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| Simon Property Group Announces 8% Increase in 2002 FFO Per Share and Declares 9.1% Increase in Common Stock Dividend |
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INDIANAPOLIS, Feb 6, 2003 /PRNewswire-FirstCall via COMTEX/ -- Simon Property Group, Inc. (the "Company") (NYSE: SPG) today announced results for the quarter and twelve months ended December 31, 2002.
Occupancy for mall and freestanding stores in the regional malls at December 31, 2002 was 92.7% as compared to 91.9% at December 31, 2001. Comparable retail sales per square foot increased 2% to $391 as compared to $383 at December 31, 2001, while total retail sales per square foot increased 2% to $386 at December 31, 2002 as compared to $378 at December 31, 2001. Average base rents for mall and freestanding stores in the regional mall portfolio were $30.70 per square foot at December 31, 2002, an increase of $1.42 or 5%, from December 31, 2001. The average initial base rent for new mall store leases signed during 2002 was $40.35, an increase of $7.77 or 24% over the tenants who closed or whose leases expired.
Major factors driving results for the quarter and twelve months:
"We're very pleased to have delivered a 24% total return to our shareholders in 2002, significantly outperforming the broader markets. We are also delighted to announce a 9.1% increase in our quarterly common stock dividend, from $0.55 to $0.60 per share. This increase is indicative of the confidence we have in our business going forward."
Fourth Quarter Activities New Development Projects:The Company has two new development projects currently under construction:
On December 10, Simon and The Coca-Cola Company announced a multi-year comprehensive marketing alliance. The agreement, which began in January of 2003, covers vending, sponsorships, promotion and on-mall advertising across the vast Simon franchise. Coca-Cola will employ major marketing initiatives at Simon properties throughout the term of the agreement. As the exclusive non-alcoholic beverage vendor for mall space controlled by Simon Property Group in its mall and community center properties, Coca-Cola will have promotional and exclusive vending rights within the common areas of Simon properties in the United States. As David Simon stated in the initial announcement, "This agreement further validates our strategy of positioning the mall as an outstanding marketing opportunity and we're delighted to be partnering with Coca-Cola. Our properties give Coca-Cola the ability to interact one-on-one with their millions of U.S. consumers in a comfortable environment. Coca-Cola will be able to leverage Simon's advertising network and a variety of interactive marketing platforms to engage customers in a truly unique and differentiated way. For Coca-Cola, this multi-faceted partnership is an effective way to engage their customers and for us, it further demonstrates the marketing value of the Simon mall franchise." Dispositions: The Company's aggressive recycling of capital continued in the fourth quarter with the disposition of four non-core assets:
During the year, the Company sold its interests in 17 non-core assets for total consideration of $589 million. During 2002, net gains on the sale of real estate assets totaled approximately $170 million. 2003 Activities The Company's disposition efforts continue in 2003 with the sale of a portfolio of assets. On January 9, 2003, Memorial Mall in Sheboygan, Wisconsin; Mounds Mall and Cinema in Anderson, Indiana; and Richmond Square in Richmond, Indiana were sold for total consideration of $34 million. The Company also announced today that it intends to acquire the remaining ownership interest in The Forum Shops at Caesars in Las Vegas, Nevada for approximately $174 million in cash. Forum Shops is one of the top retail destinations in the world with a tenant mix comprised of a "who's who" in retailing -- Christian Dior, Emporio Armani, Gianni Versace, Gucci, Louis Vuitton, Dolce & Gabbana, Valentino, Salvatore Ferragamo, Escada, Fendi, MaxMara, St. John, BOSS Hugo Boss, DKNY, Tourneau, Judith Lieber and many more. Traffic at the center averages 54,000 shoppers daily and annual tenant sales exceed $1,100 per square foot. A 175,000 square foot expansion of The Forum Shops affronting Las Vegas Boulevard is scheduled to open in the fall of 2004, adding a multilevel luxury retail, restaurant, and entertainment complex to the project. The acquisition of this interest would be accretive to earnings immediately. Upon completion of The Forum Shops expansion, a return in excess of 12% is expected on this additional investment. Dividends Today the Company also announced a common stock dividend of $0.60 per share, an increase of 9.1%. This dividend will be paid on February 28, 2003 to shareholders of record on February 18, 2003. Solely for purposes of satisfying U.S. federal income tax withholding obligations under section 1.1445-8 of the federal income tax regulations with respect to payments to non-U.S. shareholders, the Company will characterize this entire distribution as a capital gain dividend to reflect the taxable composition of its 2002 distributions. This characterization is relevant only for purposes of withholding on payments to non-U.S. shareholders of record as of the close of business on February 18, 2003, and is not relevant to U.S. shareholders. The Company also declared dividends on its three public issues of preferred stock, all payable on March 31, 2003 to shareholders of record on March 17, 2003:
The Company also announced today that its current business plan for 2003 is in line with the current Wall Street consensus FFO estimate of $4.01 per share. This guidance is based on management's view of current market conditions in the regional mall business. Estimates of future FFO and future earnings per share are, and certain other matters discussed in this press release may be, deemed 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. 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, 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. Funds from Operations ("FFO") is a widely used measure of the operating performance of real estate companies and is provided here as a supplemental measure to Generally Accepted Accounting Principles (GAAP) net income and earnings per share. FFO, as defined by NAREIT, means consolidated net income without giving effect to real estate depreciation and amortization, gains or losses from extraordinary items and gains or losses on the sales of real estate, plus the allocable portion, based on economic ownership interest, of funds from operations of unconsolidated joint ventures, all determined on a consistent basis in accordance with accounting principles generally accepted in the United States. However, FFO does not represent cash flow from operations, should not be considered as an alternative to net income as a measure of operating performance, and is not an alternative to cash flow as a measure of liquidity. 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 242 properties containing an aggregate of 183 million square feet of gross leasable area in 36 states, as well as eight assets in Europe and Canada and ownership interests in other real estate assets. Additional Simon Property Group information is available at www.shopsimon.com . Supplemental Materials The Company's supplemental information package to be filed today on Form 8-K may be requested in e-mail or hard copy formats by contacting Shelly Doran - Vice President of Investor Relations, Simon Property Group, P.O. Box 7033, Indianapolis, IN 46207 or via e-mail at sdoran@simon.com . Conference Call The Company will provide an online simulcast of its fourth quarter conference call at www.shopsimon.com (Corporate Info tab), www.companyboardroom.com and www.streetevents.com . To listen to the live call, please go to either 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 tomorrow, February 7th. An online replay will be available for approximately 90 days at www.shopsimon.com .
SIMON(A)
Combined Statements of Operations
Unaudited
(In thousands, except as noted)
For the For the
Three Months Ended Twelve Months Ended
December 31, December 31,
2002(B) 2001 2002(B) 2001
REVENUE:
Minimum rent $375,577 $344,297 $1,337,928 $1,271,142
Overage rent 22,960 22,953 47,977 48,534
Tenant
reimbursements 185,408 165,245 658,894 606,516
Other income 38,684 36,747 141,003 122,643
Total revenue 622,629 569,242 2,185,802 2,048,835
EXPENSES:
Property operating 92,385 85,970 364,848 329,030
Depreciation and
amortization 127,207 129,098 480,012 453,557
Real estate taxes 57,733 50,870 217,579 198,190
Repairs and
maintenance 23,020 21,593 77,472 77,940
Advertising and
promotion 23,205 24,468 61,327 64,941
Provision for
credit losses 1,993 591 8,972 8,415
Impairment on
Investment
Properties -- 47,000 -- 47,000
Other 11,010 9,246 36,854 36,344
Total operating
expenses 336,553 368,836 1,247,064 1,215,417
OPERATING INCOME 286,076 200,406 938,738 833,418
Interest expense 152,258 150,687 602,972 607,625
Income before
minority interest 133,818 49,719 335,766 225,793
Minority interest (4,129) (2,876) (10,498) (10,593)
Gain (Loss) on
sales of assets
and other, net (8,372) 58 162,011 (C) 2,610
Income before
unconsolidated
entities 121,317 46,901 487,279 217,810
Loss from
MerchantWired
LLC, net -- (D) (5,745) (32,742)(D) (18,104)
Income from other
unconsolidated
entities 26,628 (E) 37,811 (E) 92,811(C),(E) 82,591 (E)
Income before
extraordinary
items and
cumulative
effect of
accounting
change 147,945 78,967 547,348 282,297
Extraordinary
items - Debt
related
transactions (10) 408 14,307 163
Cumulative effect
of accounting
change -- (62) -- (1,700)(F)
Income before
allocation to
limited partners 147,935 79,313 561,655 280,760
LESS:
Limited
partners'
interest in the
Operating
Partnerships 33,109 16,126 127,727 55,526
Preferred
distributions
of the SPG
Operating
Partnership 2,835 2,835 11,340 11,417
Preferred
dividends of
subsidiary -- -- -- 14,668
NET INCOME 111,991 60,352 422,588 199,149
Preferred
dividends (15,683) (16,499) (64,201) (51,360)
NET INCOME
AVAILABLE
TO COMMON
SHAREHOLDERS $96,308 $43,853 $358,387 $147,789
SIMON(A)
Per Share Data and Selected Mall Operating Statistics
Unaudited
Three Months Twelve Months
Ended Ended
December 31, December 31,
2002 2001 2002 2001
PER SHARE DATA:
Basic per share amounts:
Income before extraordinary items
and cumulative effect of accounting
change $0.52 $0.25 $1.93 $0.87
Extraordinary items - - 0.06 -
Cumulative effect of accounting
change - - - (0.01)
Net income available to Common
Shareholders - Basic $0.52 $0.25 $1.99 $0.86
Diluted per share amounts:
Before extraordinary items and
cumulative effect of accounting
change $0.52 $0.25 $1.93 $0.86
Extraordinary items - - 0.06 -
Cumulative effect of accounting
change - - - (0.01)
Net income available to Common
Shareholders - Diluted $0.52 $0.25 $1.99 $0.85
SELECTED REGIONAL MALL OPERATING STATISTICS
December 31, December 31,
2002 2001
Occupancy(G) 92.7% 91.9%
Average rent per square foot(G) $30.70 $29.28
Total sales volume (in millions)(H) $17,971 $16,941
Comparable sales per square foot(H) $391 $383
Total sales per square foot(H) $386 $378
SIMON(A)
Reconciliation of Net Income to Funds from Operations ("FFO")
Unaudited
(In thousands, except as noted)
Three Months Ended Twelve Months Ended
December 31, December 31,
2002 2001 2002 2001
Income before extraordinary
items and cumulative effect of
accounting change(I)(J) $147,945 $78,967 $547,348 $282,297
Plus: Depreciation and
amortization from combined
consolidated properties 126,623 128,883 478,379 452,428
Plus: Simon's share of
depreciation and amortization
from unconsolidated entities 42,563 40,139 150,217 138,814
Plus: Simon's share of
MerchantWired LLC impairment
charge and write-off, net of
tax benefit - - 26,695 (D) -
Plus: Write-off of Technology
Investments - - - 16,645
Plus: Impairment on investment
properties - 47,000 - 47,000
Less: (Gain) Loss on sales of
real estate, net 8,372 (58) (162,011)(C) (2,610)
Less: Simon's share of
adjustment to market value for
acquired in place leases
(FASB 141) (4,984) - (4,984) -
Less: Management Co. gain on
sale of real estate, net - - (8,400)(C) -
Less: Minority interest portion
of depreciation, amortization
and extraordinary items (2,268) (2,485) (7,943) (7,012)
Less: Preferred distributions
(including those of
subsidiary) (18,518) (19,334) (75,541) (77,445)
FFO of the Simon Portfolio $299,733 $273,112 $943,760 $850,117
FFO of the Simon Portfolio $299,733 $273,112 $943,760 $850,117
FFO Allocable to the LP
Unitholders (77,124) (74,057) (247,303) (232,097)
Basic FFO Allocable to the
Companies 222,609 199,055 696,457 618,020
Impact of Series A and B
Preferred Stock
Conversion & Option
Exercise (K) 10,257 10,817 38,274 39,041
Diluted FFO Allocable to the
Companies $232,866 $209,872 $734,731 $657,061
Basic Weighted Average Paired
Shares Outstanding 185,539 173,427 179,910 172,669
Effect of Stock Options 654 279 672 358
Impact of Series A Preferred
6.5% Convertible Stock 1 1,894 919 1,912
Impact of Series B Preferred
6.5% Convertible Stock 12,491 12,491 12,491 12,491
Diluted Weighted Average Number
of Equivalent Paired Shares 198,685 188,091 193,992 187,430
Basic FFO Per Paired Share:
Basic FFO Allocable to the
Companies $222,609 $199,055 $696,457 $618,020
Basic Weighted Average Paired
Shares Outstanding 185,539 173,427 179,910 172,669
Basic FFO per Paired Share $1.20 $1.15 $3.87 $3.58
Percent Increase 4.5% 8.2%
Diluted FFO per Paired Share:
Diluted FFO Allocable to the
Companies $232,866 $209,872 $734,731 $657,061
Diluted Weighted Average Number
of Equivalent Paired Shares 198,685 188,091 193,992 187,430
Diluted FFO per Paired Share $1.17 $1.12 $3.79 $3.51
Percent Increase 4.5% 8.0%
SIMON(A)
Combined Balance Sheets
(In thousands, except as noted)
Unaudited
December 31, December 31,
2002(B) 2001
ASSETS:
Investment properties, at cost $14,249,615 $13,194,396
Less - accumulated depreciation 2,222,242 1,877,175
12,027,373 11,317,221
Cash and cash equivalents 397,129 259,760
Tenant receivables and accrued
revenue, net 311,361 316,842
Notes and advances receivable from
Management Company and affiliates 75,105 79,738
Investment in unconsolidated
entities, at equity 1,665,654 1,451,137
Goodwill, net 37,212 37,212
Deferred costs, other assets, and
minority interest, net 390,668 349,044
Total assets $14,904,502 $13,810,954
LIABILITIES:
Mortgages and other indebtedness $9,546,081 $8,841,378
Accounts payable, accrued expenses
and deferred revenue 624,505 544,431
Cash distributions and losses in
partnerships and joint ventures,
at equity 13,898 26,084
Other liabilities, minority
interest, and accrued dividends 228,508 213,279
Total liabilities 10,412,992 9,625,172
COMMITMENTS AND CONTINGENCIES
LIMITED PARTNERS' INTEREST IN THE
OPERATING PARTNERSHIPS 872,925 820,239
LIMITED PARTNERS' PREFERRED INTEREST
IN THE SPG 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,
16,830,057 and 16,879,896 issued
and outstanding, respectively.
Liquidation values $858,006 and
$907,845, respectively. 814,254 877,468
Common stock, $.0001 par value,
400,000,000 shares authorized,
184,438,095 and 172,700,861 issued,
respectively 18 17
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 3,685,524 3,347,567
Accumulated deficit (961,339) (927,654)
Accumulated other comprehensive
income (7,471) (9,893)
Unamortized restricted stock award (10,736) (20,297)
Common stock held in treasury at
cost, 2,098,555 shares (52,518) (52,518)
Total shareholders' equity 3,467,733 3,214,691
$14,904,502 $13,810,954
SIMON(A)
Combined Joint Venture Statements of Operations
Unaudited
(In thousands, except as noted)
For the For the
Three Months Ended Twelve Months Ended
December 31, December 31,
2002(B) 2001 2002(B) 2001
REVENUE:
Minimum rent $228,624 $196,276 $808,607 $691,469
Overage rent 15,969 12,808 29,279 25,640
Tenant
reimbursements 116,568 99,552 409,925 349,134
Other income 20,239 15,682 55,409 44,752
Total revenue 381,400 324,318 1,303,220 1,110,995
EXPENSES:
Property
operating 54,966 49,120 210,800 182,489
Depreciation
and
amortization 63,846 58,446 234,775 203,910
Real estate
taxes 34,472 28,771 126,660 112,309
Repairs and
maintenance 22,956 15,901 71,054 51,689
Advertising
and promotion 15,247 14,808 39,164 36,405
Provision for
credit losses 5,214 456 9,168 5,070
Other 14,350 9,358 34,466 20,583
Total
operating
expenses 211,051 176,860 726,087 612,455
OPERATING
INCOME 170,349 147,458 577,133 498,540
Interest
expense 89,677 78,871 338,299 307,849
Income before
minority
interest
and
unconsolidated
entities 80,672 68,587 238,834 190,691
Income from
unconsolidated
entities 3,222 -- 3,062 --
Minority
interest (362) -- (751) --
Income from
continuing
operations 83,532 68,587 241,145 190,691
Income from
discontinued
joint venture
partnership
interests (L) 0 11,037 14,346 32,562
Income before
extraordinary
items and
cumulative
effect of
accounting
change ("IBEC") 83,532 79,624 255,491 223,253
Extraordinary
items -- -- -- (295)
Cumulative
effect of
accounting
change -- (128) -- (3,011)(F)
NET INCOME $83,532 $79,496 $255,491 $219,947
Third-party
investors'
share of IBEC $48,914 $46,401 $150,161 $134,748
Our share of
IBEC 34,618 33,223 105,330 88,505
Amortization
of excess
investment 9,432 5,230 26,635 21,279
Income from
unconsolidated
joint ventures $25,186 $27,993 $78,695 $67,226
SIMON(A)
Combined Joint Venture Balance Sheets
Unaudited
(In thousands, except as noted)
December 31, December 31,
2002 2001
ASSETS:
Investment properties, at cost $8,160,065 $6,958,470
Less - accumulated depreciation 1,327,751 1,070,594
6,832,314 5,887,876
Net investment properties, at cost
of discontinued joint venture
partnership interests (L) -- 1,002,274
Cash and cash equivalents 199,634 167,173
Tenant receivables 199,675 164,647
Investment in unconsolidated
entities 6,966 --
Other assets 190,561 134,504
Other assets of discontinued joint
venture partnership interests (L) -- 101,868
Total assets $7,429,150 $7,458,342
LIABILITIES AND PARTNERS' EQUITY:
Mortgages and other notes payable $5,306,465 $4,721,711
Mortgages of discontinued joint
venture partnership interests (L) -- 967,677
5,306,465 5,689,388
Accounts payable and accrued
expenses 289,793 191,440
Other liabilities 66,090 85,137
Other liabilities discontinued joint
venture partnership interests (L) 28,772
Total liabilities 5,662,348 5,994,737
Preferred Units 125,000 -
Partners' equity 1,641,802 1,463,605
Total liabilities and partners'
equity $7,429,150 $7,458,342
Our Share of:
Total assets $3,123,011 $3,088,952
Partners' equity $724,511 $754,056
Add: Excess Investment, net 831,728 563,278
Our net investment in joint ventures $1,556,239 $1,317,334
Mortgages and other notes payable $2,279,609 $2,392,522
"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.
(B) 2002 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) Primary components: sale of 50% interest in Orlando Premium Outlets
($39 million); sale of joint venture interests in five "Mills"
properties ($123 million) and partial sale of Miami International
Mall ($26 million); offset by the write-off of certain
predevelopment and land costs ($17 million), loss on sale of
Machesney Mall ($5 million), and loss on sale of Wichita Mall
($2 million). An additional $8.4 million gain, net of tax, related
to the sale of joint venture interests in five "Mills" properties
was recorded by the management company and is reflected in income
from other unconsolidated entities.
(D) Consists of operating losses, net of tax, of $0 million and
$6 million and write-downs, net of tax, of $0 million and
$26.7 million for the three months and twelve months ended December
31, 2002, respectively. MerchantWired was a network infra-
structure business in which the Company owned a 53% interest. The
members of MerchantWired LLC concluded during the second quarter that
there were no viable alternatives except to discontinue
MerchantWired's operations. The network remained active until all
MerchantWired retail customers were transferred to alternative
service providers on September 3, 2002. No further operating losses
or investments are expected.
(E) Consists of income from unconsolidated joint ventures (presented in
the attached financial statements) plus the Company's share of income
(loss) from the management company of $1.4 million and $9.8 million
for the three months ended December 31, 2002 and 2001, respectively,
and $14.1 million and $15.3 million for the twelve months ended
December 31, 2002 and 2001, respectively.
(F) Due to the adoption of SFAS 133 - Accounting for Derivatives and
Financial Instruments on January 1, 2001.
(G) Includes mall and freestanding stores.
(H) 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.
(I) Includes gains on land sales of $11.1 million and $7.6 million for
the three months ended December 31, 2002 and 2001, respectively and
$39.4 million and $15.7 million for the twelve months ended December
31, 2002 and 2001, respectively.
(J) Includes straight-line adjustments to minimum rent of $3.4 million
and $5.5 million for the three months ended December 31, 2002 and
2001, respectively and $10.2 million and $14.9 million for the twelve
months ended December 31, 2002 and 2001, respectively.
(K) Includes dividends of Series A and B Preferred Stock allocable to the
Companies as well as increased allocation of FFO to the Company as a
result of assumed increase in the number of common shares
outstanding.
(L) Discontinued Joint Venture Partnership Interests represent those
partnership interests that have been sold or consolidated.
Consolidation occurs when the Company acquires additional ownership
interests in a partnership and as a result gains control. These
interests have been separated from operational interests to present
comparative balance sheets and results of operations.
SOURCE Simon Property Group, Inc.
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