Simon Property Group plans to spin off all of its strip centre business and smaller enclosed malls into an independent, publicly traded REIT called SpinCo.
SpinCo's mission will be to own stable, quality strip centres and malls that effectively serve the communities in which they are located.
SpinCo is expected to initially own or have an interest in 54 strip centres and 44 malls, each of the malls generating annual net operating income (NOI) of approximately USD10m or less.
SpinCo's initial year NOI is estimated to be in excess of USD400m and its initial year funds from operations (FFO) is estimated to be approximately USD300m which is approximately USD0.80 per share. SpinCo will operate one of the largest, most diversified portfolios of strip centres and malls in the US, having 53 million total square feet in 23 states. Occupancy of SpinCo's strip centres and malls is 94.2 per cent and 90.4 per cent, respectively, as of 30 September 2013, and substantial recent investment has been made in SpinCo's assets.
The new company, which will have an independent, dedicated executive management team and conservatively capitalised balance sheet, will be well-positioned to deliver internal growth through active asset management and re-developments and external growth through acquisitions and selective new developments. SpinCo intends to pursue an investment grade credit rating from the major credit rating agencies.
Simon says: "Today, on the 20th anniversary of Simon's initial public offering, we are pleased to announce this significant transaction which we believe will unlock the potential of the strip centres and malls to be owned by SpinCo. We believe we are creating a new company that has both a strong Simon heritage and all of the requisite tools to grow its business and succeed. At the same time, this transaction allows Simon to focus on our global portfolio of larger malls, mills and premium outlets while maintaining our considerable scale and conservative leverage profile."
The spin-off will be effected through a pro rata special distribution to Simon shareholders. Simon Property Group's limited partnership unitholders will receive units of SpinCo's operating partnership subsidiary.
BofA Merrill Lynch and Goldman Sachs are serving as exclusive financial advisors and Wachtell, Lipton, Rosen & Katz is serving as legal advisor to Simon in connection with the proposed transaction.