Simon Property Moves Forward On Macerich Acquisition

SANTA MONICA, CA—Indianapolis-based Simon Property Group has made several acquisition approaches with Macerich since it was revealed it had acquired a 3.6% stake in the REIT last November -- including one as recently as a few weeks ago, according to unnamed sources in a Wall Street Journal article.

Simon Property Group and locally-based Macerich did not return calls to GlobeSt.com seeking comment.

During Macerich's earnings call last month, CEO Art Coppola acknowledged the rumors.

"… I would like to briefly address the speculation in the market regarding Simon Property Group's investment in Macerich," he said. "As you likely know, in November 2014 Simon announced that it had acquired a stake in our Company. At this point there is really nothing more that we can share with you. It is our policy not to comment on market rumors or speculation, and we do not intend to make any further comments or statements during this call regarding Simon."

Even without official confirmation from the players, though, the anecdotal evidence is strong that Simon Property is positioning itself for a takeover.

Besides the account in the Wall Street Journal, it is telling that Simon recently bolstered its borrowing power with an expansion to its global commercial paper program and an extension of its $2.75 billion revolving credit facility. At the start of this week it announced it amended and extended $2 billion unsecured multi-currency supplemental revolving credit facility to $2.75 billion. The facility can be further increased to $3.5 billion during its term, which runs through 2019 and can be extended for an additional year. The REIT also increased the size of its global commercial paper note program from $500 million to $1 billion.

"This amended and extended supplemental facility, combined with our existing $4 billion facility, provides the company with $6.75 billion of total revolving credit capacity," CEO David Simon said in a prepared statement. "Also, our commercial paper program has been well received, allowing us to expand on its initial success and further diversify our funding sources."

If Simon is successful, the resulting company would be the largest retail REIT by far in the US, as Simon Property is already No. #1 and Macerich is No. #3.

It would also give the retail asset class a powerful push after what has been a banner period of recovery. In general, investment sales hit a peak in 2014 with $423.8 billion in total deals, but retail properties in particular saw the biggest gain in volume, with $81.4 billion in total deals--a 31% gain in volume over the prior year, according to Real Capital Analytics.

However, as Simon Property well knows from its own experiences in the past, a takeover will not be easy especially if Macerich is reluctant.

Ten or so years ago, it tried to take over Taubman Centers in a $1.68 billion hostile bid. That attempt was squashed after Taubman's home state of Michigan passed a law protecting REITs from takeover attempts.

Then, in 2009, Simon tried at least four times to buyout General Growth Properties when it was in bankruptcy. Ultimately, the courts paved the way for GGP to spin off several properties and to be recapitalized by another company.