PR Newswire | Feb 8, 2021 04:10PM EST

02/08 15:10 CST

Simon Property Group Reports Fourth Quarter and Full Year 2020 Results INDIANAPOLIS, Feb. 8, 2021

INDIANAPOLIS, Feb. 8, 2021 /PRNewswire/ -- Simon, a global leader in the ownership of premier shopping, dining, entertainment and mixed-use destinations, today reported results for the quarter and twelve months ended December 31, 2020.

"2020 was a difficult year for all those affected by COVID-19, including our Company," said David Simon, Chairman, Chief Executive Officer and President. "We feel confident we have turned the corner, and we expect growth in earnings and cash flow in 2021."

"Even with the unprecedented operating environment over the past year, we:

* generated over $2.3 billion in operating cash flow; * acquired an 80% interest in The Taubman Realty Group; * made strategic investments in widely recognized retail brands at attractive valuations and have already made significant progress in repositioning these brands and increasing their operating cash flow; * raised over $13 billion in the debt and equity markets; * opened two new international shopping destinations, expanded two others and completed three domestic redevelopments; * granted approximately $400 million in tenant rent abatements to support small and local businesses, regional entrepreneurs and restauranteurs; * paid nearly $700 million in real estate taxes (an increase from 2019) despite losing approximately 13,500 shopping days in our domestic portfolio during the year as a result of the restrictive governmental orders placed on our retail real estate and * returned more than $2 billion to shareholders in cash dividends paid."

Results for the Year

* Net income attributable to common stockholders was $1.109 billion, or $3.59 per diluted share for the twelve months ended December 31, 2020. Results for 2020 include non-cash impairment charges, partially offset by a gain on sale, of $115.0 million, or $0.32 per diluted share. * Funds From Operations ("FFO") was $3.237 billion, or $9.11 per diluted share for the year ended 2020. FFO for the year ended 2020 was negatively impacted by $2.67 per diluted share primarily due to reduced revenues from the Company's domestic and international operations caused by the impact of the COVID-19 pandemic, partially offset by cost reduction initiatives. * Portfolio net operating income ("NOI") for the full year 2020 declined 17.1%. The year-over-year decline is primarily due to reduced revenues from tenant rent abatements, higher uncollectible rents, lower sales-based rents and a reduction in ancillary property income, including Simon Brand Ventures sponsorship income, partially offset by cost reduction initiatives. The Company did not amortize any rent abatements; instead, abatements were expensed in the period granted.

Results for the Quarter

* Net income attributable to common stockholders was $271.5 million, or $0.86 per diluted share for the three months ended December 31, 2020. The current year period includes a non-cash impairment charge, partially offset by a gain on sale, of $16.8 million, or $0.05 per diluted share. * FFO was $786.6 million, or $2.17 per diluted share. FFO in the current year period was negatively impacted by $0.95 primarily due to reduced revenues from the Company's domestic and international operations caused by the impact of the COVID-19 pandemic, partially offset by cost reduction initiatives. * Portfolio NOI for the three months ended December 31, 2020 declined 23.9%.

U.S. Malls and Premium Outlets Operating Statistics

* Occupancy was 91.3% at December 31, 2020. * Base minimum rent per square foot was $55.80 at December 31, 2020, an increase of 2.2% year-over-year.

Business UpdateAs of February 5, 2021, the Company has collected from its U.S. retail portfolio, 90% of its net billed rents for the second, third and fourth quarters, combined.

($ millions) Q2 2020

through

Q4 2020

U.S. Managed Portfolio Gross Contractual Rents $4,762

Rent Write-Offs Related to Tenants in Bankruptcy (102)

Net Contractual Rents 4,660

Deferrals Agreed (341)

Abatements Granted (410)

Net Billed Rents 3,909

Collected $3,520

Collected as percent of Net Billed Rents 90%

Amounts are presented on a gross basis, not at the Company's share. U.S. managed portfolio gross contractual rents do not include any prior period deferrals or sales-based rents. Amounts above relate to the contractual rents in the stated periods. Abatements reduced Lease Income in the period they were granted or agreed.

Acquisition of Taubman Centers, Inc.In December, the Company completed its acquisition of an 80% ownership interest in The Taubman Realty Group ("TRG"). Under the terms of the transaction, Simon, through its operating partnership, Simon Property Group, L.P., acquired all of Taubman Centers, Inc. ("TCO") common stock for $43.00 per share in cash, and the Taubman family sold approximately one-third of its ownership interest at the transaction price and remains a 20% partner in TRG.

Total consideration for the acquisition, including the redemption of TCO's 6.5% Series J Cumulative Preferred Shares and its 6.25% Series K Cumulative Preferred Shares, was approximately $3.45 billion and was funded with existing liquidity, including proceeds from Simon's issuance of 22,137,500 shares of its common stock which was completed in November 2020.

Capital Markets and Balance Sheet LiquidityDuring the fourth quarter, the Company completed a public offering of 22,137,500 shares of its common stock. Net proceeds from the offering were approximately $1.56 billion.

Subsequent to the end of the quarter, the Company completed a two tranche senior notes offering totaling $1.5 billion. Combined, the two new issues of senior notes had a weighted average term of 8.4 years and a weighted average coupon rate of 1.96%.

As of December 31, 2020, Simon had more than $8.2 billion of liquidity consisting of $1.5 billion of cash on hand, including its share of joint venture cash, and $6.7 billion of available capacity under its revolving credit facilities, net of $623 million outstanding under its U.S. commercial paper program.

DividendsThe Company paid its fourth quarter 2020 common stock dividend of $1.30 per share, in cash, on January 22, 2021. Simon's Board of Directors will declare a common stock cash dividend for the first quarter of 2021 on or before March 31, 2021.

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 March 31, 2021 to shareholders of record on March 17, 2021.

2021 GuidanceThe Company currently estimates net income to be within a range of $4.60 to $4.85 per diluted share and that FFO will be within a range of $9.50 to $9.75 per diluted share for the year ending December 31, 2021. This guidance range assumes no further government mandated shutdowns of the Company's domestic retail properties.

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, 2021

Low High

End End

Estimated net income attributable to common stockholders $4.60 $4.85 per diluted share

Depreciation and amortization including Simon's share 4.90 4.90 of unconsolidated entities

Estimated FFO per diluted share $9.50 $9.75

Conference CallSimon will hold a conference call to discuss the quarterly financial results today at 5:00 p.m. Eastern Time, Monday, February 8, 2021. 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 February 15, 2021. To access the audio replay, dial 1-855-859-2056 (international 404-537-3406) passcode 9827795.

Supplemental Materials and WebsiteSupplemental information on our fourth 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 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 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 business, 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; 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; the intensely competitive market environment in the retail industry, including e-commerce; an increase in vacant space at our properties; the inability to lease newly developed properties and renew leases and relet space at existing properties on favorable terms; 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; 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, 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; changes in market rates of interest; the transition of LIBOR to an alternative reference rate; 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, including guarantees of certain joint venture indebtedness; environmental liabilities; natural disasters; the availability of comprehensive insurance coverage; the potential for terrorist activities; security breaches that could compromise our information technology or infrastructure; 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 SimonSimon 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.

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

For the Three Months For the Twelve Months

Ended December 31, Ended December 31,

2020 2019 2020 2019

REVENUE:

Lease income $ 1,032,795 $ 1,356,238 $ 4,302,367 $ 5,243,771

Management fees and other revenues 25,336 29,174 96,882 112,942

Other income 73,298 103,203 208,254 398,476

Total revenue 1,131,429 1,488,615 4,607,503 5,755,189

EXPENSES:

Property operating 81,675 113,741 349,154 453,145

Depreciation and amortization 331,851 324,310 1,318,008 1,340,503

Real estate taxes 110,067 118,600 457,142 468,004

Repairs and maintenance 23,376 26,743 80,858 100,495

Advertising and promotion 37,646 41,216 98,613 150,344

Home and regional office costs 41,249 45,217 171,668 190,109

General and administrative 5,366 7,333 22,572 34,860

Other 38,152 34,579 137,679 109,898

Total operating expenses 669,382 711,739 2,635,694 2,847,358

OPERATING INCOME BEFORE OTHER ITEMS 462,047 776,876 1,971,809 2,907,831

Interest expense (197,855) (189,813) (784,400) (789,353)

Loss on extinguishment of debt - (116,256) - (116,256)

Income and other tax benefit (expense) 1,572 (6,744) 4,637 (30,054)

Income from unconsolidated entities 63,260 127,657 219,870 444,349

Unrealized gains (losses) in fair value of equity instruments 494 (3,365) (19,632) (8,212)

(Loss) gain on sale or disposal of, or recovery on,

assets and interests in unconsolidated entities and impairment, net (16,792) 2,061 (114,960) 14,883

CONSOLIDATED NET INCOME 312,726 590,416 1,277,324 2,423,188

Net income attributable to noncontrolling interests 40,409 79,388 164,760 321,604

Preferred dividends 834 834 3,337 3,337

NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS $ 271,483 $ 510,194 $ 1,109,227 $ 2,098,247

BASIC AND DILUTED EARNINGS PER COMMON SHARE:

Net income attributable to common stockholders $ 0.86 $ 1.66 $ 3.59 $ 6.81

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

December 31, December 31,

2020 2019

ASSETS:

Investment properties, at cost $ 38,050,196 $ 37,804,495

Less - accumulated depreciation 14,891,937 13,905,776

23,158,259 23,898,719

Cash and cash equivalents 1,011,613 669,373

Tenant receivables and accrued revenue, net 1,236,734 832,151

Investment in unconsolidated entities, at equity 2,603,571 2,371,053

Investment in Kl?pierre, at equity 1,729,690 1,731,649

Investment in TRG, at equity 3,451,897 -

Right-of-use assets, net 512,914 514,660

Deferred costs and other assets 1,082,168 1,214,025

Total assets $ 34,786,846 $ 31,231,630

LIABILITIES:

Mortgages and unsecured indebtedness $ 26,723,361 $ 24,163,230

Accounts payable, accrued expenses, intangibles, and deferred revenues 1,311,925 1,390,682

Cash distributions and losses in unconsolidated entities, at equity 1,577,393 1,566,294

Dividend payable 486,922 -

Lease liabilities 515,492 516,809

Other liabilities 513,515 464,304

Total liabilities 31,128,608 28,101,319

Commitments and contingencies

Limited partners' preferred interest in the Operating Partnership andnoncontrolling

redeemable interests in properties 185,892 219,061

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 preferredstock):

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

796,948 issued and outstanding with a liquidation value of $39,847 42,091 42,420

Common stock, $ 0.0001 par value, 511,990,000 shares authorized, 342,849,037and

320,435,256 issued and outstanding, respectively 34 32

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

issued and outstanding - -

Capital in excess of par value 11,179,688 9,756,073

Accumulated deficit (6,102,314) (5,379,952)

Accumulated other comprehensive loss (188,675) (118,604)

Common stock held in treasury, at cost, 14,355,621 and 13,574,296 shares, (1,891,352) (1,773,571)respectively

Total stockholders' equity 3,039,472 2,526,398

Noncontrolling interests 432,874 384,852

Total equity 3,472,346 2,911,250

Total liabilities and equity $ 34,786,846 $ 31,231,630

Simon Property Group, Inc.

Unaudited Joint Venture Combined Statements of Operations

(Dollars in thousands)

For the Three Months Ended For the Twelve Months Ended December 31, December 31,

2020 2019 2020 2019

REVENUE:

Lease income $ 624,516 $ 802,746 $ 2,544,134 $ 3,088,594

Other income 85,284 88,060 300,634 322,398

Total revenue 709,800 890,806 2,844,768 3,410,992

OPERATING EXPENSES:

Property operating 136,616 152,320 519,979 587,062

Depreciation and amortization 179,719 169,693 692,424 681,764

Real estate taxes 64,864 65,314 262,351 266,013

Repairs and maintenance 19,061 23,491 68,722 85,430

Advertising and promotion 24,764 25,808 67,434 89,660

Other 55,888 53,374 163,710 196,178

Total operating expenses 480,912 490,000 1,774,620 1,906,107

OPERATING INCOME BEFORE OTHER ITEMS 228,888 400,806 1,070,148 1,504,885

Interest expense (152,703) (163,074) (616,332) (636,988)

Gain on sale or disposal of, or recovery on, assets and interests in - 3,022 - 24,609unconsolidated entities, net

NET INCOME $ 76,185 $ 240,754 $ 453,816 $ 892,506

Third-Party Investors' Share of Net Income $ 32,731 $ 128,618 $ 226,364 $ 460,696

Our Share of Net Income 43,454 112,136 227,452 431,810

Amortization of Excess Investment (A) (19,953) (21,143) (82,097) (83,556)

Our Share of Gain on Sale or Disposal of Assets and Interests in

Other Income in the Consolidated Financial Statements - - - (9,156)

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

Unconsolidated Entities, net - (1,133) - (1,133)

Income from Unconsolidated Entities (B) $ 23,501 $ 89,860 $ 145,355 $ 337,965

Note: The above financial presentation does not include any information relatedto our investments in Kl?pierre S.A.

("Kl?pierre") and The Taubman Realty Group ("TRG"). For additionalinformation, see footnote B.

Simon Property Group, Inc

Unaudited Joint Venture Combined Balance Sheets

(Dollars in thousands)

December 31, December 31,

2020 2019

Assets:

Investment properties, at cost $ 20,079,476 $ 19,525,665

Less - accumulated depreciation 8,003,863 7,407,627

12,075,613 12,118,038

Cash and cash equivalents 1,169,422 1,015,864

Tenant receivables and accrued revenue, net 749,231 510,157

Right-of-use assets, net 185,598 185,302

Deferred costs and other assets 380,087 384,663

Total assets $ 14,559,951 $ 14,214,024

Liabilities and Partners' Deficit:

Mortgages $ 15,569,485 $ 15,391,781

Accounts payable, accrued expenses, intangibles, and deferred revenue 969,242 977,112

Lease liabilities 188,863 186,594

Other liabilities 426,321 338,412

Total liabilities 17,153,911 16,893,899

Preferred units 67,450 67,450

Partners' deficit (2,661,410) (2,747,325)

Total liabilities and partners' deficit $ 14,559,951 $ 14,214,024

Our Share of:

Partners' deficit $ (1,130,713) $ (1,196,926)

Add: Excess Investment (A) 1,399,757 1,525,903

Our net Investment in unconsolidated entities, at equity $ 269,044 $ 328,977

Note: The above financial presentation does not include any information relatedto our investments in Kl?pierre and TRG.

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 Twelve Months Ended

December 31, December 31,

2020 2019 2020 2019

Consolidated Net Income (D) $ 312,726 $ 590,416 $ 1,277,324 $ 2,423,188

Adjustments to Arrive at FFO:

Depreciation and amortization from consolidated

properties 329,422 321,404 1,308,419 1,329,843

Our share of depreciation and amortization from

unconsolidated entities, including Kl?pierre 133,645 139,579 536,133 551,596

Loss (gain) on sale or disposal of, or recovery on,

assets and interests in unconsolidated entities and impairment, net 16,792 (2,061) 114,960 (14,883)

Unrealized (gains) losses in fair value of equity instruments (494) 3,365 19,632 8,212

Net (gain) loss attributable to noncontrolling interest holders in

properties (173) (1,172) 4,378 (991)

Noncontrolling interests portion of depreciation and amortization and loss (3,966) (4,834) (18,631) (19,442) (gain) on disposal of properties

Preferred distributions and dividends (1,313) (1,313) (5,252) (5,252)

FFO of the Operating Partnership $ 786,639 $ 1,045,384 $ 3,236,963 $ 4,272,271

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

Diluted net income per share $ 0.86 $ 1.66 $ 3.59 $ 6.81

Depreciation and amortization from consolidated properties

and our share of depreciation and amortization from unconsolidated

entities, including Kl?pierre, net of noncontrolling interests

portion of depreciation and amortization 1.27 1.30 5.14 5.25

Loss (gain) on sale or disposal of, or recovery on,

assets and interests in unconsolidated entities and impairment, net 0.05 (0.01) 0.32 (0.04)

Unrealized (gains) losses in fair value of equity instruments (0.01) 0.01 0.06 0.02

Diluted FFO per share $ 2.17 $ 2.96 $ 9.11 $ 12.04

Details for per share calculations:

FFO of the Operating Partnership $ 786,639 $ 1,045,384 $ 3,236,963 $ 4,272,271

Diluted FFO allocable to unitholders (100,472) (138,219) (424,063) (563,342)

Diluted FFO allocable to common stockholders $ 686,167 $ 907,165 $ 2,812,900 $ 3,708,929

Basic and Diluted weighted average shares outstanding 316,595 306,869 308,738 307,950

Weighted average limited partnership units outstanding 46,455 46,751 46,544 46,774

Basic and Diluted weighted average shares and units outstanding 363,050 353,620 355,282 354,724

Basic and Diluted FFO per Share $ 2.17 $ 2.96 $ 9.11 $ 12.04

Percent Change -26.7% -24.3%

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 TRG. Amounts(B) included in Footnote D below exclude our share of related activity for our investments in Kl?pierre and TRG. 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:

(Losses) gains on land sales of ($0.1) million and $3.2 million for the- three months ended December 31, 2020 and 2019, respectively, and $8.0 million and $17.3 million for the twelve months ended December 31, 2020 and 2019, respectively.

Straight-line adjustments (decreased) increased income by ($19.6)- million and $24.9 million for the three months ended December 31, 2020 and 2019, respectively, and ($23.9) million and $90.9 million for the twelve months ended December 31, 2020 and 2019, respectively.

Amortization of fair market value of leases from acquisitions increased income by $1.7 million and $1.4 million for the three months ended- December 31, 2020 and 2019, respectively, and $5.2 million and $5.4 million for the twelve months ended December 31, 2020 and 2019, respectively.

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SOURCE Simon