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Must-know: Recent developments in Simon Property’s portfolio

Brent Nyitray, CFA, MBA

Must-know: Simon Property Group's 2Q14 earnings (Part 3 of 4)

(Continued from Part 2)

Simon continues to build its shopping center portfolio

U.S. malls and shopping centers account for ~80% of Simon Property Group’s net operating income. The next biggest portion is its international properties. During the fourth quarter, the company saw a number of important developments. The biggest one was the spinoff of its smaller malls into a new real estate investment trust (or REIT)—Washington Prime Group (or WPG). WPG stock was distributed to shareholders in May.

Key recent developments

  • Simon Property Group (SPG) started construction on the Fashion Center at Pentagon City in Arlington, Virginia – a redevelopment project and a 50,000 square foot small shop expansion, including restaurants
  • Simon started work on the Chicago Premium Outlets in Aurora, Illinois, which is a 260,000 square foot expansion project
  • Overseas, Simon began work on the Shisui Premium Outlets in Shisui, Japan, which is a 130,000 square foot expansion project

Work continues on four new premium outlets, which are an important growth story for the company.

  • Charlotte Premium Outlets, which is slated to open in August, 2014, will be a 400,000 square foot outlet in which Simon has a 50% stake
  • Twin Cities Premium Outlet in Eagan, Minnesota, is another large 410,000 square foot project slated to open this summer in which Simon has a 35% interest
  • Montreal Premium Outlets, scheduled to open this fall, is a 360,000 square foot outlet in which Simon holds a 50% interest
  • Vancouver Designer Outlet, scheduled to open in April, 2015, is a 242,000 square foot project in which Simon owns 45%

Finally, Simon completed the acquisition of ownership interest in a number of projects internationally, particularly the McArthurGlen Designer Outlets. McArthurGlen is a leader in upscale European designer outlet centers.

Simon also acquired the remaining joint venture interest in Kravco Simon Investments, which buys out the remaining interest and gives Simon 100% ownership of the King of Prussia Mall.

Simon’s bullish outlook could mean good things for other mall REITs like General Growth Properties (GGP), Macerich (MAC), Taubman (TCO), and Realty Income Fund (O).

Continue to Part 4

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