Simon Property Group has fortified its foothold in the luxury retail sector, acquiring the remainder of Taubman Realty Group to gain full ownership of an attractive portfolio of roughly 20 upscale malls in affluent U.S. markets.
The Indianapolis-based retail real estate investment trust on Monday said it had closed on its purchase of the remaining 12% interest in Taubman that it didn't already own in exchange for 5.06 million limited partnership units in Simon. In a note, Piper Sandler valued the deal at roughly $900 million, based on Simon's Friday stock close of $175.76 per share.
Simon, the nation's biggest mall landlord, didn't return an email from CoStar News on Monday seeking comment.
The transaction marks the final one in a series of deals where Simon, bit by bit starting in 2020, kept increasing its ownership in Taubman, which is based in Bloomfield Hills, Michigan. By gaining full control of Taubman, Simon will now have total latitude to redevelop and make other changes to Taubman's malls as it sees fit — and reap all the benefits, according to Rudy Milian, president and CEO of retail consultant Woodcliff Realty Advisors.
"It makes sense," Milian told CoStar News. "It's a quality portfolio. And for Simon to control 100%, they get 100% of the benefit of the asset. And so if they redevelop some of that, then they get 100% of the upside. And Simon's creative. They're able to redevelop a lot of properties, bring in the right kind of tenants and bring additional income."
Luxury malls from coast to coast
Taubman's roster of malls reads like a who's who of prominent U.S. brick-and-mortar luxury retail destinations. It includes Beverly Center in Los Angeles; The Mall at Short Hills in New Jesey; International Plaza in Tampa, Florida; Cherry Creek Shopping Center in Denver; The Gardens on El Paseo in Palm Desert, California; The Mall at Green Hills in Nashville, Tennessee; The Gardens Mall in Palm Beach Gardens, Florida; and The Mall at Millenia in Orlando, Florida. There are also two malls in China.
"This acquisition aligns with our strategy of owning high-quality assets, unlocking operational synergies and driving further innovation," David Simon, chairman and CEO of Simon Property, said in a statement. "With full ownership of [Taubman], we are well-positioned to capitalize on new growth opportunities, increase net operating income and deliver long-term returns to our shareholders."
Other retail landlords own luxury malls, but not as expansive as the collection that Taubman had and now Simon has. For example, Brookfield Property's portfolio includes Miami Design District in Miami; Brookfield Place in New York; Ala Moana Center in Hawaii; The Shops at Merrick Park in Coral Gables, Florida; The Shops at La Cantera in San Antonio; and Grand Canal Shoppes with The Venetian hotel in Las Vegas.
On a purposely much smaller scale than Simon, global mall owner Unibail-Rodamco-Westfield has assembled a portfolio of just over a dozen U.S. malls, including 10 flagships. URW identifies those flagships as properties where sales, occupancy, foot traffic and rent increases are high, located in affluent markets.
Slowly rising mall stake
In 2020, during the pandemic, Simon purchased an 80% stake in Taubman. It sealed the deal in December that year for $2.65 billion, down from a $3.6 billion offer in February that year, made before the pandemic struck and forced malls and shopping centers to close.
In December 2023, Simon acquired an incremental 4% stake in Taubman for $200 million and purchased another incremental 4% for $265 million in December 2024, according to Piper Sandler.
The Taubman family founded its retail business in 1950 and is now led by Robert and William Taubman.
Simon reported its third-quarter results Monday, and CEO Simon was asked about the efficiencies in acquiring the rest of Taubman and its portfolio.
"From an operational enhancement point of view, we bring our expertise in development, redevelopment, leasing, marketing, brand ventures, and we put all that together and, you know, that's what we do for a living," Simon said. "Then we run the properties day to day, and we bring all that we can gather to a portfolio like that. And that's where we see tremendous amount of upside."
For example, he said, under his REIT's control he thinks the occupancy at the Taubman malls can be brought up to Simon's levels.
That latest acquisition "brings to an end a storied pioneering mall platform and allows [Simon] to boost the returns on these assets" and to take advantage of synergies across 20-plus Taubman centers, according to Piper Sandler.
"Now that [Simon] owns 100%, the operation of the legacy centers should become more efficient as management can fully roll out the Simon overlay," Piper Sandler said in its note, referring to more kiosks and temporary leasing.
During the earnings call, David Simon said that later this week the REIT will announce a major ground-up, full-price retail and mixed-use project in Nashville, Tennessee. He described it as a "landmark deal."