2012 Annual Report
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® 2012 Annual Report WorldReginfo - fba36912-cfdf-4f26-8844-520d70f52b73 2012 ANNUAL REPORT 11 WorldReginfo - fba36912-cfdf-4f26-8844-520d70f52b73 10 SIMON PROPERTY GROUP, INC. Simon Property Group, Inc. (NYSE: SPG) is an S&P 100 company SIMON and the largest real estate company in the world. Our portfolio includes more than 320 retail real estate properties in North America and Asia encompassing the entire retail spectrum — Malls, PROPERTY Premium Outlets®, The Mills® and Community/Lifestyle Centers. Additional Simon Property Group information is available at GROUP www.simon.com. FINANCIAL HIGHLIGHTS (in millions, except per share figures) 2012 2011 Consolidated Revenue $ 4,880 $ 4,306 Funds from Operations (FFO) $ 2,885 $ 2,439 FFO Per Share (Diluted) $ 7.98 $ 6.89 Net Income Per Share (Diluted) $ 4.72 $ 3.48 Dividends Per Share $ 4.10 $ 3.50 Common Stock Price at December 31 $ 158.09 $ 128.94 Total Equity Capitalization $ 57,287 $ 45,815 Total Market Capitalization (1) $ 85,622 $ 70,492 (1) Includes our share of consolidated and joint venture debt. Consolidated Revenue FFO Per Diluted Share Dividends Per Share Equity Market Capitalization $ in billions $ in billions $4.88 $7.98 $4.10 $57.3 $4.31 $6.89 $3.50 $45.8 $3.96 $3.78 $5.50 $2.70 $5.03 $2.60 $35.2 $28.1 ‘09 ’10 ’11 ’12 ‘09 ’10 ’11 ’12 ‘09 ’10 ’11 ’12 ‘09 ’10 ’11 ’12 Table of Contents Financial Highlights 1 This Annual Report contains a number of forward- From the Chairman & CEO 2 looking statements. For more information, please see page 25. It also includes the non-GAAP Selected Financial Data 9 financial measures of funds from operations, or Management’s Discussion and Analysis 10 FFO, and net operating income, or NOI. These Consolidated Financial Statements 31 financial measures are commonly used in the real estate industry and we believe provide Notes to Consolidated Financial Statements 36 useful information to investors. Please refer to Total Return Performance 64 pages 25 through 27 for a definition of FFO Properties 65 and reconciliations of each of the non-GAAP measures used in this report to the most-directly Board of Directors 68 comparable GAAP measure. Executive Officers and Senior Management 70 Investor Information 71 WorldReginfo - fba36912-cfdf-4f26-8844-520d70f52b73 2012 ANNUAL REPORT 1 FROM THE CHAIRMAN & CEO Dear Fellow Stockholders, 2012 was an excellent year for our Company. We delivered strong results, including several record highs for our Company. We generated funds from operations (FFO) of $7.98 per share, an increase of 15.8% over the prior year. As a reference point, our 2012 FFO per share was 23.7% higher than our pre-recession high reported in 2008. We paid dividends to our stockholders of $4.10 per Our common stock again outperformed in 2012, gener- share in 2012, an increase of 17.1% from 2011. In the first ating a total return to our stockholders of 26% in 2012, as quarter of 2013, our Board announced another increase in compared to the MSCI U.S. REIT Index (RMS) return of 18% the quarterly dividend, to $1.15 per share. We are now on and the S&P 500 Index return of 16%. SPG has outperformed track to pay $4.60 per share in 2013, 27.8% higher than our the RMS and the S&P 500 in 11 of the last 12 years. pre-recession dividend of $3.60 paid in 2008. Even with a sluggish economy over the last four years, we Cumulative Total Returns and SPG Outperformance were able to outgrow our expensive early 2009 capital rais- as of December 31, 2012 ing activities. There are very few real estate companies, and for that matter public companies, that have achieved such SPG vs. SPG vs. S&P S&P strong growth in earnings and dividends over the course of Time Period SPG RMS RMS 500 500 the past four years. This was a goal for us to achieve, and I 1 Year 26% 18% 8% 16% 10% am very proud of these accomplishments. Our core strengths of capital allocation, balance sheet 5 Year 119% 31% 88% 9% 110% management, and operating expertise have fueled our growth. 10 Year 594% 199% 395% 99% 495% Our primary objective, as it has been every year since our 15 Year 942% 252% 690% 93% 849% 1993 IPO, is to manage each asset as if it is our only asset. This is not a new strategy for us. While we have not always been as successful as we wanted to be, and we continue to From our IPO in December of 1993 through year-end refine our approach to achieve this objective, rest assured 2012, SPG provided a compound annual return to stockholders that it is our number one priority. of 17.2%. Now let’s turn to 2012 highlights. This operating philosophy has served us well, resulting in industry-leading performance since our IPO nearly 20 years 2012 FINANCIAL AND OPERATIONAL HIGHLIGHTS ago. We are stewards of the business, but we are more than All-time highs were achieved in 2012 for consolidated professional managers. We act as owners! revenue, the Company’s share of NOI, and FFO: I love cash flow, and growing cash flow is how we Consolidated revenue increased 13.3% to $4.9 billion. measure our success. Our share of net operating income (NOI) in 2012 was $4.4 billion. By comparison, our share of The Company’s share of NOI increased 15.4% to $4.4 NOI in 1993 was $296 million. billion. As evidenced by the following chart, our active manage- FFO increased $446 million to $2.9 billion. ment, smart acquisitions, and continued investment in our Our U.S. Malls and Premium Outlets once again delivered properties have created the SPG retail real estate portfolio strong financial and operational results: that is unparalleled in quality and scale. Comparable property NOI growth was 4.8%. (1) SPG Properties Total sales on a rolling 12 month basis increased by Top Top Top 6.6% to $568 per square foot. 30 50 100 Occupancy improved by 70 basis points to 95.3%. Sales Per Square Foot $ 1,108 $ 932 $ 735 The releasing spread for the rolling 12 months was % of NOI (SPG’s Share) 33% 46% 68% $5.21 per square foot – rent for spaces leased in 2012 Occupancy 98% 98% 98% was 10.8% higher than prior rent paid for the same spaces. (1) As of December 31, 2012 for U.S. properties WorldReginfo - fba36912-cfdf-4f26-8844-520d70f52b73 2 SIMON PROPERTY GROUP, INC. OUR FIVE PLATFORMS WorldReginfo - fba36912-cfdf-4f26-8844-520d70f52b73 2012 ANNUAL REPORT 3 2012 INVESTMENTS Top left: Silver Sands Premium Outlets in Destin, FL Top right: Woodfield Mall in Schaumburg (Chicago), IL Middle right: Livermore Premium Outlets in Livermore (San Francisco), CA Bottom: Sawgrass Mills in Sunrise (Miami), FL WorldReginfo - fba36912-cfdf-4f26-8844-520d70f52b73 4 SIMON PROPERTY GROUP, INC. A Snapshot in Time rededication to operations is a priority and I expect better performance to take hold as soon as the European economy 1993 2012 is growing again. Consolidated Revenue $424 million $4.9 billion We bought our Klépierre shares at €28.00 per share and Our Share of NOI $296 million $4.4 billion the stock closed at €31.25 on March 14th, the one year FFO $150 million $2.9 billion anniversary of our acquisition. This increase of 11.6%, plus a dividend of €1.45 per share paid in 2012, results in a Sales Per Square Feet $ 279 $ 568 first year total return on our investment of 16.8%. The 2012 Occupancy 85.6% 95.3% dividend of €1.50 per share, or €86.4 million, is to be paid this year for a current yield of 5.3%. Imagine that from the beginning of the recession in 2009 through 2012, our comparable property NOI growth Mills averaged 3.1% per annum, even with all the obstacles that we In March, we acquired our joint venture partner’s stake in confronted over the last four years including department store 26 high-quality assets comprised of 13 Mills, 10 Malls and turmoil, internet sales growth (aided by the fact that internet 3 Community/Lifestyle Centers for $1.5 billion. We already retailers don’t charge sales tax that is owed), slow job and managed and had an existing ownership in these assets wage growth, gridlock in Washington, etc. We delivered! No through our 50/50 partnership with Farallon Capital. excuses allowed here. These properties are well-located in key metropolitan areas, have considerable consumer brand equity and large 2012 INVESTMENTS trade areas, and generate significant cash flow and total We have an enviable investment track record with the sales volumes. When we acquired our initial interests in these successful and profitable completion of more than $33 billion assets in 2007, they generated total annual NOI of nearly of acquisitions since 1995. In 2012 we invested approximately $500 million. In 2012, they generated total NOI in excess of $4 billion in strategic acquisitions, enhancing our domestic $600 million. Impressive growth, I might add during a tough and international footprints. economic period. As a result of this transaction, we increased our own- Klépierre ership in highly-productive properties including Arundel In March 2012, at a cost of approximately $2 billion, we Mills (Baltimore), Sawgrass Mills (Miami), and Stoneridge acquired a 29% interest in the publicly-traded European Shopping Center (San Francisco). We continue to strengthen company, Klépierre. The company is headquartered in Paris this portfolio of productive assets through redevelopment and and is focused on the ownership, management and devel- remerchandising.