Simon Will Spin Off Smaller Centers Into REIT

INDIANAPOLIS-Simon Property Group, the nation's largest mall operator, said Friday it would spin off its strip center business and smaller enclosed malls into SpinCo, an independent, publicly traded REIT. The new company will have an independent, dedicated management team, although it will maintain continued relationships with Simon.

Simon, which went public 20 years ago today, will focus on its larger malls, mills and outlet centers. “We believe we are creating a new company that has both a strong Simon heritage and all of the requisite tools to grow its business and succeed,” says David Simon, chairman and CEO of Simon. “At the same time, this transaction allows Simon to focus on our global portfolio of larger malls, Mills and Premium Outlets while maintaining our considerable scale and conservative leverage profile.”

SpinCo is expected to initially own or have an interest in 54 strip centers and 44 malls, with each of the malls generating annual NOI of approximately $10 million or less. Its initial full-year NOI is estimated to be in excess of $400 million and its initial-year funds from operations is estimated at $300 million, or $0.80 per share.

The newly minted REIT will operate one of the largest, most diversified portfolios of strip centers and malls in the US having 53 million total square feet in 23 states. Occupancy of SpinCo's strip centers and malls is 94.2% and 90.4%, respectively, as of Sept. 30, and Simon has made substantial recent investments in the assets.