INDIANAPOLIS-Outlet Malls are the best bet for current retail development, said Simon Property Group executives during a first quarter conference call this morning. David Simon, chairman and CEO, said that his mega mall REIT will concentrate on redeveloping current properties and building new outlet malls, not lifestyle centers, for the near future.
The company owns or has an interest in 337 retail properties in North America and Asia, and has plans for up to 14 outlet centers in Brazil. During the first quarter, Simon also acquired a 28.7% stake in Paris-based Klepierre with 271 shopping centers in 13 European countries.
In the first quarter, Simon recorded impressive results, as FFO increased by $648.7 million, from $570.6 million in Q1 2010. Also, total sales per square foot for the company’s total portfolio rose from $491 to $546 from a year ago, an 11.2% increase. Total occupancy is at 93.6% for the trust.
During the call, Simon said it’s just not cost effective to look at building new malls or lifestyle centers. “We think the returns in order to induce the full-price (tenants) are just took skinny, and the demand is not there,” he said. “Our redevelopment pipeline has some really good stuff going on, and we are under construction with a few outlets. Why chase full price retail at lower returns when we have our plate full?”
Renovation and expansion projects are underway at 25 centers, and the trust is building several new properties under the Premium Outlet brand, including Shisui Premium Outlets in Shisui, Japan; Phoenix Premium Outlets in Chandler; Toronto Premium Outlets in Halton Hills, Canada and Busan Premium Outlets in Busan, Korea; all which will open in 2013. Simon also plans to open two new Premium Outlets this year in Merrimack, NH and Texas City, TX.
In Brazil, the company has paired with BR Malls Participacoes SA to develop up to 14 malls in the country. “We have a site identified in Sao Paulo that we are not ready to disclose yet, and we’re very close to moving forward,” Simon said. “If everything goes according to plan, we should be able to open by early 2014. We’re also evaluating four additional sites in Brazil.”
In the quarter, Simon also signed with Bailon Group to jointly develop a Premium Outlet in Shanghai, next to the Shanghai Disney Resort. The agreement allows further centers, though Simon says the firm has to be careful in China. “We had an experience where we learned a lot in China,” he said, with some irony. The trust had signed with SZITIC CP and MSREF in 2005 to build shopping centers in China.
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