CEO of Simon spinoff to run company from D.C. perch

Back to TopCommentsE-mailPrintBookmark and Share
Greg Andrews

We’re fortunate to have Simon Property Group Inc. headquartered here, a heavyweight in the global real estate industry with a downtown work force topping 1,000.

When the company announced in December that it was spinning off its strip centers and smaller malls into a new Indianapolis-based public company, it sounded like another big shot in the arm for the city.

That might prove to be the case, but the initial boost might not be particularly noticeable. A March 24 filing with the Securities and Exchange Commission said the new firm, dubbed Washington Prime Group, is starting with only about 40 employees. And a copy of the employment contract for the newly appointed CEO, Mark Ordan, said he will work out of an office in the Washington, D.C., area, where he lives with his family.

Indianapolis is no Podunk town, of course, but Ordan isn’t the first executive affiliated with the Simon empire opting to spend much of his time elsewhere.

Simon Property CEO David Simon has been more scarce in Indianapolis since buying a $25 million residence on Park Avenue in Manhattan in 2011. And the company’s president, Richard Sokolov, commutes here from Youngstown, Ohio.

Simon Property’s decision to name the new business Washington Prime—announced in the same press release as Ordan’s appointment—had fueled speculation the company would end up based in the D.C. area. However, that apparently is not the case, since SEC filings list the “principal executive office” of Washington Prime as 225 W. Washington St., Simon’s Indianapolis headquarters tower.

Simon officials wouldn’t elaborate on how they came up with the name—which, of course, could be a reference to Washington Street or Washington, D.C., or might just have sounded good to those making the decision. In a Jan. 31 analyst call, David Simon had lamented that “the hardest thing” about the spinoff “is coming up with the appropriate name.”

Washington Prime out of the gate will be a substantial company, with more than $620 million in revenue and ownership of 44 enclosed malls and 54 strip centers.

But at least early on, it will rely on Simon Property employees to do some of the heavy lifting. While Simon Property’s entire strip center team will join Washington Prime, the new company will rely on Simon personnel to handle mall management for at least two years.

Simon workers also will supply support services, such as accounting and IT, for up to two years. One of the risks of the spinoff is that Simon employees providing such services “will face competing demands on their time,” an SEC filing says.

Kite’s Inland-buying odyssey

A new SEC filing provides a blow-by-blow account of the negotiations that led to the Feb. 10 announcement that locally based Kite Realty Group Inc. was buying Illinois-based Inland Diversified Real Estate Trust Inc. for $1.2 billion in stock.

The 13-page description leaves two big takeaways: Kite brass exercised enormous patience during the sale process, which dragged out more than a year, and considerable restraint when dangling offers.

Inland’s board at one point late last year was so close to sealing a deal with another buyer—described only as Party A—that it entered exclusive negotiations, only to backtrack after the prospective buyer insisted on tying the deal’s closing to a favorable outcome of an unspecified, pending “due diligence matter.”

At one point, six firms submitted “non-binding indications of interest.” By early January, three remained in the running, with Kite’s offer valued at $10.50 per share, Party C’s valued at $10.75, and Party D’s at $10.80.

Even though Party D had the highest stated offer, Inland decided to end talks with the firm because of difficulty in valuing preferred stock that was part of its bid.

That would have left two suitors, but soon Party A was back in the fray with an offer that, like Party C’s, topped Kite’s.

Inland went with Kite’s, anyway, because of concern that Party C was offering a fixed price, wiping out the potential benefit from a run-up in Party C’s shares from announcement of a deal. In addition, its past dealings with Party A “created substantial uncertainty as to the speed with which Party A could complete due diligence and finalize a definitive agreement, if at all.”

Further, Inland worried that if a deal with Party A unraveled, Kite “would likely be unwilling to recommence negotiations.”

So Inland entered exclusive talks with Kite, paving the way for a deal that will swell Kite’s property count from 74 to 131.

On an analyst call after announcing the deal, CEO John Kite called the purchase “transformational.” He said “this is just a very, very unique opportunity for us to buy extremely high-quality real estate at a great price.”•


Post a comment to this story

We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
You are legally responsible for what you post and your anonymity is not guaranteed.
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
Subscribe to IBJ
  1. Aaron is my fav!

  2. Let's see... $25M construction cost, they get $7.5M back from federal taxpayers, they're exempt from business property tax and use tax so that's about $2.5M PER YEAR they don't have to pay, permitting fees are cut in half for such projects, IPL will give them $4K under an incentive program, and under IPL's VFIT they'll be selling the power to IPL at 20 cents / kwh, nearly triple what a gas plant gets, about $6M / year for the 150-acre combined farms, and all of which is passed on to IPL customers. No jobs will be created either other than an handful of installers for a few weeks. Now here's the fun part...the panels (from CHINA) only cost about $5M on Alibaba, so where's the rest of the $25M going? Are they marking up the price to drive up the federal rebate? Indy Airport Solar Partners II LLC is owned by local firms Johnson-Melloh Solutions and Telemon Corp. They'll gross $6M / year in triple-rate power revenue, get another $12M next year from taxpayers for this new farm, on top of the $12M they got from taxpayers this year for the first farm, and have only laid out about $10-12M in materials plus installation labor for both farms combined, and $500K / year in annual land lease for both farms (est.). Over 15 years, that's over $70M net profit on a $12M investment, all from our wallets. What a boondoggle. It's time to wise up and give Thorium Energy your serious consideration. See http://energyfromthorium.com to learn more.

  3. Markus, I don't think a $2 Billion dollar surplus qualifies as saying we are out of money. Privatization does work. The government should only do what private industry can't or won't. What is proven is that any time the government tries to do something it costs more, comes in late and usually is lower quality.

  4. Some of the licenses that were added during Daniels' administration, such as requiring waiter/waitresses to be licensed to serve alcohol, are simply a way to generate revenue. At $35/server every 3 years, the state is generating millions of dollars on the backs of people who really need/want to work.

  5. I always giggle when I read comments from people complaining that a market is "too saturated" with one thing or another. What does that even mean? If someone is able to open and sustain a new business, whether you think there is room enough for them or not, more power to them. Personally, I love visiting as many of the new local breweries as possible. You do realize that most of these establishments include a dining component and therefore are pretty similar to restaurants, right? When was the last time I heard someone say "You know, I think we have too many locally owned restaurants"? Um, never...