,597,915


1,402,060









Interest expense

(288,896)


(244,384)


(835,532)


(737,018)

Income tax benefit (expense) of taxable REIT subsidiaries

97


(860)


(1,786)


(2,706)

Income from unconsolidated entities

37,129


17,120


96,613


49,561

(Loss) gain upon acquisition of controlling interests, 








sale or disposal of assets and interests in unconsolidated 








entities, and impairment charge on investment








in unconsolidated entities, net (A)

(2,911)


78,307


491,926


92,072









CONSOLIDATED NET INCOME

306,371


333,781


1,349,136


803,969









Net income attributable to noncontrolling interests 

50,616


58,947


230,857


142,934

Preferred dividends

834


834


2,503


2,503









NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS

$ 254,921


$ 274,000


$1,115,776


$ 658,532

















BASIC EARNINGS PER COMMON SHARE:








    Net income attributable to common stockholders

$ 0.84


$ 0.93


$ 3.71


$ 2.24









DILUTED EARNINGS PER COMMON SHARE:








    Net income attributable to common stockholders

$ 0.84


$ 0.93


$ 3.71


$ 2.24









 

Simon Property Group, Inc. and Subsidiaries

Unaudited Consolidated Balance Sheets

(Dollars in thousands, except share amounts)







September 30,


December 31,


2012


2011

ASSETS:




    Investment properties at cost

$ 34,366,668


$29,657,046

        Less - accumulated depreciation

9,101,007


8,388,130


25,265,661


21,268,916

    Cash and cash equivalents

452,712


798,650

    Tenant receivables and accrued revenue, net

456,397


486,731

    Investment in unconsolidated entities, at equity

2,013,651


1,378,084

    Investment in Klepierre, at equity

1,945,128


-

    Deferred costs and other assets

1,844,428


1,633,544

    Notes receivable from related party

-


651,000

        Total assets

$ 31,977,977


$26,216,925





LIABILITIES:




    Mortgages and other indebtedness

$ 22,569,634


$18,446,440

    Accounts payable, accrued expenses, intangibles, and deferred revenues

1,204,438


1,091,712

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

728,470


695,569

    Other liabilities

300,388


170,971

        Total liabilities

24,802,930


20,404,692





Commitments and contingencies




Limited partners' preferred interest in the Operating Partnership and noncontrolling




    redeemable interests in properties

354,006


267,945





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

44,801


45,047





        Common stock, $ 0.0001 par value, 511,990,000 shares authorized, 313,103,803 and



            297,725,698 issued and outstanding, respectively

31


30





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




            issued and outstanding

-


-





    Capital in excess of par value

9,054,730


8,103,133

    Accumulated deficit

(3,057,328)


(3,251,740)

    Accumulated other comprehensive loss

(64,776)


(94,263)

    Common stock held in treasury at cost, 3,762,595 and 3,877,448 shares, respectively

(135,781)


(152,541)

        Total stockholders' equity

5,841,677


4,649,666

Noncontrolling interests

979,364


894,622

        Total equity

6,821,041


5,544,288

        Total liabilities and equity

$ 31,977,977


$26,216,925

 

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,


2012


2011


2012


2011









Revenue:








  Minimum rent

$ 370,183


$ 356,155


$ 1,091,701


$ 1,046,992

  Overage rent

44,002


36,923


128,622


94,114

  Tenant reimbursements

176,544


169,911


508,698


490,276

  Other income

34,754


36,041


121,686


107,449

    Total revenue

625,483


599,030


1,850,707


1,738,831









Operating Expenses:








  Property operating

125,162


123,506


351,963


339,699

  Depreciation and amortization

125,512


125,260


374,333


361,345

  Real estate taxes

45,068


40,897


132,618


127,831

  Repairs and maintenance

15,418


14,954


45,269


46,005

  Advertising and promotion

11,706


12,632


39,600


37,123

  (Recovery of) provision for credit losses

(646)


1,411


(247)


3,624

  Other

36,089


37,100


128,134


109,765

    Total operating expenses

358,309


355,760


1,071,670


1,025,392









Operating Income

267,174


243,270


779,037


713,439









Interest expense

(148,891)


(149,839)


(451,581)


(441,396)

Loss from unconsolidated entities

(316)


(596)


(947)


(1,054)

Income from Continuing Operations

117,967


92,835


326,509


270,989









Loss from operations of discontinued joint venture interests

(1,978)


(17,431)


(20,769)


(39,646)

(Loss) gain on disposal of discontinued operations, net

(4,904)


78


(4,904)


15,583

Net Income

$ 111,085


$ 75,482


$ 300,836


$ 246,926









Third-Party Investors' Share of Net Income

$ 66,308


$ 45,271


$ 163,108


$ 151,741









Our Share of Net Income

44,777


30,211


137,728


95,185

Amortization of Excess Investment (B)

(21,726)


(13,052)


(55,059)


(37,832)

Our Share of Loss (Gain) on Sale or Disposal of Assets and








  Interests in Unconsolidated Entities, net

9,245


(39)


9,245


(7,792)

Income from Unconsolidated Entities (C)

$ 32,296


$ 17,120


$ 91,914


$ 49,561









Note: The above financial presentation does not include any information related to our investment in Klepierre.  

 For additional information, see footnote C attached hereto.


 

Simon Property Group, Inc. and Subsidiaries

Unaudited Joint Venture Balance Sheets

(Dollars in thousands)







September 30,


December 31,


2012


2011

Assets:




Investment properties, at cost

$ 14,128,861


$ 20,481,657

Less - accumulated depreciation

4,680,199


5,264,565


9,448,662


15,217,092

Cash and cash equivalents

554,116


806,895

Tenant receivables and accrued revenue, net

235,507


359,208

Investment in unconsolidated entities, at equity

39,539


133,576

Deferred costs and other assets

352,392


526,101

Total assets

$ 10,630,216


$ 17,042,872





Liabilities and Partners' Deficit:




Mortgages and other indebtedness

$ 11,106,661


$ 15,582,321

Accounts payable, accrued expenses, intangibles, and deferred revenue

607,805


775,733

Other liabilities

326,564


981,711

Total liabilities

12,041,030


17,339,765





Preferred units

67,450


67,450

Partners' deficit

(1,478,264)


(364,343)

Total liabilities and partners' deficit

$ 10,630,216


$ 17,042,872





Our Share of:




Partners' deficit

$ (675,359)


$ (32,000)

Add: Excess Investment (B)

1,960,540


714,515

Our net Investment in unconsolidated entities

$ 1,285,181


$ 682,515





Note: The above financial presentation does not include any information related to our investment in

         Klepierre. For additional information, see footnote C attached hereto.