Simon® Reports Third Quarter 2023 Results and Increases Full Year 2023 Guidance

Simon Property Group, Inc. +1.55% Pre

Simon Property Group, Inc.

SPG

150.44

150.44

+1.55%

0.00% Pre

INDIANAPOLIS, Oct. 30, 2023 /PRNewswire/ -- Simon®, a real estate investment trust engaged in the ownership of premier shopping, dining, entertainment and mixed-use destinations, today reported results for the quarter ended September 30, 2023.

Simon (PRNewsfoto/Simon)

"We produced an excellent quarter highlighted by strong financial and operational performance," said David Simon, Chairman, Chief Executive Officer and President.  "We continue to demonstrate our ability to grow our business."

Results for the Quarter

  • Net income attributable to common stockholders was $594.1 million, or $1.82 per diluted share, as compared to $539.0 million, or $1.65 per diluted share in 2022.
    • Net income for the third quarter of 2023 includes non-cash after-tax gains of $118.1 million, or $0.32 per diluted share, primarily due to the partial sale of the Company's ownership interest in its SPARC Group joint venture ("SPARC"). The Company now owns 33% of SPARC (reduced from 50%).
  • Funds From Operations ("FFO") was $1.201 billion, or $3.20 per diluted share, inclusive of the gains referenced above, as compared to $1.099 billion, or $2.93 per diluted share in the prior year. 
  • Domestic property Net Operating Income ("NOI") increased 4.2% and portfolio NOI increased 4.3%, in each case, compared to the prior year period. 

Results for the Nine Months

  • Net income attributable to common stockholders was $1.532 billion, or $4.68 per diluted share, as compared to $1.462 billion, or $4.46 per diluted share in 2022.
    • Net income for the nine months ended 2023 includes non-cash after-tax gains of $145.5 million or $0.39 per diluted share due to the gain in SPARC referenced above and a dilution of our ownership interest in Authentic Brands Group ("ABG"). 
  • FFO was $3.304 billion, or $8.82 per diluted share as compared to $3.207 billion, or $8.54 per diluted share in the prior year. 
  • Domestic property NOI increased 3.8% and portfolio NOI increased 4.0%, in each case, compared to the prior year period. 

U.S. Malls and Premium Outlets Operating Statistics

  • Occupancy was 95.2% at September 30, 2023, compared to 94.5% at September 30, 2022, an increase of 70 basis points.
  • Base minimum rent per square foot was $56.41 at September 30, 2023, compared to $54.80 at September 30, 2022, an increase of 2.9%. 
  • Reported retailer sales per square foot was $744 for the trailing 12 months ended September 30, 2023, a decrease of 0.7% compared to the prior year period.

Development Activity

During the quarter, construction started on Jakarta Premium Outlets®, the first Premium Outlet® Center in Indonesia.  The 300,000 square foot upscale outlet is projected to open in February 2025.  Simon owns 50% of this project. 

Construction continues on redevelopment and expansion projects at properties in North America and Asia. 

Capital Markets and Balance Sheet Liquidity

The Company was active in the credit markets through the first nine months of the year. 

During the first nine months, the Company completed eleven non-recourse mortgage loans totaling approximately $962 million (U.S. dollar equivalent), of which Simon's share was $540 million.  The weighted average interest rate on these loans was 6.03%.

During the quarter ended September 30, 2023, the Company repurchased 1,267,995 shares of its common stock.

As of September 30, 2023, Simon had approximately $8.8 billion of liquidity consisting of $1.4 billion of cash on hand, including its share of joint venture cash, and $7.4 billion of available capacity under its revolving credit facilities.

Dividends

Today, Simon's Board of Directors declared a quarterly common stock dividend of $1.90 for the fourth quarter of 2023.  This is an increase of $0.10, or 5.6% year-over-year.  The dividend will be payable on December 29, 2023 to shareholders of record on December 8, 2023. 

Simon's Board of Directors 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 29, 2023 to shareholders of record on December 15, 2023. 

2023 Guidance

The Company currently estimates net income to be within a range of $6.67 to $6.77 per diluted share and FFO to be within a range of $12.15 to $12.25 per diluted share for the year ending December 31, 2023.  The FFO per diluted share range is an increase from the $11.85 to $11.95 per diluted share range provided on August 2, 2023, or an increase of $0.30 per diluted share at the mid-point. 

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

For the year ending December 31, 2023









Low



High



End



End

Estimated net income attributable to common stockholders







    per diluted share*

$6.67



$6.77

Depreciation and amortization including Simon's share







    of unconsolidated entities

5.45



5.45

Loss on acquisition of controlling interest, sale or







    disposal of, or recovery on, assets and interests in







    unconsolidated entities and impairment, net

0.03



0.03

 

Estimated FFO per diluted share*

$12.15



$12.25









* Includes year-to-date unrealized gains of $0.05 from mark-to-market of publicly traded equity instruments

Conference Call

Simon will hold a conference call to discuss the quarterly financial results today from 5:00 p.m. to 6:00 p.m. Eastern Time, Monday, October 30, 2023.  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 November 6, 2023.  To access the audio replay, dial 1-844-512-2921 (international +1-412-317-6671) passcode 13741427. 

Supplemental Materials and Website

Supplemental information on our third quarter 2023 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 and portfolio NOI 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 NOI 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, including but not limited to those caused by inflation, recessionary pressures, wars, escalating geopolitical tensions as a result of the war in Ukraine and the conflicts in the Middle East, and supply chain disruptions; the inability to renew leases and relet vacant space at existing properties on favorable terms; the potential loss of anchor stores or major tenants; the inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise; an increase in vacant space at our properties; the potential for violence, civil unrest, criminal activity or terrorist activities at our properties; natural disasters; the availability of comprehensive insurance coverage; the intensely competitive market environment in the retail industry, including e-commerce; security breaches that could compromise our information technology or infrastructure; the increased focus on ESG metrics and reporting; environmental liabilities; our international activities subjecting us to risks that are different from or greater than those associated with our domestic operations, including changes in foreign exchange rates; our continued ability to maintain our status as a REIT; changes in tax laws or regulations that result in adverse tax consequences; risks associated with the acquisition, development, redevelopment, expansion, leasing and management of properties; the inability to lease newly developed properties on favorable terms; the loss of key management personnel; uncertainties regarding the impact of pandemics, epidemics or public health crises, and the associated governmental restrictions on our business, financial condition, results of operations, cash flow and liquidity; changes in market rates of interest; the impact of our substantial indebtedness on our future operations, including covenants in the governing agreements that impose restrictions on us that may affect our ability to operate freely; 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; risks relating to our joint venture properties, including guarantees of certain joint venture indebtedness; and general risks related to real estate investments, including the illiquidity of real estate investments.

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 real estate investment trust engaged 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.

Simon Property Group, Inc.

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,



2023

2022



2023

2022













REVENUE:











Lease income

$ 1,298,737

$ 1,215,470



$ 3,801,880

$ 3,618,035

Management fees and other revenues

30,055

28,654



92,511

85,051

Other income

82,156

71,662



237,007

188,464

Total revenue

1,410,948

1,315,786



4,131,398

3,891,550













EXPENSES:











Property operating

136,541

120,858



366,553

336,929

Depreciation and amortization

315,259

301,754



941,851

910,190

Real estate taxes

115,456

109,932



338,452

333,611

Repairs and maintenance

22,660

21,639



67,837

63,993

Advertising and promotion

28,809

27,102



86,713

72,429

Home and regional office costs

47,679

43,711



154,505

143,424

General and administrative

9,070

7,784



28,235

24,977

Other

41,240

30,810



132,369

106,649

Total operating expenses

716,714

663,590



2,116,515

1,992,202













OPERATING INCOME BEFORE OTHER ITEMS

694,234

652,196



2,014,883

1,899,348













Interest expense

(212,210)

(187,878)



(629,725)

(560,353)

Gain on disposal, exchange, or revaluation of equity interests, net

158,192

-



194,629

-

Income and other tax expense

(43,218)

(8,256)



(40,252)

(31,168)

Income from unconsolidated entities

95,480

163,086



207,835

434,343

Unrealized (losses) gains in fair value of publicly traded equity instruments, net

(6,175)

(14,563)



20,049

(63,412)

(Loss) gain on acquisition of controlling interest, sale or disposal of, or recovery on, 











assets and interests in unconsolidated entities and impairment, net

(5,541)

17,262



(9,897)

879













CONSOLIDATED NET INCOME

680,762

621,847



1,757,522

1,679,637













Net income attributable to noncontrolling interests 

85,789

81,975



222,710

214,722

Preferred dividends

834

834



2,503

2,503













NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS

$ 594,139

$ 539,038



$ 1,532,309

$ 1,462,412

























BASIC AND DILUTED EARNINGS PER COMMON SHARE:











Net income attributable to common stockholders

$ 1.82

$ 1.65



$ 4.68

$ 4.46

 

Simon Property Group, Inc.

Unaudited Consolidated Balance Sheets

(Dollars in thousands, except share amounts)









September 30,

December 31,



2023

2022

ASSETS:





Investment properties, at cost

$ 38,951,669

$ 38,326,912

Less - accumulated depreciation

17,410,320

16,563,749



21,541,349

21,763,163

Cash and cash equivalents

769,031

621,628

Tenant receivables and accrued revenue, net

757,612

823,540

Investment in TRG, at equity

3,106,062

3,074,345

Investment in Klépierre, at equity

1,456,649

1,561,112

Investment in other unconsolidated entities, at equity

3,617,515

3,511,263

Right-of-use assets, net

489,989

496,930

Deferred costs and other assets

1,226,395

1,159,293

Total assets

$ 32,964,602

$ 33,011,274







LIABILITIES:





Mortgages and unsecured indebtedness

$ 24,916,760

$ 24,960,286

Accounts payable, accrued expenses, intangibles, and deferred revenues

1,626,333

1,491,583

Cash distributions and losses in unconsolidated entities, at equity

1,758,175

1,699,828

Dividend payable

3,347

1,997

Lease liabilities

490,825

497,953

Other liabilities

556,289

535,736

Total liabilities

29,351,729

29,187,383







Commitments and contingencies





Limited partners' preferred interest in the Operating Partnership and noncontrolling





redeemable interests

202,465

212,239







EQUITY:





Stockholders' Equity





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





shares of excess common stock, 850,000,000 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

41,188

41,435







Common stock, $0.0001 par value, 511,990,000 shares authorized, 342,900,671 and





342,905,419 issued and outstanding, respectively

34

34







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





issued and outstanding

-

-







Capital in excess of par value

11,392,636

11,232,881

Accumulated deficit

(6,218,936)

(5,926,974)

Accumulated other comprehensive loss

(140,987)

(164,873)

Common stock held in treasury, at cost, 16,661,258 and 15,959,628 shares, respectively

(2,121,201)

(2,043,979)

Total stockholders' equity

2,952,734

3,138,524

Noncontrolling interests

457,674

473,128

Total equity

3,410,408

3,611,652

Total liabilities and equity

$ 32,964,602

$ 33,011,274

 

Simon Property Group, Inc.

Unaudited Joint Venture Combined Statements of Operations

(Dollars in thousands)





For the Three Months Ended

September 30,



For the Nine Months Ended

September 30, 



2023

2022



2023

2022













REVENUE:











Lease income

$ 743,388

$ 710,084



$ 2,212,197

$ 2,142,068

Other income

129,021

72,355



357,261

258,446

Total revenue

872,409

782,439



2,569,458

2,400,514













OPERATING EXPENSES:











Property operating

165,406

153,002



475,364

445,214

Depreciation and amortization

159,560

169,453



483,361

504,926

Real estate taxes

63,607

59,008



192,550

187,697

Repairs and maintenance

19,034

17,632



55,452

58,322

Advertising and promotion

19,188

17,153



58,702

52,718

Other

63,696

48,866



180,213

146,595

Total operating expenses

490,491

465,114



1,445,642

1,395,472













OPERATING INCOME BEFORE OTHER ITEMS

381,918

317,325



1,123,816

1,005,042













Interest expense

(172,523)

(147,539)



(508,230)

(438,559)

Gain on sale or disposal of, or recovery on, assets and interests in

unconsolidated entities, net

19,395

4,522



20,529

4,522













NET INCOME

$ 228,790

$ 174,308



$ 636,115

$ 571,005













Third-Party Investors' Share of Net Income

$ 124,272

$ 83,222



$ 329,338

$ 280,919













Our Share of Net Income

104,518

91,086



306,777

290,086

Amortization of Excess Investment (A)

(14,933)

(14,928)



(44,781)

(45,153)

Our Share of Gain on Sale or Disposal of, or Recovery on, Assets and

Interests in Unconsolidated Entities, net

-

(2,532)



(454)

(2,532)













Income from Unconsolidated Entities (B)

$ 89,585

$ 73,626



$ 261,542

$ 242,401



Note: The above financial presentation does not include any information related to our investments in Klépierre S.A. ("Klépierre"), The Taubman Realty Group ("TRG") and other platform investments. For additional information, see footnote B.

 

Simon Property Group, Inc.

Unaudited Joint Venture Combined Balance Sheets

(Dollars in thousands)





September 30,

December 31,



2023

2022

Assets:





Investment properties, at cost

$ 19,085,972

$ 19,256,108

Less - accumulated depreciation

8,673,301

8,490,990



10,412,671

10,765,118

Cash and cash equivalents

1,413,812

1,445,353

Tenant receivables and accrued revenue, net

470,337

546,025

Right-of-use assets, net

123,149

143,526

Deferred costs and other assets

544,390

482,375

Total assets

$ 12,964,359

$ 13,382,397







Liabilities and Partners' Deficit:





Mortgages

$ 14,324,171

$ 14,569,921

Accounts payable, accrued expenses, intangibles, and deferred revenue

990,731

961,984

Lease liabilities

113,047

133,096

Other liabilities

380,490

446,064

Total liabilities

15,808,439

16,111,065







Preferred units

67,450

67,450

Partners' deficit

(2,911,530)

(2,796,118)

Total liabilities and partners' deficit

$ 12,964,359

$ 13,382,397







Our Share of:





Partners' deficit

$ (1,277,109)

$ (1,232,086)

Add: Excess Investment (A)

1,184,743

1,219,117

Our net Investment in unconsolidated entities, at equity

$ (92,366)

$ (12,969)



Note: The above financial presentation does not include any information related to our investments in Klépierre, TRG and other platform investments. 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



For the Nine Months Ended











September 30,



September 30,











2023



2022



2023



2022

























Consolidated Net Income (D)





$     680,762



$   621,847



$  1,757,522



$  1,679,637

Adjustments to Arrive at FFO:













































Depreciation and amortization from consolidated 

















    properties 





313,053



299,202



933,669



903,137



Our share of depreciation and amortization from

















    unconsolidated entities, including Klépierre, TRG and other corporate investments

207,607



204,428



622,258



645,130



Loss (gain) on acquisition of controlling interest, sale or disposal of, or recovery on,

















assets and interests in unconsolidated entities and impairment, net

5,541



(17,262)



9,897



(879)



Net loss (income) attributable to noncontrolling interest holders in

















    properties





1,149



(3,616)



751



(2,498)



Noncontrolling interests portion of depreciation and amortization, gain on consolidation of properties,

















and loss (gain) on disposal of properties

(6,045)



(4,396)



(16,255)



(13,640)



Preferred distributions and dividends

(1,313)



(1,313)



(3,939)



(3,939)

FFO of the Operating Partnership



$   1,200,754



$  1,098,890



$  3,303,903



$  3,206,948

















































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















Diluted net income per share





$           1.82



$         1.65



$         4.68



$         4.46



Depreciation and amortization from consolidated properties

















    and our share of depreciation and amortization from unconsolidated 

















    entities, including Klépierre, TRG and other corporate investments, net of noncontrolling 

















    interests portion of depreciation and amortization

1.37



1.33



4.11



4.08



Loss (gain) on acquisition of controlling interest, sale or disposal of, or recovery on,

















assets and interests in unconsolidated entities and impairment, net

0.01



(0.05)



0.03



-

Diluted FFO per share 





$           3.20



$         2.93



$         8.82



$         8.54

























Details for per share calculations:









































FFO of the Operating Partnership



$   1,200,754



$  1,098,890



$  3,303,903



$  3,206,948

Diluted FFO allocable to unitholders



(152,599)



(138,760)



(418,135)



(404,008)

Diluted FFO allocable to common stockholders

$   1,048,155



$   960,130



$  2,885,768



$  2,802,940

























Basic and Diluted weighted average shares outstanding

327,159



327,286



327,101



328,107

Weighted average limited partnership units outstanding

47,658



47,304



47,396



47,293

Basic and Diluted weighted average shares and units outstanding

374,817



374,590



374,497



375,400

























Basic and Diluted FFO per Share



$           3.20



$         2.93



$         8.82



$         8.54

  Percent Change







9.2 %







3.3 %





















































 

Simon Property Group, Inc.

Footnotes to Unaudited Financial Information



























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 assets.



























(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, TRG and other platform investments.  Amounts included in Footnote D below exclude our share of related activity for our investments in Klépierre, TRG and other platform investments.  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.



























(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.





























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 retail 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.



























(D)

Includes our share of: 















































-

Gain on land sales of $3.2 million and $9.6 million for the three months ended September 30, 2023 and 2022, respectively, and $7.8 million and $15.6 million for the nine months ended September 30, 2023 and 2022, respectively.



























-

Straight-line adjustments increased (decreased) income by $1.4 million and ($6.8) million for the three months ended September 30, 2023 and 2022, respectively, and ($10.4) million and ($22.9) million for the nine months ended September 30, 2023 and 2022, respectively.



























-

Amortization of fair market value of leases increased (decreased) income by $0.0 million and $0.0 million for the three months ended September 30, 2023 and 2022, respectively, and $0.2 million and ($0.3) million for the nine months ended September 30, 2023 and 2022, respectively.

 

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SOURCE Simon

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