Simon says: "Shop!" And millions do. Simon Property Group is the nation's largest shopping mall and retail center owner, with a portfolio of more than 225 retail properties totaling approximately 189 million sq. ft. of leasable space across more than 35 states and Puerto Rico. The self-managed, self-administered real estate investment trust (REIT) owns, develops, and manages regional shopping malls, outlet malls (under the Premium Outlet, Prime Outlet, and The Mills brands), boutique malls, and shopping centers. Its portfolio is concentrated in the US's Southeast, Midwest, and Northeast. The REIT also has stakes in outlet centers in Canada, Japan, Malaysia, Mexico, and South Korea.
Simon Property Group invests in retail real estate properties in North America and Asia. The REIT also has ownership interests in Premium Outlets in Japan, South Korea, Canada, Mexico, and Malaysia. In Europe it has interests in properties in Italy, Austria, the Netherlands, and the UK.
The real estate investment trust owns, develops, and manages retail real estate properties, which consist primarily of malls, Premium Outlets, The Mills, and community/lifestyle centers. Nationwide, it owns or holds an interest in 228 income-producing properties, including malls, Premium Outlets, and The Mills. The REIT's retail tenants generate annual retail sales of more than $60 billion.
As part of its business, Simon has re-instituted redevelopment and expansion initiatives with renovation and expansion projects underway at more than 25 properties in the US, Asia, and Mexico.
Internationally, Simon boasts ownership interests in nine Premium Outlets in Japan, three Premium Outlets in South Korea, and one each in Mexico, Canada, and Malaysia. Simon holds a 29% equity stake in Paris-based Klépierre SA, a publicly traded real estate company, which either owns or has an interest in shopping centers in 13 European countries.
Sales and Marketing
Simon's clients include Delta Faucet, Hershey, Cadillac, and Samsung. In 2013 the firm spend $62.3 million for advertising, compared with $55.2 million in 2012.
Higher tenant sales and strong leasing activity have driven revenue growth since 2008. In 2013 revenue rose 6%, to $5.2 billion, versus $4.9 billion in 2012. The revenue rise was primarily due to a 14% increase in average rents and gains related to property transactions. Tenant reimbursements also climbed 8%.
The REIT's 2013 financial performance was positively impacted by the sale or disposal of interests in 14 properties and the acquisition of a controlling interest in an outlet center of $107.5 million. However, following three consecutive years of steep increases, net income fell 8% to $1.32 million. Simon blamed higher operating costs and increased income and other taxes for the decline.
Simon is focused on international expansion in select markets. Its strategy is to partner with established real estate companies in other countries. In 2013 the company entered several joint ventures to extend its reach in the US and abroad. It is partnering with McArthurGlen Group (having signed a definitive agreement) to form a joint venture through which SPG will invest in McArthurGlen, the leader in upscale, European designer outlets.
In 2012 Simon and BR Malls Participacoes S.A., the largest retail real estate company in Latin America signed a 50:50 joint venture agreement to develop and own outlet centers in Brazil. The agreement creates a Brazilian entity that is equally and jointly owned by BRMALLS and Simon. The venture's first outlet center opened in Sao Paulo in 2013.
Simon and Bailian Group, China's largest retail conglomerate, signed a memorandum of understanding in 2012 to jointly develop a branded Premium Outlet Center in Pudong, Shanghai, China. The outlet center is situated adjacent to the Shanghai Disney Resort.
The retail REIT is expanding into Japan, as well, through a partnership with Mitsubishi Estate Co., Ltd., to open Shisui Premium Outlets, representing the ninth Premium Outlet Center in Japan.
In the US, Simon is accumulating shares in its smaller rival Macerich. In 2014 the REIT bought 5.7 million common shares of Macerich and may be looking to buy the rest. Purchasing Macerich would allow Simon to grow at a time when opportunities for new mall development are limited.
To build its Premium Outlet holdings, Simon in late 2013 began construction on Charlotte Premium Outlets, a 400,000-square-foot project in Charlotte, North Carolina. The firm owns a 50% interest in the project, which is a joint venture with Tanger Factory Outlet Centers. Simon's investment in the project, which was completed in 2014, was about $46 million. Other activity in the Premium Outlet arena included a 410,000-square foot project in Minnesota that's 35% owned by Simon, and a 60%-owned, 350,000-sq.-ft. outlet in St. Louis. In April 2013, the REIT opened Phoenix Premium Outlets in Chandler, Arizona. Simon invested about $70 million in the new center, which was 100% leased at opening.
Mergers , Acquisitions and Divestments
In 2014 Simon spun off Washington Prime Group, which holds interests in 98 retail assets, to form an independent, publicly traded REIT. The spinoff included the strip center business, formerly owned by Simon.
In 2012 the company bought a 29% stake in Paris-based property investor Klépierre, which owns some 270 retail properties in France, Belgium, Scandinavia, and elsewhere in Europe. Simon paid BNP Paribas approximately $2 billion for the stake, after which it became Klépierre's largest shareholder. Also in 2012 Simon signed international development agreements to develop up to a dozen outlet centers in Brazil and another outlet in China adjacent to the Shanghai Disney Resort.
Simon acquired 50% of Silver Sands Factory Stores, located in Destin, Florida, in 2012. The center's developer, Howard Group, remained a 50% owner. Simon assumes primary responsibility of leasing and management duties. It opened Merrimack Premium Outlets, an upscale outlet shopping center that serves the Greater Boston and Nashua markets.
Simon in 2012 acquired Paragon Outlets Grand Prairie, located in Grand Prairie, Texas, and Paragon Outlets Livermore Valley in Livermore, California. Simon now owns 100% of each asset.
While the company looks for new opportunities, it also knows when to exit deals, ideally at a profit. In 2012 Simon sold its 49% stake in Gallerie Commerciali Italia to joint venture partner Auchan for $378 million. The deal included interest in 45 properties in Italy.
The founding Simon family, owners of the Indiana Pacers NBA franchise, owns more than 10% of the company. The Vanguard Group owns about 11% of the company.