MIAMI—Some of the biggest names in residential and commercial real estate gathered for the University of Miami's sixth-annual Impact Real Estate Conference. Among them were second-generation icons David Simon and Stuart Miller.

The event's grand finale featured Simon, Chairman and CEO of Simon Property Group and Miller, CEO of The Lennar Corporation, in a humor-laced late-afternoon conversation that captured the audience's attention. The duo briefly discussed growing up as a second-generation real estate leaders under powerful father figures as well as the evolution of the retail industry from bricks to clicks and from Wall Street to Main Street.

For context, Simon is a global leader in retail real estate ownership, management and development and a S&P 100 company. Simon's retail properties and investments across North America, Europe and Asia provide shopping experiences for millions of consumers every day and generate billions in annual retail sales. For its part, Lennar is one of the nation's largest builders of quality homes for all generations. The company builds affordable, move-up and retirement homes. Lennar's Financial Services segment provides mortgage financing, title insurance and closing services.

Neither men are strangers to the drastic impact of economic recessions on commercial real estate. As a home building, the Great Recession of 2008 was especially significant to Lennar. Simon, though, still remembers what he calls a “real real estate recession” in the early 1990s that led him to quit his job on Wall Street and move go back to work in the family business.

“I was in the corporate finance merger group, so I had done a lot of deals,” Simon recalled. “All my buddies on Wall Street said, 'You are so lucky.' I said, 'You don't know what is going on.' It was dog eat dog. There was no liquidity in the market. We weren't public. I spent the first few years doing stabilization. We were in workout mode.”

Simon went public in 1993, which gave the firm some stability. But Simon reminds there wasn't much improvement in the retail real estate world until 1996. With his financial background, good instincts and M&A-oriented mindset, the company has had what he calls a “pretty good run” since 1995. Simon has brokered a good number of M&A deals and grown the company.

“I believe in scale. Real estate is capital intensive. The bigger and better relationship you have with retailers the more you can accomplish together as partners,” Simon said. “You're overhead can be spread out over many properties. It gives you lots of opportunities globally with size. Since then it's been a pretty big run.”

Today, Simon Property Group boasts an equity market cap of $60 billion. Funds from operation total $4.2 billion. The company's asset base is about $95 to $100 billion. Simon operates 100 malls in the US and 70 outlet centers, including Sawgrass Mills in South Florida and joint venture investments in Europe and Asia.

“Outlets have been a good industry for us,” Simon said. “It's been a little touchier recently with outlets because a lot of outlets are tourism-oriented and with the stronger dollar we see a little softness in that business—not just for us but for retailers.”

Simon has also partnered with other retail powerhouses on the commercial real estate front, including Swire on the $1.2 billion Brickell City Centre project, Whitman Family Development (owners of Bal Harbour Shops) and the Soffer family (owners of Aventura mall). Beyond Sawgrass Mills, Simon Property Group also owns several other South Florida malls, including Miami International, Dadeland Mall and The Falls.

Simon sees a lot of headwinds and cross currents in the retail real estate market. In fact, he believes one of the issues is there is too much retail space in many cities in America. He cited a statistic of 24 square feet per capita in the US compare to about three to 10 square feet per capita in London, France or Canada. Still, Simon is bullish.

“We bought Sawgrass Mills in '07 and had $55 million in revenues. Today we have $150 million in revenues,” Simon said. “If you can diversify the mix and bring in the right retailers, you can bring in tourism, and grow your business.”

Instant Insights /

Simon CEO Shares Secrets to Retail Success

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