Tulalip outlets owner is No. 1 real estate company

INDIANAPOLIS — The nation’s largest shopping mall operator, Simon Property Group Inc., is now also the world’s largest real estate company.

Indianapolis-based Simon Property this month is listed at No. 1 on the FTSE EPRA/NAREIT Global Real Estate Index. John Barwick of the National Real Estate Investment Trust said Monday that’s based on the company’s market capitalization of $45.9 billion as of May 4. The market cap is the total market value of a company’s outstanding shares.

Among other malls in Washington, Simon owns Seattle Premium Outlets in Tulalip and Northgate Mall in Seattle.

Yahoo! Finance recently estimated Simon’s enterprise value at $65 billion, the Indianapolis Business Journal reports. Simon says that’s a low estimate and it’s really worth about $85 billion, including unconverted ownership units and debt Simon has issued recently. Enterprise value includes additional factors besides market capitalization.

The IBJ reports Simon is the only real estate company listed on the Standard &Poor’s 100 Index, a listing of the nation’s largest and most established companies including Apple Inc., Coca-Cola Co., and McDonald’s Corp.

In April, the company reported a 9.7 percent increase in revenue, to $1.12 billion and an 11 percent sales jump for its tenants. Simon also boosted its quarterly dividend to $1 per share.

Simon grew its revenue over the years by building and leasing new malls and acquiring rival mall owners, but the company has adjusted its strategy for growth now that it has more than 330 retail properties and 5,500 employees. The new strategy, the IBJ says, involves aggressive development of outlet malls in the United States and abroad, remodeling its top-performing U.S. properties, and a move overseas starting with a 30 percent stake in Klepierre, a French company that owns 270 shopping centers in 13 countries.

Rich Moore, an analyst for RBC Capital Markets in suburban Cleveland, said Simon is well positioned to continue to capitalize on the outlet mall craze with its 70-mall Premium Outlets chain. The outlets business contributes about 30 percent of Simon’s income, and the company is adding malls both in the United States and abroad, including several in Brazil.

“There’s no doubt when you get bigger, it becomes harder to grow,” Moore said. “However, in Simon’s case, there are so many different facets to that business, all of which are growing.”

Richard Feinberg, a Purdue University retailing professor, said Simon’s focus on foreign properties and outlet malls makes sense because it’s more expensive to build traditional enclosed malls.

Simon also plans to spend $1 billion a year remodeling and expanding its best malls, the IBJ reports.

Feinberg doesn’t see online shopping as a serious threat. He said Simon may actually be able to capitalize on the trend as it develops social media apps to support its malls.

“Clearly, they’re consumer driven, and they face the same fate as everyone who depends on the consumer,” Feinberg said. “In the short term, they’re in an updraft. Medium term, we’re not quite sure. Long term, unless nuclear weapons pop up, they’re in great shape.”

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