Issa Khalil flew to Seattle last week to see his favorite football team, the Dallas Cowboys, play the Seahawks in their first home game of the season. He included a side trip: shopping at the Seattle Premium Outlets.

“We researched this place online,” said Khalil, 26, a Calgary resident who works in the hotel industry and plays in a men’s soccer league. He, his father and cousin were headed to Nike Inc.’s store to find shoes and “anything” else with the athletic-apparel maker’s signature Swoosh.

Shoppers like Khalil are helping to buoy growth for Indianapolis-based Simon Property Group Inc., which acquired the Seattle Premium Outlets through its $3.5 billion purchase of Chelsea Property Group in 2004.

Luxury outlet malls—where upscale retailers such as Coach Inc. and Michael Kors Holdings Ltd. hawk discount goods—are now the main source of expansion for the Indianapolis-based real estate investment trust, the country’s largest.

“The purchase of Chelsea by Simon eight years ago was arguably the best REIT merger ever,” said Cedrik Lachance, a managing director at real estate research firm Green Street Advisors Inc. in Newport Beach, California. “Outlet investing has been tremendously successful for Simon.”

The discount malls have helped make Simon the best-performing retail real estate stock of the past five years, and it’s a business that the No. 2 U.S. mall landlord, General Growth Properties Inc., doesn’t have. Hedge-fund manager Bill Ackman, whose Pershing Square Capital Management LP owns about 10 percent of General Growth, is lobbying for the companies to combine, even as Simon said last week that it has no interest in buying its rival.

Outlets were among several factors that Ackman highlighted in pushing for a deal.

“Simon’s dominant participation in the outlet mall business, in which GGP has no presence, has proven to be a retail real estate sector with a high degree of resilience during periods of economic weakness, and a significant contributor” to funds from operations, a measure of cash flow, Ackman said in an Aug. 27 letter to General Growth’s board.

In 2004, the year Simon bought Chelsea, General Growth spent $11.3 billion to buy Rouse Co., an owner of full-price malls and land for master-planned communities — a deal Simon passed up. The purchase was part of an acquisition spree that saddled Chicago-based General Growth with $27 billion of debt. When it couldn’t refinance the loans in 2009, the company became the biggest in real estate firm to file for bankruptcy.

Simon tried to buy General Growth when it was in bankruptcy. It lost to a group led by Ackman and Toronto-based Brookfield Asset Management Inc., which now owns about 42 percent of the company and said it has no plans to sell its stake. General Growth also said it won’t explore a sale.

Outlets make up about 12.5 percent of the gross leasable space of Simon’s properties worldwide. They represent about one-third of the company’s asset value, Lachance said. Simon operates 72 Premium Outlet Centers in 28 states and Puerto Rico, Asia and Mexico, with plans to open six more in 2013, including its first in Canada and Brazil.

Premium Outlets, which include more red-carpet designers than conventional outlet stores, have grown by exploiting consumers’ desire for brand-name fashion and household goods while meeting retailers’ needs to boost sales and pay lower rents during a time of sluggish economic growth.

“It’s a huge trend,” said Jeremy Moller, a retail broker at JSH Properties Inc. in Seattle. “After the crash, a lot of retailers realized they could sell only so many $600 bags.”

Discounts vary by retailer and product. At the Michael Kors outlet near Seattle, the popular Hamilton tote sells for $329, as little as 5 percent less than versions available on the designer’s website. Other products are more than half off, in some cases because it’s the end of the season. The Layton shoulder bag in Kors’s signature “luggage” color, a caramel brown, sells for $155, down from $368.

Outlet centers are cheaper to build and operate than traditional malls. Their out-of-the-way locations make them relatively easy to expand yet near enough to cities to attract customers. There was about 67.9 million square feet of outlet-center space last year, 23 percent more than a decade earlier, according to data from Value Retail News, a publication of the International Council of Shopping Centers.

Construction of traditional malls, primarily near urban areas, has been dormant because of little space for new development. Only one enclosed mall has opened in the U.S. since 2006, said Jesse Tron, a spokesman for the ICSC in New York.

“In terms of green field, or ground-up development, it’s pretty much all outlet centers,” said John Sheehan, an analyst at Edward Jones, in St. Louis.

Simon opened a $142.7 million outlet center in New Hampshire in June and construction has begun on three other outlet centers, two of which are in partnership with other developers, according to its latest quarterly report. The company has budgeted $750 million on U.S. expansion and redevelopment of existing properties in 2012, compared with $265 million last year.

The largest of Simon’s premium outlets by square footage is Woodbury Common, north of Manhattan. Woodbury Common Premium Outlets gets about 12 million visitors a year, making it the No. 1 tourist destination in the state outside of Manhattan, said Susan Hawvermale, director of tourism for Orange County, N.Y., where Woodbury Common is located. The outlet mall gets more than three times the annual visitors as the Empire State Building.

“It’s the best outlet in the world,” David Simon, CEO of Simon Property, said of Woodbury Common on an April 27 conference call with analysts. “What we’re thinking about doing there, working obviously closely with the town, but assuming we make progress and get some approvals there, I think we take that asset up to yet another level.”

Les Morris, a spokesman for Simon, declined to comment further.

Simon stopped breaking out financial results from Premium Outlets separately from its traditional mall business in 2009. In that year, the segment contributed 19.7 percent of net operating income. The company gained 21 more centers when it bought Prime Outlets Acquisition Co. in 2010 for $2.3 billion.

Simon stock has climbed 66 percent in the past five years while Greensboro, N.C.-based Tanger Factory Outlet Centers, the second-largest U.S. outlet owner, has jumped 63 percent, making them the best performers in Bloomberg’s regional mall index. General Growth tumbled 49 percent in that time.

“For both Simon and Tanger, the number of outlets and the profitability of outlets have gone up significantly,” said Stephen Waters, partner at Compass Advisers in New York, who advised Tanger in its 2005 purchase of a portfolio of outlets from Blackstone Group LP. “Sales per square foot at the best outlets are very high and rival those in conventional shopping malls.”

Other companies are trying to take away some of those sales. Santa Monica, Calif.-based Macerich Co., which entered the business last year when it bought Fashion Outlets of Niagara, is expanding that property and building a second called Fashion Outlets of Chicago that’s set to open in August 2013. Glimcher Realty Trust, based in Columbus, Ohio, in May announced a rebranding of its outlets as the “Outlet Collection” that will include renovations to its Jersey Gardens mall in Elizabeth, N.J., and redevelopment of its SuperMall in Auburn, Wash.

“Simon and Tanger are the very, very clear leaders in that category,” said Rich Moore, an analyst at RBC Capital Markets in Solon, Ohio. They will have the “majority of that business over the next five years,” he said.

For retailers, discount malls are a way to lure consumers after the recession. Nike, based in Beaverton, Ore., had 464 factory outlets in operation as of the end of May, out of 557 total branded stores, according to its annual report.

Michael Kors, which opened its first outlet in 2005 in Woodbury Common, now has 85 outlet stores, compared with 168 regular stores. Coach, the New York-based leather-goods maker, expects to open at least 30 North American stores in fiscal 2013, and at least 20 of those will be factory outlets, Chairman and CEO Lew Frankfort said on a July 31 earnings conference call.

Demand was on display last weekend at the Seattle outlets, where dozens queued outside the Coach store, prompting clerks to stagger entry. Workers handed out coupons for an additional 30 percent off to people waiting to join the throng inside snapping up handbags and key fobs.

“The reason it’s important to Simon is because it’s important to retailers,” Sheehan, the Edward Jones analyst, said of the outlet business. “They want to satisfy the demand.”