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Simon Property(SPG) - 2024 Q4 - Annual Report
SPGSimon Property(SPG)2025-02-21 16:03
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Property Ownership and Interests - As of December 31, 2024, Simon Property Group owned or held interests in 194 income-producing properties in the U.S., including 92 malls and 70 Premium Outlets[20] - Simon Property Group has an 88% noncontrolling interest in The Taubman Realty Group, LLC, which has interests in 22 malls in the U.S. and Asia[20] - The company owns a 22.4% equity stake in Klépierre SA, a publicly traded real estate company with interests in shopping centers across 14 European countries[20] - The company holds interests in consolidated and joint venture properties operating in 14 countries, which may expose it to foreign currency risks[129] - The company has joint venture interests in properties in Japan, South Korea, Mexico, Malaysia, Thailand, and Canada[187] - The company maintains a diverse portfolio across multiple countries, enhancing market presence and tenant variety[193] Financial Facilities and Debt - Simon Property Group has a 5.0billionunsecuredrevolvingcreditfacilityanda5.0 billion unsecured revolving credit facility and a 3.5 billion supplemental unsecured revolving credit facility, with covenants limiting total debt to 65% of total assets[25] - The Credit Facility can be increased by up to 1.0billion,bringingthetotalpotentialsizeto1.0 billion, bringing the total potential size to 6.0 billion, with an initial maturity date of June 30, 2027[28] - Borrowings under the Credit Facility bear interest based on the Adjusted Term SOFR Rate plus a margin determined by the corporate credit rating, currently at SOFR plus 72.5 basis points[29] - The Supplemental Facility has an initial borrowing capacity of 3.5billion,whichmaybeincreasedto3.5 billion, which may be increased to 4.5 billion, with an initial maturity date of January 31, 2029[30] - Simon's consolidated mortgages and unsecured indebtedness totaled 24.5billionasofDecember31,2024[109]−Thecompanyhasatotalof24.5 billion as of December 31, 2024[109] - The company has a total of 24,264,495,000 in total consolidated indebtedness after accounting for premiums, discounts, and debt issuance costs[213] Capital Raising and Stock Repurchase - The company may raise additional capital through equity offerings or debt, including issuing common stock or partnership units without stockholder approval[26] - Simon's Board of Directors authorized a common stock repurchase plan allowing for the purchase of up to 2.0billionofcommonstockoveratwo−yearperiodendingMay16,2024[40]−Simonissued3,103,755sharesofcommonstockatanaveragepriceof2.0 billion of common stock over a two-year period ending May 16, 2024[40] - Simon issued 3,103,755 shares of common stock at an average price of 103.42 per share, totaling 321.0millionunderitsrepurchaseprogram[47]OperationalStrategiesandEmployment−SimonPropertyGroup′soperationalstrategiesanddevelopmentsfor2024aredetailedintheManagement′sDiscussionandAnalysissectionoftheForm10−K[21]−AsofDecember31,2024,Simonemployedapproximately3,000persons,withabout400beingpart−timeemployees[43]−Simon′scompensationprogramincludescompetitivesalaries,bonuses,equity−basedawards,andotherbenefitstoattractandretaintalent[46]MarketCompetitionandRisks−Theretailrealestateindustryishighlycompetitive,withSimonfacingcompetitionfromvariousdistributionchannels,includinge−commerce[41]−Thecompanyderivesitsprimaryrevenuefromretailtenants,makingitvulnerabletoadverseconditionsintheretailenvironment,includingrisinginterestratesandinflation[65]−Aportionofleaseincomeisbasedonoveragerentstiedtotenantsales,meaningdeclinesintenantsalesperformancecouldreduceoverallincome[67]−Thecompanyfacesrisksfromtenantbankruptcies,whichcouldleadtoleaseterminationsandsignificantcostsinre−tenantingspaces[72]−Vacantspacesatpropertiesmayincreaseduetoretailbankruptciesandashifttowardse−commerce,leadingtodownwardpressureonrentalratesandoccupancylevels[73]−Thecompanyisexposedtorisksfromactsofviolence,civilunrest,andterrorism,whichcouldnegativelyimpactconsumertrafficandrevenue[76]EnvironmentalandRegulatoryCompliance−Thecompanyissubjecttofederal,state,andlocalenvironmentalregulations,withnoknownmaterialadverseeffectsasofDecember31,2024[47]−LegislativeandregulatorychangesaffectingREITscouldhaveamaterialadverseeffectonthecompany′soperationsandinvestorreturns[65]−Thecompanymaintainsinsurancecoverageagainstactsofterrorismforupto321.0 million under its repurchase program[47] Operational Strategies and Employment - Simon Property Group's operational strategies and developments for 2024 are detailed in the Management's Discussion and Analysis section of the Form 10-K[21] - As of December 31, 2024, Simon employed approximately 3,000 persons, with about 400 being part-time employees[43] - Simon's compensation program includes competitive salaries, bonuses, equity-based awards, and other benefits to attract and retain talent[46] Market Competition and Risks - The retail real estate industry is highly competitive, with Simon facing competition from various distribution channels, including e-commerce[41] - The company derives its primary revenue from retail tenants, making it vulnerable to adverse conditions in the retail environment, including rising interest rates and inflation[65] - A portion of lease income is based on overage rents tied to tenant sales, meaning declines in tenant sales performance could reduce overall income[67] - The company faces risks from tenant bankruptcies, which could lead to lease terminations and significant costs in re-tenanting spaces[72] - Vacant spaces at properties may increase due to retail bankruptcies and a shift towards e-commerce, leading to downward pressure on rental rates and occupancy levels[73] - The company is exposed to risks from acts of violence, civil unrest, and terrorism, which could negatively impact consumer traffic and revenue[76] Environmental and Regulatory Compliance - The company is subject to federal, state, and local environmental regulations, with no known material adverse effects as of December 31, 2024[47] - Legislative and regulatory changes affecting REITs could have a material adverse effect on the company's operations and investor returns[65] - The company maintains insurance coverage against acts of terrorism for up to 1 billion, but such events could still adversely affect property values and revenues[85] - Environmental liabilities may arise from properties containing hazardous materials, which could lead to substantial investigation and remediation costs[86] Occupancy Rates and Property Performance - As of December 31, 2024, approximately 96.5% of the owned gross leasable area (GLA) in malls and Premium Outlets was leased, and approximately 98.8% of the owned GLA for The Mills was leased[143] - The occupancy rate for South Hills Village is 97.7% with a total GLA of 1,126,902 square feet[153] - The highest occupancy rate is at Allen Premium Outlets at 100%[157] - The average occupancy rate for properties acquired in 2004 is 97.5%[157] - The average occupancy rate for properties built in 2014 or later is 98.9%[157] International Operations and Investments - International activities represented approximately 5.4% of consolidated net income and 9.0% of net operating income (NOI) for the year ended December 31, 2024[130] - The total gross leasable area for international premium outlets is 8,854,000 square feet[193] - The company has a controlling interest in a European investee with interests in 12 Designer Outlet properties across Europe and Canada[186] Sustainability and Environmental Goals - The company aims to reduce scope 1 and scope 2 greenhouse gas emissions by 68% by 2035, based on 2019 levels[203] - A new target has been set to reduce water usage for comparable centers by 15% by 2030, based on 2022 levels[204] - The company has achieved a Green Star rating for sustainability performance from 2014 to 2024[206] Cybersecurity and Technology Risks - The company faces risks associated with cybersecurity, including potential breaches that could damage reputation and lead to financial losses[123] - The company has developed a cybersecurity risk management program to protect critical systems and information, integrating it with overall enterprise risk management[134] - The Audit Committee oversees the cybersecurity risk management program, receiving regular updates on risks and incidents[135] Debt Management and Interest Rates - An increase in interest rates could adversely impact the company's ability to refinance existing debt on attractive terms, potentially increasing future interest expenses[113] - The company relies on external financing, primarily debt financing, to fund growth and meet ongoing debt service requirements[111] - Adverse changes in credit ratings could affect the company's borrowing capacity and terms, impacting access to capital[112]