Simon and MSREF will each own a 32.5% stake in the venture, while SZITIC will have a 35% holding. The developments will be urban, multi-level centers between 430,000 sf and 750,000 sf, anchored by Wal-Mart. Among the cities they are considering for the projects include Hangzhou, Nanjing and Shanghai, all in the Yangzte River delta.
The first planned center is a 500,000-sf development in Hangzhou, a city of six million people located two hours from Shanghai. The venture expects to start construction on that center in October and complete the project in the spring of 2007. The project will cost from $65 million to $70 million to construct, Stephen Sterret, Simon's CFO, tells GSR.
The malls will be in densely populated areas with few cars and public transportation, Sterret says. Some retailers in Simon's US-based portfolios could be candidates for entering the markets. "I'm sure there would be a fair bit of retailer interest," Sterret adds.
Simon executives have been exploring opportunities in China for several months. In May, the company opened a Hong Kong office. But this is not the company's first venture in Asia. Simon's outlet center division, Chelsea Property Group, operates five properties in Japan and is looking to build in South Korea. Most recently, in March, it opened the $44-million, 178,000-sf Toki Premium Outlets, near the City of Nagoya in Japan. Simon also owns 294 US centers and interests in 52 in Europe.
Since 1991 Morgan Stanley Real Estate has acquired $67.7 billion in assets and currently manages $36.2 billion of properties. SZITIC is a retail property subsidiary of the Chinese state-owned trust and investment firm, Shenzhen International Trust and Investment Co., which was established to coordinate with Wal-Mart's expansion into China.
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