Overview

Simon Property Group, Inc. is a real estate investment trust (REIT) that owns, develops, and manages premier shopping, dining, entertainment, and mixed-use destinations, primarily consisting of malls, Premium Outlets, and The Mills. As of September 30, 2024, the company owned or held an interest in 196 income-producing properties in the United States and 35 Premium Outlets and Designer Outlet properties internationally.

Simon generates the majority of its lease income from retail tenants, including fixed minimum lease consideration, fixed common area maintenance (CAM) reimbursements, and variable lease consideration primarily based on tenants’ sales. The company also generates revenue from its management company and supplemental activities such as payment systems, national marketing alliances, and property operating services.

Simon focuses on high-quality real estate and seeks to enhance the profitability and market share of its existing assets through expansion and redevelopment. The company also selectively develops new properties and acquires or increases its interests in high-quality real estate assets or portfolios. To support its growth, Simon employs a three-fold capital strategy of providing the necessary capital, maintaining flexibility to access capital in many forms, and managing its financial structure to preserve its investment-grade credit ratings.

Results Overview

Diluted earnings per share and diluted earnings per unit increased $0.54 during the first nine months of 2024 to $5.22, primarily due to improved operating performance, a gain on the sale of interests in Authentic Brands Group (ABG), increased lease income, and higher other income, partially offset by decreased income from unconsolidated entities, unrealized losses on publicly traded equity instruments and derivatives, increased interest expense, and higher income and other tax expense.

Portfolio NOI increased 4.6% for the nine-month period in 2024 over the prior year, driven by improved operations in the domestic and international portfolios. Average base minimum rent for U.S. Malls and Premium Outlets increased 2.3% to $57.71 per square foot, and ending occupancy increased 1.0% to 96.2%.

Simon’s effective overall borrowing rate on consolidated indebtedness increased 21 basis points to 3.61% as of September 30, 2024, primarily due to an increase in the effective rate on fixed-rate debt.

United States Portfolio Data

The following table summarizes key operating statistics for Simon’s U.S. Malls and Premium Outlets:

Japan Data

The following are selected key operating statistics for Simon’s Premium Outlets in Japan:

Results of Operations

Simon’s results were affected by various acquisitions, dispositions, and openings of consolidated properties and equity method investments during the comparative periods. The company’s performance was also impacted by gains and losses related to the disposal, exchange, or revaluation of equity interests, primarily in ABG and SPARC Group.

For the three months ended September 30, 2024, lease income increased $41.1 million, and total other income increased $25.3 million, primarily due to higher interest income and land sale activity. Property operating expense increased $4.6 million, while real estate taxes decreased $21.5 million. Interest expense increased $14.2 million, and the gain on disposal, exchange, or revaluation of equity interests decreased $158.2 million compared to the prior-year period.

For the nine months ended September 30, 2024, lease income increased $156.4 million, and total other income increased $90.2 million, primarily due to higher interest income and land sale activity. Property operating expense increased $32.0 million, while real estate taxes decreased $38.6 million. Interest expense increased $48.7 million, and the gain on disposal, exchange, or revaluation of equity interests increased $220.1 million compared to the prior-year period.

Liquidity and Capital Resources

Simon’s financing strategy relies primarily on long-term fixed-rate debt. The company has access to various sources of liquidity, including the $5.0 billion unsecured revolving credit facility, the $3.5 billion supplemental unsecured revolving credit facility, and the $2.0 billion global unsecured commercial paper program.

As of September 30, 2024, Simon had an aggregate available borrowing capacity of approximately $8.1 billion under the credit facilities, net of outstanding borrowings and letters of credit. The company’s effective overall borrowing rate on consolidated indebtedness was 3.61% at September 30, 2024.

Simon’s business model and REIT status require the company to regularly access the debt markets to fund its activities. The company believes it has sufficient cash and availability under its credit facilities to address its debt maturities and capital needs through 2024.

Cash Flows

Simon’s net cash flow from operating activities and distributions of capital from unconsolidated entities totaled $3.0 billion for the nine months ended September 30, 2024. The company used these funds to pay dividends and unitholder distributions, fund capital expenditures, and make investments, among other activities.

Financing and Debt

Simon’s unsecured debt consists of $20.1 billion in senior unsecured notes of the Operating Partnership and $325.1 million outstanding under the $5.0 billion unsecured revolving credit facility. The company also has access to a $3.5 billion supplemental unsecured revolving credit facility and a $2.0 billion global unsecured commercial paper program.

During the first nine months of 2024, Simon completed various financing activities, including issuing $1.0 billion in senior unsecured notes, amending and extending the $3.5 billion supplemental unsecured revolving credit facility, and redeeming $1.0 billion and $600 million in senior unsecured notes at maturity.

Acquisitions and Dispositions

Simon may continue to pursue the acquisition of additional interests in properties or the disposition of properties that no longer meet its strategic criteria. During the period, the company acquired an additional interest in Miami International Mall, resulting in the consolidation of the property.

Joint Venture Formation and Other Investment Activity

In the first quarter of 2024, Simon sold all of its remaining interest in ABG for $1.2 billion, resulting in a pre-tax gain of $414.8 million. The company also participated in the formation of a joint venture, Phoenix Retail, LLC, to acquire and operate the Express Retail Company.

Development Activity

Simon has redevelopment and expansion projects underway at properties in North America, Europe, and Asia. The company’s share of the costs of all new development, redevelopment, and expansion projects currently under construction is approximately $1.3 billion, with a projected stabilized return on invested capital in the range of 8-10%.

Dividends, Distributions, and Stock Repurchase Program

Simon paid a common stock dividend of $6.00 per share for the nine months ended September 30, 2024, and the company’s Board of Directors declared a quarterly cash dividend for the fourth quarter of 2024 of $2.10 per share. Simon also authorized a new $2.0 billion common stock repurchase plan, which will be in effect through February 2026.