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INDIANAPOLIS, Oct. 30 /PRNewswire-FirstCall/ -- Simon Property Group, Inc.
(the "Company") (NYSE: SPG) today announced diluted funds from operations
("FFO") per share for the third quarter of 2003 of $0.93, compared to $0.93
(as restated) for the third quarter of 2002. Diluted earnings per share for
the third quarter was $0.22 per share, compared to $0.32 for the third quarter
of 2002. Third quarter 2003 results were impacted by the following events:
- On October 8, 2003, SPG and Westfield America, Inc., the U.S.
subsidiary of Westfield America Trust (ASX: WFA), announced the
withdrawal of their tender offer for all of the outstanding common
shares of Taubman Centers, Inc. (NYSE: TCO). As a result of this
withdrawal, all costs related to the tender offer were expensed during
the third quarter. The costs totaled $10.5 million, or $0.04 per share,
impacting FFO and net income.
- On September 10, 2003, the Federal District Court for the District of
Minnesota issued its Order in the litigation brought by Triple Five of
Minnesota, Inc. against the Company and other named defendants. While
the Court did not find that the Company breached fiduciary duties to
Triple Five of Minnesota, Inc., its Order nonetheless gives Triple Five
the right, within nine months after the date of the Order, to purchase
the Company's 27.5% partnership interest that the Company acquired from
Teachers' Insurance and Annuity Association in October of 1999.
According to the Order, if Triple Five buys the Company's partnership
interest, the Company must disgorge all "net profits" received with
respect to that interest.
The Company believes that the Order contains numerous legal and factual
errors and will appeal the Order to the Eighth Circuit. Even though the
Company feels strongly about its arguments on appeal, it will take a
reserve equal to $6 million as of September 30, 2003, which takes into
account its estimate of the financial impact to the Company from the
various elements of the Court's Order. This reserve impacts net income
by approximately $0.02 per share. In addition, no further contribution
to FFO will be recorded in subsequent periods by the Company with
respect to its Mall of America partnership interest until such time as
the issues in this litigation are resolved. For the third quarter of
2003, this impact reduced FFO by slightly less than $0.01 per share.
Without giving effect to the events discussed above, diluted FFO for the
third quarter of 2003 was $0.97 per share, compared with $0.93 for the third
quarter of 2002, and diluted earnings per share for the third quarter was
$0.29 per share, compared to $0.32 for the third quarter of 2002.
For the nine months ended September 30, 2003, diluted FFO was $2.78 per
share, compared to $2.51 (as restated) in 2002. Diluted earnings per share for
the nine months ended September 30, 2003 was $0.78, compared to $1.47 in 2002.
The decline in net income for the nine months is attributable to net gains on
the sale of real estate, primarily the sale of the Company's interests in five
"Mills-type" properties and a premium outlet center in the second quarter of
2002, in addition to the events described above for the third quarter of 2003.
Without giving effect to the TCO and Mall of America items previously
discussed, diluted FFO for the first nine months of 2003 was $2.82 per share,
compared with $2.51 for the same period in 2002, and diluted earnings per
share for the first nine months of 2003 was $0.85, compared to $1.47 for the
same period in 2002.
The Company considers FFO a key measure of its operating performance that
is not specifically defined by accounting principles generally accepted in the
United States ("GAAP"). The Company believes that FFO is helpful to investors
because it is a widely recognized measure of the performance of real estate
investment trusts and provides a relevant basis for comparison among REITs. A
reconciliation of net income to FFO is provided in the financial statement
section of this press release.
Occupancy for mall and freestanding stores in the regional malls at
September 30, 2003 was 91.9%, equal to the occupancy level at September 30,
2002. Comparable retail sales per square foot increased to $398 as compared to
$391 at September 30, 2002, while total retail sales per square foot increased
to $394 at September 30, 2003 as compared to $385 at September 30, 2002.
Average base rents for mall and freestanding stores in the regional mall
portfolio were $31.87 per square foot at September 30, 2003, an increase of
$1.50 or 5%, from September 30, 2002. The average initial base rent for new
mall store leases signed during the first nine months of 2003 was $40.80, an
increase of $8.12 or 25% over the tenants who closed or whose leases expired.
"Our results for the quarter, affected by the financial impact of
expensing the TCO tender offer costs and the Mall of America Court Order, do
not fully reflect the continued solid performance of our core business," said
David Simon, chief executive officer. "Our core business fundamentals continue
to demonstrate strength and stability. Regional mall occupancy remains steady,
average base rents increased 5%, tenant sales increased roughly 2% after a
successful back-to-school season, and releasing spreads for the first nine
months were 25% higher than expiring rents. Our high-quality regional mall
portfolio is performing to our expectations and in-line with our 2003 plan."
2003 Guidance
The Company expects net income per share for the year to be within a range
of $1.41 to $1.44 and FFO to be within a range of $4.00 to $4.03. This
guidance range is slightly higher than the previous guidance range given,
excluding the write-off of TCO tender offer costs and the Company's
discontinuing the recording of contribution to FFO from the Company's interest
in Mall of America. The following table provides the reconciliation of prior
estimated diluted FFO per share to current estimated diluted FFO per share to
estimated diluted net income per share.
For the twelve months ended December 31, 2003
Low High
Range Range
Estimated funds from operations per
share (guidance as of July 31, 2003) $4.05 $4.08
Impact of write-off of TCO tender offer costs (0.04) (0.04)
Impact of cessation of FFO Contribution
from Mall of America interest (0.03) (0.03)
All other factors, net 0.02 0.02
Estimated funds from operations per
share (guidance as of October 30,
2003) $4.00 $4.03
Depreciation and amortization including our
share of joint ventures (2.55) (2.55)
Loss on disposal or sale of assets, net (0.12) (0.12)
Impact of additional dilutive securities
for FFO per share 0.08 0.08
Estimated net income per share $1.41 $1.44
This guidance is based on management's view of current market conditions
in the regional mall business. The guidance ranges do not include property
transactions, other than transactions that have already closed.
New Development Projects
Las Vegas Premium Outlets, a 50/50 joint venture project developed by
Simon and Chelsea Property Group, opened on August 1, 2003. Las Vegas Premium
Outlets is a 435,000 square-foot, single-phase upscale outlet center located
between Grand Central Parkway and Interstate 15, near the intersection of U.S.
Route 95, approximately 2 1/2 miles from the north end of the Las Vegas Strip.
Net project cost was approximately $88 million.
The Company has three new development projects currently under
construction:
- Chicago Premium Outlets is the third development to be undertaken
jointly by Simon and Chelsea. Also a 50/50 joint venture, the site is
approximately 35 miles west of downtown Chicago on Interstate 88, also
known as the East-West Tollway, in Aurora, Illinois. This upscale
manufacturers' outlet shopping center will comprise 438,000 square
feet. Net costs are expected to approximate $76 million and the project
is scheduled to open in May of 2004.
- Clay Terrace is a 570,000 square foot upscale lifestyle center located
at the southwest corner of U.S. 31 and 146th Street, approximately
fifteen miles north of downtown Indianapolis, Indiana. Clay Terrace is
an open-air, mixed-use regional shopping center project, incorporating
a mix of "big box" anchor stores, specialty retail stores, unique
restaurants and Class A office space. The center will also feature a
Village Green for art shows, outdoor concerts and other activities,
all designed to convey the look and feel of an urban main street. Simon
owns the project in a 50/50 joint venture with Lauth Property Group.
Gross costs are expected to approximate $108 million and the project is
scheduled to open in the fall of 2004.
- St. Johns Town Center, a 1.5 million square foot open-air retail
project, is under construction in Jacksonville, Florida. The project
will be comprised of a village component with a mainstreet design and a
community center. Simon is developing the project in conjunction with
joint venture partner Ben Carter Properties. Initially, the Company
will own 85% of this project until certain financial hurdles are met.
Gross costs are expected to approximate $158 million and the project is
scheduled to open in March of 2005.
The Company also announced today that it expects to commence construction
early in 2004 on two additional projects:
- Firewheel Center will be a 785,000 square foot open air regional
shopping center located at the intersection of State Road 190 and
President George Bush Expressway and State Road 78 in Garland, Texas.
The project will feature Foley's, Dillard's, AMC, Barnes & Noble,
Circuit City, Sports Authority and Linens N' Things. The project will
contain approximately 245,000 square feet of small shop space, four
sit-down restaurants, plus 75,000 square feet of second level office
space. Gross costs are expected to approximate $126 million and the
project is scheduled to open in the fall of 2005. SPG will own 100% of
this asset.
- Wolf Ranch will be a 670,000 square foot retail shopping complex
located at the southwest corner of I-35 and State Road 29 in
Georgetown, Texas. It will be an open-air, mixed-use shopping center
containing a mix of "big box" anchor stores, specialty retail stores
and unique restaurants that will complement the fast growing north side
of Austin, Texas and Williamson County. Wolf Ranch will be anchored by
Target and Kohl's and contain eight junior anchors including Linens N'
Things, Office Depot and PetsMart. Gross costs are expected to
approximate $80 million and the project is scheduled to open in August
of 2005. SPG will also own 100% of this asset.
Asset Expansions
The following expansions or department store additions were completed
during the third quarter of 2003:
- In August, Nordstrom opened at Barton Creek Square in Austin, Texas
along with 40,000 square feet of new small shop space.
- In August, Kohl's opened in Lincolnwood Town Center in Lincolnwood,
Illinois.
- In September, Younkers opened at Bay Park Square in Green Bay,
Wisconsin along with 67,000 square feet of new small shop space.
- In September, Saks Fifth Avenue opened at Fashion Mall at Keystone in
our hometown of Indianapolis.
Acquisitions
On August 20, 2003, the Company purchased a 100 percent stake in Stanford
Shopping Center, in Palo Alto, California, for $333 million. Stanford Shopping
Center is one of the most successful regional malls in the United States with
2002 total sales in excess of $500 million and comparable tenant sales per
square foot of approximately $600.
The Company also announced today that it expects to complete a series of
transactions that will increase its ownership in Kravco Investments L.P. (KI),
a Philadelphia, Pennsylvania-based owner of regional malls, and Kravco Company
(KC), its affiliated property management company. These transactions, which
could close in the next 30 days, will increase SPG's ownership in KI to
approximately 80% and in KC to 50%. Members of the family of Arthur Powell,
one of the founders of these companies, will retain ownership of the remaining
interests.
SPG is acquiring interests in KI and KC from certain private investors,
The Rouse Company and Westfield America Trust. SPG, Rouse and Westfield
obtained their interests in Kravco in connection with the 2002 acquisition of
assets from Rodamco North America, N.V. SPG currently owns approximately 18%
of KI and 15% of KC.
KI owns interests in seven regional malls, six of which are located in the
Philadelphia metropolitan area. Included in the portfolio is an interest in
the Plaza and Court at King of Prussia, one of the country's most successful
regional malls. Sales per square foot of the KI mall portfolio for 2002
exceeded $400. KI also owns interests in three community shopping centers.
KC manages a number of retail assets in addition to the KI portfolio and
also operates a third-party development business. KC will continue to be
headquartered in King of Prussia, PA.
Total consideration to be paid by SPG in these transactions is
approximately $300 million, including the assumption of its pro rata share of
mortgage indebtedness. SPG expects to issue $120 million of perpetual
preferred operating partnership units as part of the consideration. SPG
expects the acquisition to be immediately accretive to its funds from
operations.
The Kravco transactions are subject to execution of definitive agreements
and customary closing conditions.
Dispositions
On October 1, 2003, the Company sold New Orleans Centre, a mixed-use
project in New Orleans, Louisiana for approximately $36 million. A loss on the
disposition of approximately $13 million is reflected in third quarter
results.
Dividends
Today the Company also announced a common stock dividend of $0.60 per
share. This dividend will be paid on November 28, 2003 to shareholders of
record on November 14, 2003.
The Company also declared dividends on its three public issues of
preferred stock, all payable on December 31, 2003 to shareholders of record on
December 17, 2003:
- Simon Property Group, Inc. 6.50% Series B Convertible Preferred Stock
(NYSE:SPGPrB) - $1.625 per share.
- Simon Property Group, Inc. 8.75% Series F Cumulative Redeemable
Preferred Stock (NYSE:SPGPrF) - $0.546875 per share.
- Simon Property Group, Inc. 7.89% Series G Cumulative Preferred Stock
(NYSE:SPGPrG)- $0.98625 per share.
Forward-Looking Statements
Estimates of future net income per share and FFO are by definition, and
certain other matters discussed in this press release may be, forward-looking
statements within the meaning of the federal securities laws. Although the
Company believes the expectations reflected in any forward-looking statements
are based on reasonable assumptions, it can give no assurance that its
expectations will be attained, and it is possible that our actual results may
differ materially from those indicated by these forward-looking statements due
to a variety of risks and uncertainties. The Company undertakes no obligation
to publicly update or revise any forward-looking statements whether as a
result of new information, future events or otherwise.
Those risks and uncertainties include, but are not limited to, the
national, regional and local economic climate, competitive market forces,
changes in market rental rates, trends in the retail industry, the inability
to collect rent due to the bankruptcy or insolvency of tenants or otherwise,
acquisitions and changes in market rates of interest. The reader is directed
to the Company's various filings with the Securities and Exchange Commission,
including quarterly reports on Form 10-Q, reports on Form 8-K and annual
reports on Form 10-K for a discussion of such risks and uncertainties.
Conference Call
The Company will provide an online simulcast of its quarterly conference
call at www.simon.com (in the About Simon section),
www.companyboardroom.com, and www.streetevents.com . To listen to the live
call, please go to any of these websites at least fifteen minutes prior to the
call to register, download and install any necessary audio software. The call
will begin at 11:00 a.m. Eastern Standard Time (New York) tomorrow, October
31st. An online replay will be available for approximately 90 days at
www.simon.com .
Supplemental Materials
The Company will publish a quarterly supplemental information package
tomorrow morning which will be available at www.simon.com in the Investor
Relations section, Other Financial Reports tab. It will also be furnished to
the SEC as part of a Form 8-K. If you wish to receive a copy via mail, please
call 800-461-3439.
Simon Property Group, Inc. (NYSE: SPG), headquartered in Indianapolis,
Indiana, is a real estate investment trust engaged in the ownership and
management of income-producing properties, primarily regional malls and
community shopping centers. Through its subsidiary partnerships, it currently
owns or has an interest in 237 properties containing an aggregate of 183
million square feet of gross leasable area in 36 states. The Company also
holds interest in nine assets in Europe and Canada and ownership interests in
other real estate assets. Additional Simon Property Group information is
available at www.simon.com .
SIMON(A)(B)(C)
Combined Statements of Operations
Unaudited
(In thousands, except as noted)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
REVENUE:
Minimum rent $337,571 $325,795 $1,002,974 $942,078
Overage rent 9,637 9,610 24,600 24,552
Tenant reimbursements 174,755 163,718 505,616 467,621
Management fees and
other revenue 19,102 0 59,202 0
Other income 25,515 41,949 77,040 100,318
Total revenue 566,580 541,072 1,669,432 1,534,569
EXPENSES:
Property operating 86,575 84,479 247,662 233,772
Depreciation and
amortization 127,822 123,526 374,350 346,661
Real estate taxes 57,129 53,687 168,572 156,800
Repairs and
maintenance 18,769 18,446 62,192 52,798
Advertising and
promotion 14,344 14,219 38,271 37,447
Provision for credit
losses 2,301 2,182 11,029 6,805
Home and regional
office costs 17,688 10,363 56,571 32,494
General and
administrative 4,030 790 11,108 2,587
Costs related to
withdrawn tender
offer 10,500 0 10,500 0
Other 5,696 6,260 17,753 20,416
Total operating
expenses 344,854 313,952 998,008 889,780
OPERATING INCOME 221,726 227,120 671,424 644,789
Interest expense 149,196 151,841 451,992 449,269
Income before
minority interest 72,530 75,279 219,432 195,520
Minority interest (888) (1,811) (3,307) (6,369)
Gain (loss) on sales
of assets and other,
net (5,146) 76 (5,122) 170,383
Gain (loss) from debt
related
transactions, net 0 (1,790) 0 14,349
Income tax expense of
taxable REIT
subsidiaries (2,422) 0 (6,450) 0
Income before
unconsolidated
entities 64,074 71,754 204,553 373,883
Loss from
MerchantWired, LLC,
net 0 0 0 (32,742)
Income from other
unconsolidated
entities 24,015 22,933 70,989 66,183
Income before
discontinued
operations 88,089 94,687 275,542 407,324
Results of operations
from discontinued
operations 329 2,248 1,774 6,396
Loss on disposal or
sale of discontinued
operations, net (12,935) 0 (25,693) 0
Income before
allocation to
limited partners 75,483 96,935 251,623 413,720
LESS:
Limited partners'
interest in the
Operating
Partnership 14,244 19,514 47,917 94,618
Preferred
distributions of
the Operating
Partnership 2,835 2,835 8,505 8,505
NET INCOME 58,404 74,586 195,201 310,597
Preferred dividends (15,683) (15,683) (47,048) (48,518)
NET INCOME AVAILABLE
TO COMMON
SHAREHOLDERS $42,721 $58,903 $148,153 $262,079
SIMON(A)(B)
Per Share Data and Selected Mall Operating Statistics
Unaudited
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
PER SHARE DATA:
Basic Earnings Per Common Share:
Income before discontinued
operations $0.28 $0.31 $0.89 $1.44
Discontinued operations (0.05) 0.01 (0.10) 0.03
Net Income available to Common
Shareholders $0.23 $0.32 $0.79 $1.47
Percent Decrease 28.1% 46.3%
Diluted Earnings Per Common Share:
Income before discontinued
operations $0.27 $0.31 $0.88 $1.44
Discontinued operations (0.05) 0.01 (0.10) 0.03
Net Income available to Common
Shareholders $0.22 $0.32 $0.78 $1.47
Percent Decrease 31.3% 46.9%
SELECTED REGIONAL MALL OPERATING STATISTICS
September 30, September 30,
2003 2002
Occupancy(D) 91.9% 91.9%
Average rent per square foot(D) $31.87 $30.37
Total sales volume (in millions)(E) $12,276 $11,980
Comparable sales per square foot(E) $398 $391
Total sales per square foot(E) $394 $385
SIMON(A)(B)
Reconciliation of Net Income to FFO(F)
Unaudited
(In thousands, except as noted)
The Company considers FFO a key measure of its operating performance that
is not specifically defined by GAAP. The Company believes that FFO is
helpful to investors because it is a widely recognized measure of the
performance of REITs and it provides a relevant basis for comparison among
REITs. The Company also uses this measure internally to measure the
operating performance of the portfolio.
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002(G) 2003 2002(G)
Net Income(H)(I) $58,404 $74,586 $195,201 $310,597
Plus: Limited partners' interest
in the Operating Partnership and
preferred distributions
of the Operating
Partnership 17,079 22,349 56,422 103,123
Plus: Depreciation and
amortization from combined
consolidated properties
and discontinued
operations 126,978 125,311 374,907 351,756
Plus: Simon's share of
depreciation and amortization and
other items from unconsolidated
entities 36,218 34,365 108,721 107,654
Plus: (Gain)/Loss on sales of real
estate and discontinued
operations 18,081 (76) 30,815 (170,383)
Less: Gains on debt related
transactions resulting from
impairment charge 0 0 0 (14,056)
Less: Management Company gain on
sale of real estate, net 0 0 0 (8,400)
Less: Minority interest portion of
depreciation and amortization (695) (1,846) (2,661) (5,675)
Less: Preferred distributions and
dividends (18,518) (18,518) (55,553) (57,023)
FFO of the Simon Portfolio $237,547 $236,171 $707,852 $617,593
FFO of the Simon Portfolio $237,547 $236,171 $707,852 $617,593
FFO Allocable to the LP
Unitholders (58,202) (60,725) (173,482) (163,154)
Basic FFO Allocable to the Company 179,345 175,446 534,370 454,439
Impact of Series A, B and C
Preferred Stock Conversion
& Option Exercise (J) 10,407 9,268 29,647 27,972
Diluted FFO Allocable to the
Company $189,752 $184,714 $564,017 $482,411
Basic Weighted Average Shares
Outstanding 189,165 185,532 188,445 178,013
Effect of Stock Options 895 729 786 678
Impact of Series A Preferred 6.5%
Convertible Stock 0 1 0 1,228
Impact of Series B Preferred 6.5%
Convertible Stock 12,491 12,491 12,491 12,491
Impact of Series C Cumulative
Preferred 7% Convertible Units 1,968 0 1,319 0
Diluted Weighted Average Number of
Equivalent Shares 204,519 198,753 203,041 192,410
Basic FFO Per Share:
Basic FFO Allocable to the Company $179,345 $175,446 $534,370 $454,439
Basic Weighted Average Shares
Outstanding 189,165 185,532 188,445 178,013
Basic FFO per Share $0.95 $0.95 $2.84 $2.55
Percent Increase 0.0% 11.4%
Diluted FFO per Share:
Diluted FFO Allocable to the
Company $189,752 $184,714 $564,017 $482,411
Diluted Weighted Average Number of
Equivalent Shares 204,519 198,753 203,041 192,410
Diluted FFO per Share $0.93 $0.93 $2.78 $2.51
Percent Increase 0.0% 10.8%
SIMON(A)(B)(C)
Combined Balance Sheets
Unaudited
(In thousands, except as noted)
September 30, December 31,
2003 2002
ASSETS:
Investment properties, at cost $14,822,113 $14,249,615
Less - accumulated depreciation 2,478,513 2,222,242
12,343,600 12,027,373
Cash and cash equivalents 361,067 397,129
Tenant receivables and accrued
revenue, net 275,994 311,361
Notes and advances receivable from
Management Company and affiliates -- 75,105
Investment in unconsolidated
entities, at equity 1,486,862 1,665,654
Goodwill, net 37,212 37,212
Deferred costs, other assets, and
minority interest, net 600,242 390,668
Total assets $15,104,977 $14,904,502
LIABILITIES:
Mortgages and other indebtedness $10,000,254 $9,546,081
Accounts payable, accrued expenses
and deferred revenue 621,416 624,505
Cash distributions and losses in
partnerships and joint ventures,
at equity 17,798 13,898
Other liabilities, minority
interest and accrued dividends 187,779 228,508
Total liabilities 10,827,247 10,412,992
COMMITMENTS AND CONTINGENCIES
LIMITED PARTNERS' INTEREST IN THE
OPERATING PARTNERSHIP 778,745 872,925
LIMITED PARTNERS' PREFERRED INTEREST
IN THE OPERATING PARTNERSHIP 150,852 150,852
SHAREHOLDERS' EQUITY
CAPITAL STOCK OF SIMON PROPERTY
GROUP, INC. (750,000,000 total
shares authorized, $.0001 par value,
237,996,000 shares of excess
common stock):
All series of preferred stock,
100,000,000 shares authorized,
16,829,957 and 16,830,057
issued, and outstanding,
respectively. Liquidation
value $857,996 and $858,006,
respectively. 814,602 814,254
Common stock, $.0001 par value,
400,000,000 shares authorized,
188,096,157 and 184,438,095 issued,
respectively 19 18
Class B common stock, $.0001 par
value, 12,000,000 shares
authorized, 3,200,000
issued and outstanding 1 1
Class C common stock, $.0001 par
value, 4,000 shares authorized,
issued and outstanding -- --
Capital in excess of par value 3,736,234 3,686,161
Accumulated deficit (1,148,359) (961,338)
Accumulated other comprehensive
income 13,587 (8,109)
Unamortized restricted stock award (15,433) (10,736)
Common stock held in treasury at
cost, 2,098,555 shares (52,518) (52,518)
Total shareholders' equity 3,348,133 3,467,733
$15,104,977 $14,904,502
SIMON
Joint Venture Statements of Operations
Unaudited
(In thousands, except as noted)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
REVENUE:
Minimum rent $220,789 $205,484 $649,292 $578,084
Overage rent 5,396 5,733 14,390 13,310
Tenant reimbursements 120,047 104,767 338,874 291,518
Other income 51,344 16,109 146,634 35,152
Total revenue 397,576 332,093 1,149,190 918,064
EXPENSES:
Property operating 77,904 57,560 214,501 155,368
Depreciation and
amortization 67,103 58,928 196,814 170,606
Real estate taxes 34,039 31,560 104,525 92,019
Repairs and maintenance 18,205 18,268 56,852 47,395
Advertising and
promotion 10,139 9,264 27,474 23,692
Provision for credit
losses 3,394 1,499 9,354 3,920
Other 17,889 8,292 58,364 20,116
Total operating
expenses 228,673 185,371 667,884 513,116
OPERATING INCOME 168,903 146,722 481,306 404,948
Interest expense 91,119 88,600 270,988 247,803
Income Before Minority
Interest and
Unconsolidated
Entities 77,784 58,122 210,318 157,145
Income from unconsolidated
entities 3,019 (1,667) 7,209 (160)
Minority interest (178) (389) (539) (389)
Income from Continuing
Operations 80,625 56,066 216,988 156,596
Income from
discontinued joint
venture interests(K) 16 1,065 1,295 15,363
NET INCOME $80,641 $57,131 $218,283 $171,959
Third-party investors'
share of Net Income $50,528 $33,232 $128,387 $101,247
Our share of Net Income 30,113 23,899 89,896 70,712
Amortization of Excess
Investment 6,098 5,711 18,907 17,203
Income from
Unconsolidated Joint
Ventures $24,015 $18,188 $70,989 $53,509
SIMON
Joint Venture Balance Sheets
Unaudited
(In thousands, except as noted)
September 30, December 31,
2003 2002
ASSETS:
Investment properties, at cost $8,826,865 $8,160,065
Less - accumulated depreciation 1,570,167 1,327,751
7,256,698 6,832,314
Cash and cash equivalents 247,050 199,634
Tenant receivables 202,425 199,675
Investment in unconsolidated
entities 19,355 6,966
Other assets 207,854 190,561
Total assets $7,933,382 $7,429,150
LIABILITIES AND PARTNERS' EQUITY:
Mortgages and other notes payable $5,764,397 $5,306,465
Accounts payable and accrued
expenses 269,780 289,793
Other liabilities 84,210 66,090
Total liabilities 6,118,387 5,662,348
Preferred units 152,450 125,000
Partners' equity 1,662,545 1,641,802
Total liabilities and partners'
equity $7,933,382 $7,429,150
Our Share of:
Total assets $3,248,423 $3,123,011
Partners' equity $657,616 $724,511
Add: Excess Investment, net 811,448 831,728
Our net investment in joint ventures $1,469,064 $1,556,239
Mortgages and other notes payable $2,382,622 $2,279,609
Excess Investment represents the unamortized difference of our investment
over our share of the equity in the underlying net assets of the partnerships
and joint ventures acquired. We amortize excess investment over the life of
the related Properties, typically 35 years, and the amortization is included
in income from unconsolidated entities.
SIMON(A)
Footnotes to Financial Statements
Unaudited
Notes:
(A) On December 31, 2002, Simon Property Group, Inc. merged with its
paired share affiliate, SPG Realty Consultants, Inc. The Statements of
Operations and Balance Sheets represent the combined, condensed
financial statements of Simon Property Group, Inc. and SPG Realty
Consultants, Inc. for 2002.
(B) The results reflect the acquisition of assets from Rodamco North
America N.V. on May 3, 2002. The portfolio acquired by Simon consists
primarily of interests in 13 high-quality, highly productive regional
malls in the United States.
(C) On January 1, 2003, the Company's partnership subsidiary, Simon
Property Group, L.P., acquired all of the remaining equity interests
of M.S. Management Associates, Inc. ("MSM"). MSM provides management,
leasing and other services for certain of the Company's properties.
MSM is now a wholly owned consolidated taxable REIT subsidiary ("TRS")
of Simon Property Group, L.P. As of January 1, 2003, financial
results of MSM are reported on the consolidated method. New line
items on the Statements of Operations as a result of the consolidation
are: Management fees and other revenue, Home and regional office
costs, General and administrative expense, and Income tax expense of
taxable REIT subsidiaries. In prior years, a portion of Home and
regional office costs and General and administrative expense incurred
by MSM was allocated to the consolidated properties and reported as
Property operating expense. Effective with the consolidation of MSM,
this allocation is eliminated in 2003 and the allocations in 2002 have
been reclassified to conform with the current year presentation. Home
and regional office costs include salary and benefits, office rent,
office expenses and information services expenses incurred in the
Company's home office and regional offices. General and
administrative expense represents the costs of operating as a public
company and includes such items as stock exchange fees, public and
investor relations expenses, executive officers' compensation
expenses, audit fees, and legal fees.
(D) Includes mall and freestanding stores.
(E) Based on the standard definition of sales for regional malls adopted
by the International Council of Shopping Centers, which includes only
mall and freestanding stores.
(F) As defined by NAREIT, FFO is 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 sales of real estate, 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. The Company has adopted NAREIT's
clarification of the definition of FFO that requires it to include the
effects of nonrecurring items not classified as extraordinary,
cumulative effect of accounting change or resulting from the sale of
depreciable real estate. 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.
(G) FFO for the quarter and nine months ended September 30, 2002 have been
restated to reflect the Company's losses on debt-related transactions
previously reported as extraordinary under GAAP and share of
impairment of technology assets, reducing FFO by a net $1.8 million,
or $0.01 per share for the quarter, and a net $26.4 million, or $0.10
per share for the nine months.
(H) Includes our share of gains on land sales of $2.9 million and $11.4
million for the three months ended September 30, 2003 and 2002,
respectively, and $23.7 million and $28.4 million for the nine months
ended September 30, 2003 and 2002, respectively.
(I) Includes our share of straight-line adjustments to minimum rent of
$0.6 million and $1.4 million for the three months ended September 30,
2003 and 2002, respectively, and $4.5 million and $6.8 million for the
nine months ended September 30, 2003 and 2002, respectively.
(J) Includes dividends of Series A, B and C Preferred Stock allocable to
the Company as well as increased allocation of FFO to the Company as a
result of assumed increase in the number of common shares outstanding.
The Series A shares impacted only the 2002 results as they were
converted during 2002.
(K) Discontinued Joint Venture Interests represent those partnership
interests that have been sold or consolidated. Consolidation occurs
when the Company acquires an additional ownership interest in a joint
venture and has, as a result, gained control of the joint venture.
These interests have been separated from operational interests to
present comparative results of operations for those joint ventures
held as of September 30, 2003.
SOURCE Simon Property Group, Inc.
CONTACT: Investors, Shelly Doran, +1-317-685-7330, or Media, Les Morris,
+1-317-263-7711, both of Simon Property Group, Inc./
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