Simon Property to Spin-Off Strip Mall Business

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Simon Property Group, the largest shopping mall owner and operator in the U.S., announced its plan to spin off its strip centers and small enclosed malls into a separate real estate investment trust. 

The new REIT, SpinCo, will include 54 strip centers and 44 malls -- each generating annual net operating income of approximately $10 million or less, the company said. 

SpinCo's strip centers have an occupancy of 94.2 percent, while the malls are 90.4 percent occupied. The portfolio includes 53 million total square feet in 23 states. 

Simon expects the REIT to generate a net operating income of $400 million in its first year. The distribution to Simon Property shareholders is expected to be completed in the second quarter of 2014.

Richard Sokolov, Simon's president and chief operating officer, will also become chairman of SpinCo, and David Simon, chairman and chief executive of Simon, will serve as a director.

"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," Mr. Simon said.

Earlier this year, Simon Property increased its earnings forecast for 2013, based on increases sales and higher rents. In the summer, the company entered a joint venture to invest in McArthurGlen, the European designer outlets leader.