Layoffs and Property Management and Simon Property Group and Downsizing and Employment and Retail and Real Estate & Retail

Simon layoffs would jeopardize HQ incentive deal

April 20, 2009

During one of the worst markets for real estate in decades, at a time when developers of all sizes are shedding employees, officials with Simon Property Group Inc. continue to insist they have had zero layoffs.

That assertion is puzzling to local market observers, who say the mall giant has quietly dropped dozens of employees at its local headquarters because of a weak business climate. A handful of those employees, speaking with IBJ on condition of anonymity, say they were among those laid off.

So why not own up? One possible reason: The $23 million incentive deal for Simon's new headquarters, which opened in 2006, requires the company to maintain a minimum head count of 885 employees for at least 10 years. If the company drops below that figure, it could owe the city millions of dollars.

For starters, Simon could lose a tax abatement that will save it $3.8 million over 10 years. And if the city enforces the head count requirement, Simon also would have to pay for using parking garage space the city bought for the company. Simon would owe the Capital Commons rate of $125 per month for each of its 430 spaces, or about $645,000 per year.

The company insists its employee count remains well above 885. Simon currently employs between 900 and 990 people at its headquarters, said John Rulli, an executive vice president at Simon. He declined to provide an exact figure.

Rulli acknowledged Simon has let some employees go. But he would not characterize them as "layoffs," saying the employees have been replaced in other areas as the business shifts resources from new developments to its existing portfolio. That evolution has kept the head count intact, he said. Examples include replacing an architect with a marketing director and moving some development employees into operations.

"It's like a player trade," said Rulli, who added that the company also has moved jobs to Indianapolis from around the country, recently from New Jersey.

But former employees say they didn't understand the cuts to reflect a mere reshuffling of priorities. They say Simon began dismissing employees in late January. The company in a Jan. 26 report provided the city with a head count status report tied to the tax abatement. In the report, the company said it employed 948 people in 2008, down from 975 in 2007, and up from 937 in 2006.

If headquarters employment has declined by more than 63 since Jan. 26, the company would be in violation of its incentive agreement.

The parking agreement gives the city's Department of Metropolitan Development the right to request a Simon head count once a year to ensure the company is in compliance.

If the employee figure is breached, the DMD must inform Simon and give the company 90 days to comply before it can begin charging the company for parking. The city paid $11.5 million for the eastern half of the Capital Commons garage under Simon's headquarters. The city has not made a request for the company's head count separate from the annual report tied to the tax abatement.

The former employees did not know how many workers have been let go but said they knew of several people across different departments who were escorted from the building.

"The company was staffed and geared up for prosperous times," said one former employee. "David [Simon] is a smart guy. He's making sound decisions to keep the company stable and operating profitably."

Rulli said the company has always run leaner than its competitors.

"If we were doing layoffs as a result of the times, I wouldn't have a problem telling you that," he said. "There are shareholders out there who want to know we're running the business properly."

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