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Simon Property to Spin Off Strip Centers, Small Malls Into REIT

Simon Property Group Inc., the largest U.S. mall owner, plans to spin off its strip-center business and smaller enclosed malls into a new real estate investment trust.

The new company, referred to as SpinCo, will own all or part of 54 strip centers and 44 malls and is expected to generate net operating income of more than $400 million in its first year, Indianapolis-based Simon said in a statement today. SpinCo will operate 53 million square feet (4.9 million square meters) of retail space in 23 states.

The spinoff will lift Simon’s sales per square foot, net operating income growth and occupancy rates and allow the company to focus on its larger malls and outlets, according to the statement. Simon’s current dividend of $4.80 a share will be maintained and is expected to grow in line with its funds from operations and taxable income, the statement showed. SpinCo’s initial dividend is forecast to be at least 50 cents a share.

The spinoff “will unlock the potential of the strip centers and malls to be owned by SpinCo,” Simon Chairman and Chief Executive Officer David Simon said in the statement.

David Simon will be a director of the new REIT. Richard Sokolov, Simon’s president and chief operating officer, will become chairman of the board of directors at SpinCo.

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