Indianapolis, Indiana-based leading retail real estate
investment trust (REIT),
Simon Property Group, Inc. (
recently formed a joint venture (JV) with Institutional Mall
Investors (IMI) to own and operate two properties - Woodfield
Mall in Illinois and The Shops at Mission Viejo in California.
IMI is an investment venture owned by an affiliate of Miller
Capital Advisory Inc. (MCA) and The California Public Employees'
Retirement System (CalPERS).
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As per the deal, Simon Property and IMI each will hold 50% stake
in Woodfield Mall and 51% and 49% in The Shops at Mission Viejo,
respectively. Both the companies will manage and lease the two
properties. As a matter of fact, Simon Property owned full
ownership of Mission Viejo-based Mall and IMI has 100% stake in
the Woodfield Mall.
The new JV is an expansion of a previous alliance between Simon
and IMI. The companies also jointly own several posh shopping
malls across the U.S. - The Galleria in Houston, The Fashion
Centre at Pentagon City in Virginia and The Westchester in New
Woodfield Mall, a 2.2 million square feet shopping center, is
positioned in the northwest Chicago suburb of Schaumburg. It is
the largest shopping center in Illinois and one of the largest
shopping malls in the United States. It also shelters around 300
stores and restaurants. The property is currently burdened with a
mortgage loan worth $425 million, having a 4.5% interest rate.
The Shops at Mission Viejo, an upscale mall spanning 1.2 million
square feet, is located in Mission Viejo, California. The mall
anchors around 150 stores and restaurants and is South Orange
County's main shopping destination. The property is currently
mortgage free, but the JV plans to place a mortgage on the
property in the coming weeks.
Both the malls boast a class of industry-leading tenants such as
Apple Inc. (
J. C. Penney Company, Inc. (
Macy's, Inc. (
Nordstrom Inc. (
With the abovementioned acquisitions, Simon Property aims to
capitalize on the strong growth opportunities in the Illinois and
California markets. The upscale shopping malls are expected to
bring high-quality retail options for consumers and positively
impact the marketplace. Consequently, the company expects the
transaction to be accretive to its earnings going forward.
Lately, Simon property has been riding on growth trajectory
through acquisition of upscale properties in the key U.S.
markets. Last month, the company acquired two upscale outlet
centers in Grand Prairie, Texas and Livermore, California from an
unnamed seller for an undisclosed amount. Prior to that, Simon
property inked a JV with
Tanger Factory Outlet Centers Inc, (
to develop two upscale outlet centers in Charlotte, North
Carolina and Columbus, Ohio. Both the parties would hold an equal
stake in the properties, which are expected to open in 2014.
Simon Property has scheduled the release of its fourth-quarter
2012 results on February 4, 2013. The Zacks Consensus Estimate
for the fourth quarter FFO (fund from operations) is currently
pegged at $2.16 per share.
Simon Property currently has a Zacks #2 Rank (implying a
short-term Buy rating). Also, we maintain our long-term
'Outperform' recommendation on the stock.
Note: FFO, a widely accepted and reported measure of the
performance of REITs is derived by adding depreciation,
amortization and other non-cash expenses to net income.