MAC Macerich Co

Simon Property Group Inc. (SPG), a leading real estate investment trust (REIT), has recently announced its decision to develop Phoenix Premium Outlet – an upscale outlet shopping center serving the Greater Phoenix and Scottsdale areas in Arizona.

The property is strategically located in one of the busiest shopping destinations of the region, surrounded by a world class resort, spa, golf and a casino. When complete, the mall would provide an estimated 550,000 square feet of premium retail space in a unique outdoor setting. 

The first phase of construction of the project, spanning 360,000 square feet of space housing approximately 90 outlet stores of reputed brands, is slated to commence in the first quarter of 2012 with a spring 2013 opening. The shopping center is expected to offer an exquisite collection of designer label brands and upscale fashion items at a discount of 25% to 65% of the retail price. In addition to a value-for-money shopping spree, the mall is also expected to create new employment opportunities across the region. 

Simon Property is the largest publicly traded retail real estate company in North America with assets in almost all retail distribution channels. Furthermore, the company’s international presence gives it a more sustainable long-term growth story than its domestically focused peers. The geographic and product diversity of the company insulates it from market volatility to a great extent and provides a steady source of income.

However, increased tenant bankruptcies have resulted in a decline in occupancy and an increase in vacancy rates in most of the markets in which Simon Property operates. This has affected the top-line growth of the company and puts considerable pressure on maintaining its profitability through stringent cost-cutting measures.

We maintain our ‘Neutral’ rating on Simon Property, which currently has a Zacks #3 Rank that translates into a short-term ‘Hold’ rating, indicating that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank for Macerich Co. (MAC), one of the competitors of Simon Property.

 
MACERICH CO (MAC): Free Stock Analysis Report
 
SIMON PROPERTY (SPG): Free Stock Analysis Report
 
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