In compliance with the strategy of increasing its footprint in the international arena, Simon Property Group Inc. (SPG) recently penned a joint venture (JV) deal with McArthurGlen Group, a leading European Designer outlets operator.
Simon Property will make an initial investment of €435 million ($569 million) and as per the deal terms, the company will gain ownership of six properties and become a partner in McArthurGlen's property management and development company. The investments will comprise properties in Austria, Italy, the Netherlands, the United Kingdom and Canada.
The deal is a strategic fit for the retail real estate investment trust (REIT) – Simon Property – which can leverage on McArthurGlen’s high-quality retail real estate assets in Europe. Also, with Simon Property being a leading operator of malls and premium outlets in the U.S. and Asia, McArthurGlen stands to benefit from its relationships and expertise.
Notably, Simon Property has assets in almost all retail distribution channels across the U.S. Furthermore, the company’s international presence gives it more sustainable long-term growth prospects than its domestically focused peers.
Its ownership stake in Klépierre provides for consolidation of its global footprint and offers access to high quality retail assets in the high barrier-to-entry markets of Europe. We believe that the diversification with respect to product and geography also largely insulates Simon Property from market volatility and helps it deliver a decent performance.
Simon Property currently holds a Zacks Rank #3 (Hold). However, other retail REITs that are performing better and deserve a look include Cedar Realty Trust Inc. (CDR), Kimco Realty Corporation (KIM) and The Macerich Company (MAC), all carrying a Zacks Rank #2 (Buy).
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