Simon Property Group stunned the mall industry Tuesday by acquiring the Prime Outlets portfolio of 22 outlet shopping centers — including the 130-store Prime Outlets Ellenton — for $2.3 billion.
Experts widely had been expecting Simon to launch a bidding war for General Growth Property Inc., its biggest rival, which recently renegotiated enough of its $27 billion debt to file a reorganization plan to get out of bankruptcy and elude Simon's grasp.
The nation's biggest mall operator and owner of Tyrone and Gulf View Square malls in the bay area, Simon declined comment. But analysts think Indianapolis-based Simon, which stockpiled a $6 billion cash war chest, hired investment bankers and reportedly amassed $1 billion of General Growth debt to enhance its bargaining power, is still eager to go after the nation's second biggest mall owner. Brookfield Asset Management of Toronto is also mounting a bid.
In Prime Outlets, Simon tightens its grip on the outlet shopping industry to 77 centers, about a third of the entire 200-outlet-center industry in the United States. Simon already owns Chelsea Property Group, which has long planned to put one of its Premium Outlets centers in eastern Pasco County, and the Mills Corp., which owns Sawgrass Mills in Broward County. Prime and Chelsea already operate competing outlet centers within minutes of each other in Orlando and St. Augustine.
"This deal surprised a lot of people, but some investors have been saying Lightstone Group (the hedge fund that owns Prime) has been looking for a white knight or to sell through a public offering," said Linda Humphers, editor of the Value Retail News, the industry trade journal.
While retailers languished through the recession and shopping center rents shrank, outlet centers have done comparatively well. Prime's centers were 92 percent full and generated a respectable $377 a square foot in sales through June 30.
Lightstone, however, also controls other commercial real estate including Extended Stay America, a debt-ridden budget hotel chain that steered into Chapter 11 bankruptcy this year.
Simon is paying $700 million in cash and Simon partnership units to Lightstone, with the rest of the purchase price being assumed debt. The deal is scheduled to close in early 2010.
Simon on Tuesday also said 34 banks, led by JPMorgan Chase and Bank of America, agreed to double Simon's unsecured credit lines to $7 billion.
Mark Albright can be reached at email@example.com or (727) 893-8252.