SPG Simon Property Group Inc

Simon Property Group Inc. (SPG), a leading real estate investment trust (REIT), has recently completed the acquisition of a 28.7% equity stake (54.43 million shares) in Klépierre – a Paris-based real estate company that owns, manages and develops shopping centers, retail properties and offices across Continental Europe. Earlier in the month, Simon Property had acquired the ownership interests in Klépierre from BNP Paribas for $2.0 billion.

Klépierre’s portfolio includes 271 shopping centers in 13 countries, with 50% of its properties in France and Belgium, 25% in Scandinavia, and the remainder in Central and Southern Europe. The acquisition has strengthened the international footprint of Simon Property and is expected to be accretive to earnings.

Simon Property had also purchased its joint venture partner’s (Farallon Capital Management, L.L.C.) ownership stake in 26 assets of The Mills Limited Partnership, in a transaction valued at $1.5 billion. The purchase price included the repayment of senior loan facility and mezzanine loan of the JV, and the retirement of preferred stock. The Mills acquisition is likely to be completed in the next week.

The company had funded both the acquisitions from the proceeds of a just-concluded secondary and debt offering. Simon Property sold 9.1375 million common shares at $137.00 each, including the partial exercise of the over-allotment options by the underwriters.

At the same time, Simon Property also sold $1.75 billion worth of aggregate principal amount of its senior unsecured notes consisting of $600 million of 2.150% notes due 2017, $600 million of 3.375% notes due 2022, and $550 million of 4.750% notes due 2042.

Headquartered in Indianapolis, Indiana, Simon Property is the largest publicly traded retail real estate company in North America with assets in almost all retail distribution channels. The company acquires, owns and leases a diverse portfolio of shopping malls in North America, Europe and Asia.

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 also insulates it from market volatility to a great extent and provides a steady source of income.

We maintain our Neutral recommendation on the stock, which presently has a Zacks #2 Rank translating into a short-term Buy rating. We also have a Neutral recommendation and a Zacks #3 Rank (short-term Hold) for Macerich Co. (MAC), one of the competitors of Simon Property.

 
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