As mall-based retailers struggle to compete with the onslaught from online shopping, the companies that own and manage the malls are finding their own business models severely challenged.
For the second time in as many weeks, there is a major agreement involving mall operators.
The Simon Property Group will buy mall operator Taubman Realty in a deal valued at around $3.6 billion.
The deal will affect two malls in Connecticut - Westfarms in West Hartford and Stamford Town Center in Stamford.
Simon Property Group Inc. is the nation’s largest mall operator. It said Monday that its operating partnership, Simon Property Group, LP, will buy all of Taubman stock for $52.50 per share. The Taubman family will sell about one-third of its ownership stake at the transaction price and remain a 20% partner in Taubman Realty Group LP.
Taubman Realty owns, manages or leases 26 shopping centers in the U.S. and Asia, including The Mall at Short Hills in New Jersey, and Waterside Shops in Naples, Florida. Simon owns or has a stake in 204 properties in the U.S., including premium outlets as of last year.
"By joining together, we will enhance the ability of (Taubman) to invest in innovative retail environments that create exciting shopping and entertainment experiences for consumers, immersive opportunities for retailers and substantial new job prospects for local communities," said David Simon, Simon’s chairman, CEO and president in a statement.
Malls have struggled with retail bankruptcies and store closings after a vast shift in the way Americans shop.
Since 2015, only nine malls have been built, a dramatic fall from their peak construction in 1973 of 43, according to CoStar Group, a real estate research firm.
Vacancy rates at malls are hovering around 4% on average, says CoStar, though struggling malls are closer to 7% vacant.
Last week Macy’s, a cornerstone in many malls, announced that it is closing 125 of its least productive stores and cutting 2,000 corporate jobs. The store closures represent about one fifth of all its locations and are in poor-performing malls. And consortium of buyers, including mall owners Simon and Brookfield Property Partners, bid $81 million last week for Forever 21, the ubiquitous mall staple that filed for bankruptcy protection in September.
Several years ago, Simon and the company that became Brookfield Property Partners, another big mall operator, teamed up to save struggling teen apparel retailer Aeropostale, which was in bankruptcy.
Traditional malls are adding more entertainment and other non-retail options like restaurants and gyms to create new energy at their properties. They’re also trying to avoid darkened areas inside their properties, which can exacerbate their problems and trigger lease clauses that allow tenants to renegotiate.
The acquisition of a majority stake in Taubman is expected to close by the middle of the year. It still needs approval from two-thirds of the outstanding Taubman voting stock and a majority of outstanding Taubman voting stock not held by the Taubman family.
Shares of Taubman Centers Inc., based in Bloomfield Hills, Michigan, soared 53% Monday. Shares of Simon Property, based in Indianapolis, rose less than 1%.
FULL LIST OF MALL INVOLVED IN THE DEAL
Following is a list of malls that are part of a $3.6 billion deal between The Simon Property Group and Taubman Realty
- Beverly Center - Los Angeles, California
- Cherry Creek Shopping Center - Denver, Colorado
- City Creek Center - Salt Lake City, Utah
- Country Club Plaza - Kansas City, Missouri
- Dolphin Mall - Miami, Florida
- Fair Oaks Mall - Fairfax, Virginia
- Great Lakes Crossing Outlets - Auburn Hills, Michigan
- International Market Place - Waikiki, Hawaii
- International Plaza - Tampa, Florida
- Stamford Town Center - Stamford, Connecticut
- Sunvalley Shopping Center - Concord, California
- The Gardens Mall - Palm Beach Gardens
- The Gardens on El Paseo - Palm Desert, California
- The Mall at Green Hills - Nashville, Tennessee
- The Mall at Millenia - Orlando, Florida
- The Mall at Short Hills - Short Hills, New Jersey
- The Mall at University Town Center - Sarasota, Florida
- The Mall of San Juan - San Juan, Puerto Rico
- The Shops at Belmond Charleston Place - Charleston, South Carolina
- Twelve Oaks Mall - Novi, Michigan
- Waterside Shops - Naples, Florida
- Westfarms - West Hartford, Connecticut