Indianapolis-based Simon Property Group Inc. (NYSE: SPG) is reporting second quarter Funds From Operations of $1.8 billion, compared to $1.6 billion last year. Chief Executive Officer David Simon says the "excellent" quarterly performance has led the company to boost full-year guidance.
Simon, a leading global retail real estate company, today reported results for the quarter ended June 30, 2015.
Results for the Quarter 1
Funds from Operations ("FFO") was $955.4 million, or $2.63 per diluted share, as compared to $783.8 million, or $2.16 per diluted share, in the prior year period, a 21.8% increase. Included in the second quarter 2015 results is $80.2 million, or $0.22 per diluted share, related to a gain upon sale of marketable securities. The second quarter 2014 results include a net contribution of $0.05 per diluted share from the Washington Prime Group Inc. ("WPG") properties that were spun-off effective May 28, 2014.
Net income attributable to common stockholders was $472.9 million, or $1.52 per diluted share, as compared to $406.6 million, or $1.31 per diluted share, in the prior year period.
Growth in comparable FFO per diluted share for the three months ended June 30, 2015 was 14.2%.
Results for the Six Months 1
Funds from Operations ("FFO") was $1.786 billion, or $4.92 per diluted share, as compared to $1.649 billion, or $4.54 per diluted share, in the prior year period.
Net income attributable to common stockholders was $835.1 million, or $2.69 per diluted share, as compared to $748.2 million, or $2.41 per diluted share, in the prior year period.
Growth in comparable FFO per diluted share for the six months ended June 30, 2015 was 10.8%.
1 For a reconciliation of FFO and net income per diluted share on a comparable basis, please see Footnote H of the Footnotes to Unaudited Reconciliation of Non-GAAP Financial Measures.
"This was an excellent quarter for Simon, with strong financial and operational performance," said David Simon, Chairman and CEO. "Our growing development and redevelopment opportunities position us to continue to deliver strong results for our stockholders. Based upon our results to date and expectations for the remainder of 2015, we are once again raising our quarterly dividend and increasing our full-year 2015 guidance."
Comparable Property Net Operating Income
Comparable property NOI growth for the three months ended June 30, 2015 was 3.6%. The growth for the six months ended June 30, 2015 was 3.5%. Comparable properties include U.S. Malls, Premium Outlets and The Mills.
Today Simon's Board of Directors declared a quarterly common stock dividend of $1.55 per share. This is a 19.2% increase year-over-year and an increase of $0.05 or 3.3% from the previous quarter. The dividend will be payable on August 31, 2015 to stockholders of record on August 17, 2015.
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 September 30, 2015 to stockholders of record on September 16, 2015.
During the quarter, we completed a 140,000 square foot expansion of Las Vegas North Premium Outlets, one of the most productive and well-known outlet centers in North America; and a 130,000 square foot expansion of Shisui Premium Outlets, a highly productive center in Shisui (Chiba), Japan.
Construction continues on three new Premium Outlets opening in 2015:
Gloucester Premium Outlets in Gloucester, New Jersey, serving the greater Philadelphia metropolitan area, is a 375,000 square foot center scheduled to open in August. Simon owns a 50% interest in this project.
Tucson Premium Outlets is a 366,000 square foot center scheduled to open in October. Simon owns 100% of this project.
Tampa Premium Outlets is a 441,000 square foot center scheduled to open in October. Simon owns 100% of this project.
Construction continues on other significant expansion projects including Roosevelt Field, Del Amo Fashion Center, King of Prussia, The Galleria in Houston, Woodbury Common Premium Outlets, San Francisco Premium Outlets and Chicago Premium Outlets.
At quarter-end, redevelopment and expansion projects, including the addition of new anchors, were underway at 28 properties in the U.S. Simon's share of the costs of all development and redevelopment projects under construction at quarter-end was approximately $2.3 billion.
During the second quarter, construction started on two significant new development projects:
The Shops at Clearfork in Fort Worth, Texas – 590,000 square foot center projected to open in February 2017. Simon owns a 45% interest in this project.
A 355,000 square foot upscale outlet center located in Columbus, Ohio projected to open in June 2016. Simon owns a 50% interest in this project.
We entered into a partnership to jointly develop the 500,000 square foot retail component to Brickell City Centre in Miami, Florida, projected to open in September 2016. Simon owns a 25% interest in this project.
In addition, Vancouver Designer Outlet in Vancouver, British Columbia, Canada opened on July 9th. The center serves the greater Vancouver metropolitan market with 242,000 square feet of high-quality, name brand stores. Simon owns a 45% interest in this center.
Joint Venture Transaction
During the second quarter, we created a joint venture with Sears Holdings Corporation that includes 10 Sears stores located at our malls. Sears Holdings subsequently sold its interest in the joint venture to Seritage Growth Properties. Sears Holdings is leasing and continues to operate the existing stores at the properties and the joint venture will have the ability to create additional value through re-developing the contributed properties and re-leasing space at each property to third-party tenants. In July, we purchased 1,125,760 Seritage Growth Properties common shares at $29.58 per share.
In addition to the joint venture, we separately acquired a Sears store at the La Plaza Mall in McAllen, Texas.
The Company was active in the secured debt markets in the first half of the year continuing to lower our effective borrowing costs. We closed on seven new loans totaling approximately $2.4 billion, or the non-U.S. dollar equivalent thereof, of which SPG's share is $1.2 billion. The weighted average interest rate on these loans is 2.9% and term is 8.0 years.
As of June 30, 2015, Simon had over $5.5 billion of liquidity consisting of cash on hand, including its share of joint venture cash, and its available revolving credit facility capacity.
Common Stock Repurchase Program
On April 2nd, the Company announced that its Board of Directors authorized a common stock repurchase program. Under the 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.
During the quarter ended June 30, 2015, the Company invested $505.7 million for the purchase of 1,903,340 shares of its common stock and 944,359 limited partnership units.
Today, the Company is raising both the low and high ends of its previously provided full year 2015 FFO range and currently estimates a range of $10.02 to $10.07 per diluted share for the year ending December 31, 2015, with net income to be within a range of $5.47 to $5.52 per diluted share.
Simon is a global leader in retail real estate ownership, management and development and a S&P100 company (Simon Property Group, NYSE:SPG). Our industry-leading retail properties and investments across North America, Europe and Asia provide shopping experiences for millions of consumers every day and generate billions in annual retail sales. For more information, visit simon.com.