PR Newswire | Aug 10, 2020 04:15PM EDT

08/10 15:15 CDT

Simon Property Group Reports Second Quarter 2020 Results INDIANAPOLIS, Aug. 10, 2020

INDIANAPOLIS, Aug. 10, 2020 /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 June 30, 2020.

"We continue to navigate through the challenging times presented by the pandemic with a commitment to the safety of our employees, shoppers, retailers and the communities we serve," said David Simon, Chairman, Chief Executive Officer and President. "Despite losing nearly 10,500 shopping days in our U.S. portfolio in the second quarter, we produced solid profitability and positive cash flow from operations. We have generally been encouraged by the shopper response, particularly in certain locations, after re-opening. These trends reinforce that our portfolio is an attractive destination for consumers. We remain committed to supporting our thousands of local and regional small businesses and restaurant entrepreneurs by granting rent abatements for the period they were closed. Our Company is well-positioned through a combination of deep brand relationships, the best portfolio with a strong mix of geographic locations and product types and a strong balance sheet, to continue our leadership position in the retail real estate industry."

Results for the Quarter

* Net income attributable to common stockholders was $254.2 million, or $0.83 per diluted share, as compared to $495.3 million, or $1.60 per diluted share in 2019. * Funds From Operations ("FFO") was $746.5 million, or $2.12 per diluted share, as compared to $1.064 billion, or $2.99 per diluted share, in the prior year period. The Company's domestic and international operations were negatively impacted by approximately $1.13 per diluted share primarily due to reduced lease income and ancillary property revenues as a result of the COVID-19 pandemic, partially offset by approximately $0.36 per diluted share from cost reduction initiatives. * Comparable property Net Operating Income ("NOI") for the three months ended June 30, 2020 declined 18.5% and portfolio NOI declined 21.0%.

Results for the Six Months

* Net income attributable to common stockholders was $691.8 million, or $2.26 per diluted share, as compared to $1.044 billion, or $3.38 per diluted share in 2019. Results for the six months ended 2019 included a combined $83.6 million, or $0.24 per diluted share, of proceeds from an insurance settlement and a gain on the sale of our interest in a multi-family residential property. * FFO was $1.727 billion, or $4.90 per diluted share, as compared to $2.146 billion, or $6.04 per diluted share, in the prior year period. FFO for the six months ended June 30, 2020 declined $0.79 per diluted share due to $0.02 per diluted share in the first quarter and $0.77 per diluted share negative impact in the second quarter to the Company's domestic and international operations as a result of the COVID-19 pandemic. The six months ended 2019 also included the $0.24 per diluted share noted above. * Comparable property NOI for the six months ended June 30, 2020 declined 9.3% and portfolio NOI declined 10.7%.

U.S. Malls and Premium Outlets Operating Statistics

* Occupancy was 92.9% at June 30, 2020. * Base minimum rent per square foot was $56.02 at June 30, 2020, an increase of 2.8% year-over-year. * Leasing spread per square foot for the trailing 12 months ended June 30, 2020 was flat.

COVID-19 Business UpdateOn March 18, 2020, after extensive discussions with federal, state and local officials and in recognition of the need to address the spread of COVID-19, the Company closed all of its retail properties in the United States. Our properties reopened, when permitted to do so under applicable governmental orders, beginning May 1. All of the Company's retail properties were reopened as of July 10. Seven retail properties in California were subsequently closed on July 15, and remain closed, due to a new restrictive governmental order. The Company's retail properties were closed, in aggregate, for approximately 10,500 shopping days during the second quarter.

As of August 7, 91% of the tenants across the Company's U.S. retail properties were open and operating. More than half of the remaining unopened tenants are closed because of restrictive governmental orders limiting or prohibiting their operations.

The Company has collected from its U.S. retail portfolio, including some level of rent deferrals, approximately 51% of its contractual rent billed for April and May combined, approximately 69% for June and approximately 73% for July with only de minimis deferrals. These percentages have not been adjusted for any rent abatements granted.

Development ActivityOn June 19, 2020, Siam Premium Outlets Bangkok (Bangkok, Thailand) opened with 264,000 square feet of high-quality, name brand stores. Siam Premium Outlets Bangkok is the first Premium Outlet(r) Center in Thailand. Simon owns a 50% interest in this center.

During the quarter, the 178,000 square-foot phase IV expansion of Gotemba Premium Outlets (Gotemba City, (Tokyo) Japan) opened adding enhanced amenities, elevated food offerings and more than 80 new, exciting brands, including many opening their first outlet store in Japan. Simon owns 40% of this center.

Construction continues on certain redevelopment and new development projects in the U.S. and internationally that are nearing completion. Simon's share of the remaining required cash funding for these projects, that are currently scheduled to be completed in 2020 or 2021, is approximately $140 million.

Capital Markets and Balance Sheet LiquidityAs of June 30, 2020, Simon had approximately $8.5 billion of liquidity consisting of $3.6 billion of cash on hand, including its share of joint venture cash, and $4.9 billion of available capacity under its revolving credit facilities and term loan, net of $702 million outstanding under its U.S. commercial paper program.

Subsequent to the end of the quarter, the Company completed a three tranche senior notes offering totaling $2.0 billion. Two tranches totaling $1.5 billion were new issues of senior notes with a weighted average term of 20 years and a weighted average coupon rate of 3.23%. The third tranche of $500 million was issued as additional notes under an indenture pursuant to which Simon Property Group, L.P. previously issued 3.50% notes due September 2025.

In July, the Company used a combination of proceeds from the offering and cash on hand to repay $2.5 billion outstanding under its Credit Facilities.

DividendsThe Company paid its second quarter 2020 common stock dividend of $1.30 per share, in cash, on July 24, 2020. Simon's Board of Directors will declare a common stock dividend for the third quarter on or before September 30, 2020. The Company expects to pay at least $6.00 per share in common stock dividends for 2020, in cash, subject to the Board of Directors' approval.

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 September 30, 2020 to shareholders of record on September 16, 2020.

Conference CallSimon will hold a conference call to discuss the quarterly financial results today at 5:00 p.m. Eastern Time, Monday, August 10, 2020. 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 August 17, 2020. To access the audio replay, dial 1-855-859-2056 (international 404-537-3406) passcode 2558073.

Supplemental Materials and WebsiteSupplemental information on our second quarter 2020 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 MeasuresThis press release includes FFO, FFO per share, comparable property Net Operating Income growth and portfolio 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 StatementsCertain 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: uncertainties regarding the impact of the COVID-19 pandemic and governmental restrictions intended to prevent its spread on our tenants' businesses, financial condition, results of operations, cash flow and liquidity and our ability to access the capital markets, satisfy our debt service obligations and make distributions to our stockholders; the inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise; changes in economic and market conditions that may adversely affect the general retail environment; the intensely competitive market environment in the retail industry; changes to applicable laws or regulations or the interpretation thereof; risks associated with the acquisition, development, redevelopment, expansion, leasing and management of properties; the inability to lease newly developed properties and renew leases and relet space at existing properties on favorable terms; the potential loss of anchor stores or major tenants; decreases in market rental rates; 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; general risks related to real estate investments, including the illiquidity of real estate investments; security breaches that could compromise our information technology or infrastructure; risks relating to our joint venture properties; our continued ability to maintain our status as a REIT; changes in tax laws or regulations that result in adverse tax consequences; changes in the value of our investments in foreign entities; our ability to hedge interest rate and currency risk; changes in insurance costs; the availability of comprehensive insurance coverage; natural disasters; the potential for terrorist activities; environmental liabilities; the loss of key management personnel; and the transition of LIBOR to an alternative reference rate. 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 SimonSimon 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 Six Months

Ended June 30, Ended June 30,

2020 2019 2020 2019

REVENUE:

Lease income $ 1,013,510 $ 1,298,567 $ 2,275,742 $ 2,578,623

Management fees and other 21,035 28,248 50,201 55,792revenues

Other income 27,496 70,371 89,458 215,604

Total revenue 1,062,041 1,397,186 2,415,401 2,850,019

EXPENSES:

Property operating 70,620 106,119 176,243 217,669

Depreciation and amortization 324,140 352,606 652,402 681,249

Real estate taxes 117,221 115,914 234,764 231,372

Repairs and maintenance 14,080 21,850 38,511 49,772

Advertising and promotion 12,689 35,420 46,216 72,545

Home and regional office costs 36,090 46,467 90,460 99,027

General and administrative 7,296 10,359 14,190 19,496

Other 29,037 27,820 56,878 53,236

Total operating expenses 611,173 716,555 1,309,664 1,424,366

OPERATING INCOME BEFORE OTHER 450,868 680,631 1,105,737 1,425,653ITEMS

Interest expense (197,061) (198,425) (384,688) (397,160)

Income and other tax benefit 62 (7,010) 5,845 (17,112)(expense)

Income from unconsolidated 44,322 106,542 94,787 196,986entities

Unrealized gains (losses) infair value of equity 202 (12,317) (18,846) (7,000)instruments

(Loss) gain on sale ordisposal of, or recovery on, assets and interests in 2,681 2,681unconsolidated entities and (7,845) (6,883)impairment, net

CONSOLIDATED NET INCOME 290,548 572,102 795,952 1,204,048

Net income attributable to 35,501 75,944 102,465 158,580noncontrolling interests

Preferred dividends 834 834 1,669 1,669

NET INCOME ATTRIBUTABLE TO $ 254,213 $ 495,324 $ 691,818 $ 1,043,799COMMON STOCKHOLDERS

BASIC AND DILUTED EARNINGS PERCOMMON SHARE:

Net income attributable to $ 0.83 $ 1.60 $ 2.26 $ 3.38common stockholders

Simon Property Group, Inc.

Unaudited Consolidated Balance Sheets

(Dollars in thousands, except share amounts)

June 30, December 31,

2020 2019

ASSETS:

Investment properties, at cost $ 37,972,093 $ 37,804,495

Less - accumulated depreciation 14,389,809 13,905,776

23,582,284 23,898,719

Cash and cash equivalents 3,306,100 669,373

Tenant receivables and accrued revenue, net 1,457,695 832,151

Investment in unconsolidated entities, at equity 2,385,946 2,371,053

Investment in Kl?pierre, at equity 1,644,020 1,731,649

Right-of-use assets, net 517,061 514,660

Deferred costs and other assets 1,133,064 1,214,025

Total assets $ 34,026,170 $ 31,231,630

LIABILITIES:

Mortgages and unsecured indebtedness $ 27,268,883 $ 24,163,230

Accounts payable, accrued expenses, intangibles, and 1,216,831 1,390,682deferred revenues

Cash distributions and losses in unconsolidated 1,576,679 1,566,294entities, at equity

Dividend payable 458,150 -

Lease liabilities 519,416 516,809

Other liabilities 463,380 464,304

Total liabilities 31,503,339 28,101,319

Commitments and contingencies

Limited partners' preferred interest in the OperatingPartnership and noncontrolling redeemable interests 187,392 219,061in properties

EQUITY:

Stockholders' Equity

Capital stock (850,000,000 total shares authorized, $ 0.0001 par value, 238,000,000 shares of excesscommon stock, 100,000,000 authorized shares ofpreferred stock):

Series J 8 3/8% cumulative redeemable preferredstock, 1,000,000 shares authorized, 796,948 issued 42,256 42,420and outstanding with a liquidation value of $39,847

Common stock, $ 0.0001 par value, 511,990,000 sharesauthorized, 320,555,104 and 320,435,256 issued and 32 32outstanding, respectively

Class B common stock, $ 0.0001 par value, 10,000 - -shares authorized, 8,000 issued and outstanding

Capital in excess of par value 9,763,059 9,756,073

Accumulated deficit (5,703,183) (5,379,952)

Accumulated other comprehensive loss (155,126) (118,604)

Common stock held in treasury, at cost, 14,667,884 (1,917,698) (1,773,571)and 13,574,296 shares, respectively

Total stockholders' equity 2,029,340 2,526,398

Noncontrolling interests 306,099 384,852

Total equity 2,335,439 2,911,250

Total liabilities and equity $ 34,026,170 $ 31,231,630

Simon Property Group, Inc.

Unaudited Joint Venture Combined Statements of Operations

(Dollars in thousands)

For the Three Months Ended June 30, For the Six Months Ended June 30,

2020 2019 2020 2019

REVENUE:

Lease income $ 574,246 $ 760,131 $ 1,318,096 $ 1,519,110

Other income 46,205 79,389 120,718 155,311

Total revenue 620,451 839,520 1,438,814 1,674,421

OPERATINGEXPENSES:

Property 107,309 140,262 254,339 284,983operating

Depreciationand 165,511 170,407 336,989 340,664amortization

Real estate 60,634 67,809 129,023 136,526taxes

Repairs and 13,589 18,832 33,204 41,209maintenance

Advertising 10,016 19,695 32,768 44,021and promotion

Other 15,734 47,743 65,964 97,058

Totaloperating 372,793 464,748 852,287 944,461expenses

OPERATINGINCOME BEFORE 247,658 374,772 586,527 729,960OTHER ITEMS

Interest (152,409) (157,927) (309,050) (313,944)expense

Gain on saleor disposal ofassets and - - - 21,587interests inunconsolidatedentities, net

NET INCOME $ 95,249 $ 216,845 $ 277,477 $ 437,603

Third-PartyInvestors' $ 53,989 $ 110,620 $ 146,848 $ 223,287Share of NetIncome

Our Share of 41,260 106,225 130,629 214,316Net Income

Amortizationof Excess (20,761) (20,774) (41,601) (41,567)Investment (A)

Our Share ofGain on Saleor Disposal ofAssets andInterests in - - - (9,155)Other Incomein theConsolidatedFinancialStatements

Income fromUnconsolidated $ 20,499 $ 85,451 $ 89,028 $ 163,594Entities (B)

Note: The above financial presentation does not include any informationrelated to our investments in Kl?pierre S.A. ("Kl?pierre") and HBS GlobalProperties ("HBS"). For additional information, see footnote B.

Simon Property Group, Inc.

Unaudited Joint Venture Combined Balance Sheets

(Dollars in thousands)

June 30, December 31,

2020 2019

Assets:

Investment properties, at cost $ 19,670,435 $ 19,525,665

Less - accumulated depreciation 7,641,911 7,407,627

12,028,524 12,118,038

Cash and cash equivalents 733,224 1,015,864

Tenant receivables and accrued revenue, net 756,871 510,157

Right-of-use assets, net 180,952 185,302

Deferred costs and other assets 368,254 384,663

Total assets $ 14,067,825 $ 14,214,024

Liabilities and Partners' Deficit:

Mortgages $ 15,436,464 $ 15,391,781

Accounts payable, accrued expenses, intangibles, 808,425 977,112and deferred revenue

Lease liabilities 183,406 186,594

Other liabilities 395,429 338,412

Total liabilities 16,823,724 16,893,899

Preferred units 67,450 67,450

Partners' deficit (2,823,349) (2,747,325)

Total liabilities and partners' deficit $ 14,067,825 $ 14,214,024

Our Share of:

Partners' deficit $ (1,233,667) $ (1,196,926)

Add: Excess Investment (A) 1,488,444 1,525,903

Our net Investment in unconsolidated entities, at $ 254,777 $ 328,977equity

Note: The above financial presentation does not include any information relatedto our investments in Kl?pierre and HBS Global Properties. For additionalinformation, 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 Six Months Ended

June 30, June 30,

2020 2019 2020 2019

Consolidated Net Income $ 290,548 $ 572,102 $ 795,952 $ 1,204,048(D)

Adjustments to Arrive atFFO:

Depreciation and amortization from 321,707 350,045 647,745 675,983 consolidated properties

Our share of depreciation and amortization from unconsolidated entities, 129,309 139,271 266,017 273,902 including Kl?pierre and HBS

Loss (gain) on sale or disposal of, or recovery on, assets and interests 7,845 (2,681) 6,883 (2,681) in unconsolidated entities and impairment, net

Unrealized (gains) losses in fair value of equity (202) 12,317 18,846 7,000 instruments

Net loss (gain) attributable to 3,628 (400) 3,799 518 noncontrolling interest holders in properties

Noncontrolling interests portion of depreciation (5,048) (4,935) (9,511) (9,818) and amortization

Preferred distributions (1,313) (1,313) (2,626) (2,626) and dividends

FFO of the Operating $ 746,474 $ 1,064,406 $ 1,727,105 $ 2,146,326Partnership

Diluted net income pershare to diluted FFO pershare reconciliation:

Diluted net income per $ 0.83 $ 1.60 $ 2.26 $ 3.38share

Depreciation and amortization from consolidated properties and our share of depreciation and amortization from 1.27 1.37 2.57 2.65 unconsolidated entities, including Kl?pierre and HBS, net of noncontrolling interests portion of depreciation and amortization

Loss (gain) on sale or disposal of, or recovery on, assets and interests 0.02 (0.01) 0.02 (0.01) in unconsolidated entities and impairment, net

Unrealized (gains) losses in fair value of equity - 0.03 0.05 0.02 instruments

Diluted FFO per share $ 2.12 $ 2.99 $ 4.90 $ 6.04

Details for per sharecalculations:

FFO of the Operating $ 746,474 $ 1,064,406 $ 1,727,105 $ 2,146,326Partnership

Diluted FFO allocable to (98,537) (140,077) (228,166) (282,396)unitholders

Diluted FFO allocable to $ 647,937 $ 924,329 $ 1,498,939 $ 1,863,930common stockholders

Basic and Diluted weighted 305,882 308,709 306,193 308,843average shares outstanding

Weighted average limitedpartnership units 46,528 46,783 46,608 46,791outstanding

Basic and Diluted weightedaverage shares and units 352,410 355,492 352,801 355,634outstanding

Basic and Diluted FFO per $ 2.12 $ 2.99 $ 4.90 $ 6.04Share

Percent Change -29.1% -18.9%

Simon Property Group, Inc.

Footnotes to Unaudited Financial Information

Notes:

Excess investment represents the unamortized difference of our(A) 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.

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 Kl?pierre and HBS Global(B) Properties. Amounts included in Footnote D below exclude our share of related activity for our investments in Kl?pierre and HBS Global Properties. For further information on Kl?pierre, reference should be made to financial information in Kl?pierre's public filings and additional discussion and analysis in our Form 10-K.

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(C) 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 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:

Gains on land sales of $1.1 million and $7.2 million for the three- months ended June 30, 2020 and 2019, respectively, and $6.3 million and $11.6 million for the six months ended June 30, 2020 and 2019, respectively.

Straight-line adjustments (decreased) increased income by ($2.6)- million and $27.2 million for the three months ended June 30, 2020 and 2019, respectively, and $9.4 million and $43.8 million for the six months ended June 30, 2020 and 2019, respectively.

Amortization of fair market value of leases from acquisitions increased- income by $1.1 million and $1.4 million for the three months ended June 30, 2020 and 2019, respectively, and $2.4 million and $2.7 million for the six months ended June 30, 2020 and 2019, respectively.

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SOURCE Simon