Redevelopment Focus of Simon Property's Retail Growth Plans

David Simon, chairman and chief executive officer of Simon Property Group (NYSE; SPG), was a featured speaker at the Spring 2011 Real Estate Luminaries Series held at Georgetown University's McDonough School of Business. The event was co-sponsored by NAREIT and Georgetown. The focus of the event centered on commercial real estate's path from recovery to expansion, a shift Simon said is well on its way.

"The capital markets have bounced back tremendously," Simon said. "The basic fundamentals in most of the sectors are actually ticking up. It is still not overly robust, but it is headed in the right direction."

In the mall sector where Simon Property is one of the dominant global companies, Simon said pricing power is beginning to shift back to landlords for high-quality properties. For lesser-quality properties, he said it is still a struggle to drive rents.

"The retailers learned a lot in the Great Recession, so they are still very focused on watching their bottom line," Simon said. "Even though pricing power may exist in certain assets it is still tougher to accelerate rents just because of their increased level of caution since the recession."

As Simon looks at his own company's growth plans over the near term he said he expects most of its activity to be centered on redevelopment.

"I don't see any new development in full-price retail real estate for the foreseeable future," he said, adding it is at least a couple of years away. Retailers are focused on proven, existing properties. He added there may be select new starts in the outlet center business where demand is stronger.

Simon said over the next three to four years he expects to put at least $2 billion back into the portfolio to make good, strong existing assets better.

Acquisitions are a challenge now that prices have increased and there is a large amount of capital chasing what assets are available, Simon said.

"Acquisitions are hard to plan out, and you have to be ready when the opportunity strikes," he said.

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Redevelopment Focus of Simon Property's Growth Plans

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