MAC Macerich Co

According to the latest industry buzz, Simon Property Group Inc. (SPG), a leading real estate investment trust (REIT), is likely to expand its Premium Outlet Center business in China to capitalize on the premium shopping frenzy spurred by an improvement in market fundamentals.

The Premium Outlet Centers offers an unrivaled mix of leading designer and name-brand products at significant savings, and are set up in an architecturally distinct village-style setting with charm and ambiance. The company is reportedly in talks with various reputed Chinese retailers to set up its premium outlet division in one of the fastest growing economic regions of the world. The increasing popularity of several European and American retailer brands in China has further made Simon Property overtly optimistic about its success in the country.

The company presently has 69 Premium Outlet Centers in its kitty across the globe, including 57 in the U.S., 8 in Japan, 2 in South Korea and 1 each in Mexico and Puerto Rico. Premium Outlet Centers in the U.S. are strategically located in close proximity to major metropolitan markets such as New York, Los Angeles, Boston and Chicago and visitor markets such as Orlando, Las Vegas and Palm Springs.

Incidentally, one of the outlet centers in Sendai, Japan, has been closed since March due to earthquake and tsunami and is likely to reopen in July. Consequently, with the simultaneous expansion of its outlet center business in China, Simon Property is expected to generate a significant amount of revenue from its international operations.

Simon Property is the largest publicly traded retail real estate company in North America with assets in almost all retail distribution channels. The company generally enters into long-term leases with its tenants, which insulate it from short-term market swings that have weighed on other players in the industry.

Furthermore, Simon Property’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 safeguards it from market volatility and provides a steady source of income.

We maintain our ‘Neutral’ rating on Simon Property, which presently has a Zacks #3 Rank translating into a short-term ‘Hold’ rating and indicates 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.

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