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Simon Property to Offer Notes

Zacks Equity Research

The retail real estate investment trust (:REIT), Simon Property Group Inc. (SPG), disclosed the decision of its majority-owned operating partnership subsidiary – Simon Property Group, L.P. – to make a public offering of €750 million ($1.01 billion) principal amount of 2.375% senior unsecured notes due 2020. The offering of the notes is anticipated to close on Oct 2, 2013.

In particular, Simon Property Group, L.P. plans to utilize the generated proceeds mainly for paying off euro denominated debts under the unsecured revolving credit facility. The remaining proceeds are expected to be used for other corporate purposes.

A consortium of leading financial institutions such as J.P. Morgan Securities plc of JPMorgan Chase & Co. (JPM), The Royal Bank of Scotland plc, Goldman Sachs International of The Goldman Sachs Group, Inc. (GS), Mitsubishi UFJ Securities International plc and Barclays Bank PLC of Barclays PLC (BCS) acted as the joint book-running managers for the public offering.

The aforementioned transaction is strategic fit as it will lower debt and consequently the interest expenses. Moreover, increased financial flexibility will enable Simon Property to pursue its portfolio restructuring activity that will go a long way in enhancing its top-line growth. Notably, as of Jun 30, 2013, Simon Property’s cash and cash equivalents amounted to $1.10 billion.

As a matter of fact, Simon Property has been actively capitalizing on growth opportunities in fast-growing markets worldwide. Earlier this month, the company began developing the Charlotte Premium Outlets in North Carolina. Moreover, last month Simon Property opened its third Premium Outlet Center – Busan Premium Outlets – in South Korea and its first Premium Outlet Center – St. Louis Premium Outlets – in Chesterfield. We believe that such activities will help boost Simon Property’s top line and strengthen the company’s upscale portfolio base.

Simon Property currently carries a Zacks Rank #3 (Hold).

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