Tuesday, December 8, 2009

Simon to Buy Outlet Landlord

With $700 Million Deal, Mall Owner Raises Bet on a Resilient Retailing Format By KRIS HUDSON Mall owner Simon Property Group Inc. said it will buy Prime Outlets for $700 million, in a deal that highlights cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 relative health of outlet centers in a mostly bleak environment for retailers. The deal, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 year's biggest in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 U.S. commercial real-estate industry, also marks cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 first time Simon has tapped a $4 billion war chest it has raised this year to take advantage of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 property sector's spreading distress. Unlike private real-estate owners, big public companies like Simon have been able to borrow money and sell equity. Many of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365se companies are expected to use cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365ir resources to snap up properties weaker landlords are forced to put up for sale. Simon already is cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 country's largest owner of retail properties by number, with 323 malls and ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r shopping centers. Adding Prime's 22 centers would cement Simon's dominance of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 resilient outlet-center market, giving it a total of 63 outlet properties. That's twice as many as No. 2 outlet-center operator Tanger Factory Outlet Centers Inc. Controlling so many properties promises to give Simon an enormous advantage when negotiating leases with retailers. The company would have cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 clout to do multiple deals, potentially insisting that retailers take space in poorly performing locations as a condition of getting prime real estate in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 most popular centers. "Simon has cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 heft to be an active participant in consolidating cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 mall and outlet sector industries, which are two businesses where bigger is better," said Jim Sullivan, an analyst at Green Street Advisors Inc. Like most owners of outlet centers, Prime Outlets has been weacá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365ring cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 storm better than ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r owners of retail properties, as shoppers have favored cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 centers' brand-name merchandise offered at discount prices. Prime Outlets' occupancy stands at 92% and its sales per square foot at $370. But Prime's parent, David Lichtenstein's Lightstone Group LLC, has been struggling on a number of fronts. Its biggest problem has been cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 660-hotel Extended Stay Hotels chain, which closely held Lightstone bought for $8 billion in 2007 and saddled with nearly that much in debt. Mr. Lichtenstein contributed roughly $200 million in equity in that deal, much of which he borrowed. Extended Stay sought bankruptcy protection in June. Prime Outlets is Lightstone's largest and strongest asset, and its sale will give cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 company cash to address Extended Stay's capital needs and possibly make new investments. But selling it now means that Lightstone is getting less for cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 centers than what cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365y were worth at cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 peak of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 market. David Simon, chief executive of Simon and cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 son of late founder Mel Simon, has made it clear in recent months that he thinks cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 downturn will provide rare opportunities to buy valuable assets cheaply. The company also is trying to position itself to take over General Growth Properties Inc., which owns 200 U.S. malls and is attempting to exit Chapter 11 bankruptcy protection next year. Simon's deal for Prime Outlets isn't putting much of a drain on Simon's war chest. Simon is paying $700 million in cash and stock and assuming $1.2 billion of securitized mortgages and $400 million of ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r debt. None of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 mortgages are delinquent, according to a person familiar with cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 matter. The deal is expected to close in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 first quarter of 2010. Lightstone began speaking to Simon and ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365rs about selling Prime Outlets two months ago, according to people familiar with cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 talks. Tanger also bid on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 properties before Simon prevailed, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365se people said. A Lightstone representative declined to comment. A Tanger representative didn't return calls seeking comment. Lightstone forfeited four malls separate from Prime Outlets to its lenders this year. The company still has several office buildings, strip centers, industrial buildings and 20,000 apartment units. Lightstone bought Prime Outlets in 2003 for $625 million. Green Street puts cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 number of outlet centers in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 U.S. at roughly 300, meaning Simon will control 30% of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 market once it completes its deal for Prime Outlets. Simon's Chelsea Outlets division, which Simon bought in 2004, posted occupancy rates of 95.6% and sales per square foot of $492 in this year's third quarter. In comparison, Simon's regular malls had occupancy rates of 91.4% and sales of $438 per square foot. What's more, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 4.5% decline in sales per square foot at cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Chelsea outlets was less severe than cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 11.1% decline at Simon's regular malls. Simon was advised in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 deal by J.P. Morgan Chase & Co. and UBS AG. Lightstone was advised by Citigroup Inc. Write to Kris Hudson at kris.hudson@wsj.com

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