Simon Property Group Reports First Quarter 2019 Results
Apr 30, 2019, 06:59 ET
INDIANAPOLIS, April 30, 2019 /PRNewswire/ -- Simon, a global leader in premier shopping, dining, entertainment and mixed-use destinations, today reported results for the quarter ended March 31, 2019.
Results for the Quarter
- Net income attributable to common stockholders was $548.5 million, or $1.78 per diluted share, as compared to $620.7 million, or $2.00 per diluted share in 2018. The prior year period includes gains of $135.3 million, or $0.38 per diluted share, primarily related to disposition activity. Adjusting for the prior year gains, net income attributable to common stockholders per diluted share increased 9.9%.
- Funds from Operations ("FFO") was $1.082 billion, or $3.04 per diluted share, as compared to $1.026 billion, or $2.87 per diluted share, in the prior year period, an increase of 5.9% per diluted share. Adjusting the prior year for the $11.3 million impact of expensing internal leasing costs due to the recently implemented ASC 842, FFO per diluted share increased 7.0%.
"I am pleased with our quarterly results, which exceeded the end of the first quarter First Call consensus estimate by $0.10 per share," said David Simon, Chairman, Chief Executive Officer and President. "Our growing development and redevelopment pipeline, combined with our A-rated balance sheet, sets us apart and allows us to continue to strengthen our platforms with a focus on the future."
U.S. Malls and Premium Outlets Operating Statistics
- Reported retailer sales per square foot was $660, an increase of 3.1%, for the trailing 12-months ended March 31, 2019.
- Occupancy was 95.1% at March 31, 2019, compared to 94.6% at March 31, 2018.
- Base minimum rent per square foot was $54.34 at March 31, 2019.
- Leasing spread per square foot for the trailing 12-months ended March 31, 2019 was $14.17, an increase of 27.3%.
Portfolio Net Operating Income ("NOI") and Comparable Property NOI
Total portfolio NOI growth for the three months ended March 31, 2019 was 1.7%. Total portfolio NOI includes NOI from comparable properties, new developments, redevelopments, expansions, acquisitions, international properties and our share of NOI from investments. Comparable property NOI growth for the three months ended March 31, 2019 was 1.6%.
Dividends
Today, Simon's Board of Directors declared a quarterly common stock dividend of $2.05 per share. This is a 5.1% increase year-over-year. The dividend will be payable on May 31, 2019 to shareholders of record on May 17, 2019.
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 June 28, 2019 to shareholders of record on June 14, 2019.
Development Activity
During the quarter, construction started on a 251,000 square foot upscale outlet located in Bangkok, Thailand, projected to open in February 2020. Simon owns 50% of this project.
Construction continues on three new international development projects including:
- Queretaro Premium Outlets (Queretaro, Mexico); scheduled to open in May 2019. Simon owns a 50% interest in this project.
- Malaga Designer Outlet (Malaga, Spain); scheduled to open in September 2019. Simon owns a 46% interest in this project.
- West Midland Designer Outlet (Cannock, England); scheduled to open in October 2020. Simon owns a 20% interest in this project.
Construction also continues on other significant redevelopment and expansion projects including The Shops at Riverside (Hackensack, NJ), Southdale Center (Edina (Minneapolis), MN), Northshore Mall (Peabody (Boston), MA), Paju Premium Outlets (Seoul, South Korea) and Gotemba Premium Outlets (Gotemba, Japan).
At quarter-end, redevelopment and expansion projects, including the redevelopment of former department store spaces, were underway at more than 30 properties in the U.S., Canada, Asia and Europe. Simon's share of the costs of all new development and redevelopment projects under construction at quarter-end was more than $1.4 billion.
Shop Premium Outlets
On March 26, 2019, we launched Shop Premium Outlets® (SPO), a new online outlet shopping platform which drives business to the stores and online of participating retailers. SPO will enable the highly engaged Premium Outlets® customer base to shop 24/7 for their favorite fashion, luxury and lifestyle brands, all in one place, up to 65 percent off every day.
Balance Sheet Activity
As of March 31, 2019, Simon had approximately $7.0 billion of liquidity consisting of cash on hand, including its share of joint venture cash, and available capacity under its revolving credit facilities.
The Company ended the first quarter with strong credit profile metrics, including:
- Net debt to NOI of 5.1X.
- Fixed charge coverage of 5.1X.
Common Stock Repurchase Program
On February 12th, the Company announced that its Board of Directors authorized a new common stock repurchase program. Under the new program, the Company may purchase up to $2 billion of its common stock over the next 24 months, as market conditions warrant. The shares may be purchased in the open market or in privately negotiated transactions.
2019 Guidance
The Company reaffirms its previous financial guidance and continues to estimate net income to be within a range of $7.30 to $7.40 per diluted share for the year ending December 31, 2019 and that FFO will be within a range of $12.30 to $12.40 per diluted share.
The following table provides the reconciliation for the expected range of estimated net income attributable to common stockholders per diluted share to estimated FFO per diluted share:
For the year ending December 31, 2019
Low |
High |
||
Estimated net income attributable to common stockholders per diluted share |
$7.30 |
$7.40 |
|
Depreciation and amortization including Simon's share of unconsolidated entities |
5.00 |
5.00 |
|
Estimated FFO per diluted share |
$12.30 |
$12.40 |
Conference Call
Simon will hold a conference call to discuss the quarterly financial results today at 8:30 a.m. Eastern Time, Tuesday, April 30, 2019. A live webcast of the conference call will be accessible in listen-only mode at investors.simon.com. An audio replay of the conference call will be available until May 7, 2019. To access the audio replay, dial 1-855-859-2056 (international 404-537-3406) passcode 5667848.
Supplemental Materials and Website
Supplemental information on our first quarter 2019 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 on 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, portfolio net operating income growth 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 the Company's 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: changes in economic and market conditions that may adversely affect the general retail environment; the potential loss of anchor stores or major tenants; the inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise; decreases in market rental rates; the intensely competitive market environment in the retail industry; the inability to lease newly developed properties and renew leases and relet space at existing properties on favorable terms; risks related to international activities, including, without limitation, the impact, if any, of the United Kingdom's exit from the European Union; changes to applicable laws or regulations or the interpretation thereof; risks associated with the acquisition, development, redevelopment, expansion, leasing and management of properties; general risks related to real estate investments, including the illiquidity of real estate investments; the impact of our substantial indebtedness on our future operations; any disruption in the financial markets that may adversely affect our ability to access capital for growth and satisfy our ongoing debt service requirements; any change in our credit rating; changes in market rates of interest and foreign exchange rates for foreign currencies; changes in the value of our investments in foreign entities; our ability to hedge interest rate and currency risk; our continued ability to maintain our status as a REIT; changes in tax laws or regulations that result in adverse tax consequences; risks relating to our joint venture properties; environmental liabilities; changes in insurance costs, the availability of comprehensive insurance coverage; security breaches that could compromise our information technology or infrastructure; natural disasters; the potential for terrorist activities; and the loss of key management personnel. 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 subsequent other periodic reports, but except as required by law, 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.
About Simon
Simon is a global leader in the ownership of premier shopping, dining, entertainment and mixed-use destinations and an S&P 100 company (Simon Property Group,NYSE:SPG). Our properties across North America, Europe and Asia provide community gathering places for millions of people every day and generate billions in annual sales. For more information, visit simon.com.
Simon Property Group, Inc. |
||
Unaudited Consolidated Statements of Operations |
||
(Dollars in thousands, except per share amounts) |
||
For the Three Months |
||
Ended March 31, |
||
2019 |
2018 |
|
REVENUE: |
||
Lease income |
$ 1,280,058 |
$ 1,267,893 |
Management fees and other revenues |
27,544 |
28,181 |
Other income |
145,232 |
98,108 |
Total revenue |
1,452,834 |
1,394,182 |
EXPENSES: |
||
Property operating |
111,549 |
113,448 |
Depreciation and amortization |
328,643 |
316,936 |
Real estate taxes |
115,459 |
114,187 |
Repairs and maintenance |
27,922 |
27,684 |
Advertising and promotion |
37,125 |
34,800 |
Home and regional office costs |
52,560 |
41,064 |
General and administrative |
9,136 |
12,628 |
Other |
20,102 |
31,502 |
Total operating expenses |
702,496 |
692,249 |
OPERATING INCOME BEFORE OTHER ITEMS |
750,338 |
701,933 |
Interest expense |
(198,733) |
(205,492) |
Income and other taxes |
(10,102) |
(6,220) |
Income from unconsolidated entities |
90,444 |
90,026 |
Gain on sale or disposal of, or recovery on, assets and interests in unconsolidated |
||
entities and impairment, net |
- |
135,277 |
CONSOLIDATED NET INCOME |
631,947 |
715,524 |
Net income attributable to noncontrolling interests |
82,638 |
94,036 |
Preferred dividends |
834 |
834 |
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS |
$ 548,475 |
$ 620,654 |
BASIC AND DILUTED EARNINGS PER COMMON SHARE: |
||
Net income attributable to common stockholders |
$ 1.78 |
$ 2.00 |
Simon Property Group, Inc. |
||
Unaudited Consolidated Balance Sheets |
||
(Dollars in thousands, except share amounts) |
||
March 31, |
December 31, |
|
2019 |
2018 |
|
ASSETS: |
||
Investment properties, at cost |
$ 37,193,798 |
$ 37,092,670 |
Less - accumulated depreciation |
13,119,895 |
12,884,539 |
24,073,903 |
24,208,131 |
|
Cash and cash equivalents |
436,802 |
514,335 |
Tenant receivables and accrued revenue, net |
733,159 |
763,815 |
Investment in unconsolidated entities, at equity |
2,197,309 |
2,220,414 |
Investment in Klépierre, at equity |
1,676,635 |
1,769,488 |
Deferred costs and other assets |
1,723,968 |
1,210,040 |
Total assets |
$ 30,841,776 |
$ 30,686,223 |
LIABILITIES: |
||
Mortgages and unsecured indebtedness |
$ 23,185,965 |
$ 23,305,535 |
Accounts payable, accrued expenses, intangibles, and deferred revenues |
1,157,477 |
1,316,861 |
Cash distributions and losses in unconsolidated entities, at equity |
1,559,534 |
1,536,111 |
Other liabilities |
1,012,976 |
500,597 |
Total liabilities |
26,915,952 |
26,659,104 |
Commitments and contingencies |
||
Limited partners' preferred interest in the Operating Partnership and noncontrolling |
||
redeemable interests in properties |
225,882 |
230,163 |
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 |
42,666 |
42,748 |
Common stock, $ 0.0001 par value, 511,990,000 shares authorized, 320,435,571 and |
||
320,411,571 issued and outstanding, respectively |
32 |
32 |
Class B common stock, $ 0.0001 par value, 10,000 shares authorized, 8,000 |
||
issued and outstanding |
- |
- |
Capital in excess of par value |
9,706,021 |
9,700,418 |
Accumulated deficit |
(4,979,489) |
(4,893,069) |
Accumulated other comprehensive loss |
(120,962) |
(126,017) |
Common stock held in treasury, at cost, 11,449,963 and 11,402,103 shares, respectively |
(1,435,309) |
(1,427,431) |
Total stockholders' equity |
3,212,959 |
3,296,681 |
Noncontrolling interests |
486,983 |
500,275 |
Total equity |
3,699,942 |
3,796,956 |
Total liabilities and equity |
$ 30,841,776 |
$ 30,686,223 |
Simon Property Group, Inc. |
||
Unaudited Joint Venture Combined Statements of Operations |
||
(Dollars in thousands) |
||
For the Three Months Ended |
||
2019 |
2018 |
|
REVENUE: |
||
Lease income |
$ 758,979 |
$ 752,606 |
Other income |
75,922 |
81,108 |
Total revenue |
834,901 |
833,714 |
OPERATING EXPENSES: |
||
Property operating |
144,721 |
146,293 |
Depreciation and amortization |
170,258 |
159,836 |
Real estate taxes |
68,717 |
68,267 |
Repairs and maintenance |
22,376 |
23,196 |
Advertising and promotion |
24,326 |
24,224 |
Other |
49,316 |
49,732 |
Total operating expenses |
479,714 |
471,548 |
OPERATING INCOME BEFORE OTHER ITEMS |
355,187 |
362,166 |
Interest expense |
(156,016) |
(150,932) |
Gain on sale or disposal of, or recovery on, assets and interests in unconsolidated entities, net |
21,587 |
- |
NET INCOME |
$ 220,758 |
$ 211,234 |
Third-Party Investors' Share of Net Income |
$ 112,668 |
$ 106,183 |
Our Share of Net Income |
108,090 |
105,051 |
Amortization of Excess Investment (A) |
(20,792) |
(21,527) |
Our Share of Gain on Sale or Disposal of Assets and Interests in |
||
Other Income in the Consolidated Financial Statements |
(9,155) |
- |
Income from Unconsolidated Entities (B) |
$ 78,143 |
$ 83,524 |
Note: The above financial presentation does not include any information related to our investments in Klépierre S.A. |
||
("Klépierre") and HBS Global Properties ("HBS"). For additional information, see footnote B. |
||
Simon Property Group, Inc. |
||
Unaudited Joint Venture Combined Balance Sheets |
||
(Dollars in thousands) |
||
March 31, |
December 31, |
|
2019 |
2018 |
|
Assets: |
||
Investment properties, at cost |
$ 18,887,972 |
$ 18,807,449 |
Less - accumulated depreciation |
6,971,412 |
6,834,633 |
11,916,560 |
11,972,816 |
|
Cash and cash equivalents |
1,012,497 |
1,076,398 |
Tenant receivables and accrued revenue, net |
407,040 |
445,148 |
Deferred costs and other assets |
617,399 |
390,818 |
Total assets |
$ 13,953,496 |
$ 13,885,180 |
Liabilities and Partners' Deficit: |
||
Mortgages |
$ 15,202,622 |
$ 15,235,415 |
Accounts payable, accrued expenses, intangibles, and deferred revenue |
876,348 |
976,311 |
Other liabilities |
560,101 |
344,205 |
Total liabilities |
16,639,071 |
16,555,931 |
Preferred units |
67,450 |
67,450 |
Partners' deficit |
(2,753,025) |
(2,738,201) |
Total liabilities and partners' deficit |
$ 13,953,496 |
$ 13,885,180 |
Our Share of: |
||
Partners' deficit |
$ (1,184,895) |
$ (1,168,216) |
Add: Excess Investment (A) |
1,581,225 |
1,594,198 |
Our net Investment in unconsolidated entities, at equity |
$ 396,330 |
$ 425,982 |
Note: The above financial presentation does not include any information related to our investments in Klépierre and |
||
HBS Global Properties. For additional information, see footnote B. |
||
Simon Property Group, Inc. |
|||||||
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 |
|||||||
March 31, |
|||||||
2019 |
2018 |
||||||
Consolidated Net Income (D) |
$ 631,947 |
$ 715,524 |
|||||
Adjustments to Arrive at FFO: |
|||||||
Depreciation and amortization from consolidated |
|||||||
properties |
325,938 |
314,006 |
|||||
Our share of depreciation and amortization from |
|||||||
unconsolidated entities, including Klépierre and HBS |
134,630 |
134,925 |
|||||
Gain on sale or disposal of, or recovery on, assets and interests in unconsolidated |
|||||||
entities and impairment, net |
- |
(135,277) |
|||||
Unrealized change in fair value of equity instruments |
(5,317) |
3,029 |
|||||
Net loss attributable to noncontrolling interest holders in |
|||||||
properties |
917 |
92 |
|||||
Noncontrolling interests portion of depreciation and amortization |
(4,882) |
(4,648) |
|||||
Preferred distributions and dividends |
(1,313) |
(1,313) |
|||||
FFO of the Operating Partnership |
$ 1,081,920 |
$ 1,026,338 |
|||||
Diluted net income per share to diluted FFO per share reconciliation: |
|||||||
Diluted net income per share |
$ 1.78 |
$ 2.00 |
|||||
Depreciation and amortization from consolidated properties |
|||||||
and our share of depreciation and amortization from unconsolidated |
|||||||
entities, including Klépierre and HBS, net of noncontrolling |
|||||||
interests portion of depreciation and amortization |
1.27 |
1.24 |
|||||
Gain on sale or disposal of, or recovery on, assets and interests in unconsolidated |
|||||||
entities and impairment, net |
- |
(0.38) |
|||||
Unrealized change in fair value of equity instruments |
(0.01) |
0.01 |
|||||
Diluted FFO per share |
$ 3.04 |
$ 2.87 |
|||||
Details for per share calculations: |
|||||||
FFO of the Operating Partnership |
$ 1,081,920 |
$ 1,026,338 |
|||||
Diluted FFO allocable to unitholders |
(142,319) |
(134,559) |
|||||
Diluted FFO allocable to common stockholders |
$ 939,601 |
$ 891,779 |
|||||
Basic and Diluted weighted average shares outstanding |
308,978 |
310,584 |
|||||
Weighted average limited partnership units outstanding |
46,800 |
46,863 |
|||||
Basic and Diluted weighted average shares and units outstanding |
355,778 |
357,447 |
|||||
Basic and Diluted FFO per Share |
$ 3.04 |
$ 2.87 |
|||||
Percent Change |
5.9% |
||||||
Simon Property Group, Inc. |
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Footnotes to Unaudited Financial Information |
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Notes: |
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(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. |
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(B) |
The Unaudited Joint Venture Combined Statements of Operations do not include any operations or our share of net income or excess investment amortization related to our investments in Klépierre and HBS Global Properties. Amounts included in Footnote D below exclude our share of related activity for our investments in Klépierre and HBS Global Properties. For further information on Klépierre, reference should be made to financial information in Klépierre's public filings and additional discussion and analysis in our Form 10-K. |
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(C) |
This report contains measures of financial or operating performance that are not specifically defined by GAAP, including FFO and FFO 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. |
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We determine FFO based upon the definition set forth by the National Association of Real Estate Investment Trusts ("NAREIT") Funds From Operations White Paper - 2018 Restatement. Our main business includes acquiring, owning, operating, developing, and redeveloping real estate in conjunction with the rental of real estate. Gains and losses of assets incidental to our main business are included in FFO. 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 sale, disposal or property insurance recoveries of, or any impairment related to, depreciable 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. 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. |
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(D) |
Includes our share of: |
|||||||||||
- |
Gains on land sales of $4.4 million and $1.3 million for the three months ended March 31, 2019 and 2018, respectively. |
|||||||||||
- |
Straight-line adjustments increased income by $16.7 million and $8.6 million for the three months ended March 31, 2019 and 2018, respectively. |
|||||||||||
- |
Amortization of fair market value of leases from acquisitions increased income by $1.3 million and $1.4 million for the three months ended March 31, 2019 and 2018, respectively. |
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SOURCE Simon
