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Simon buying Prime Outlets in $2.3B deal

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Simon Property Group Inc. is doubling down on outlet malls with an agreement to buy Baltimore-based Prime Outlets, a privately held firm that owns 22 of the giant properties.

The deal, which Simon values at about $2.3 billion including the assumption of debt, gives the company a total of 63 outlet malls with more than 25 million square feet of space. Locally based Simon made its first foray into the outlet mall business with its 2004 acquisition of Chelsea Property Group Inc., a deal valued at $3.5 billion.

Simon said it will pay about $700 million for Prime Outlets in the form of cash and partnership units, and take on the company's existing debt load.

Analysts have expected Simon, the largest U.S. mall owner, to go shopping this year. The company has conserved cash by paying most of its dividend in stock, and has generated more capital by selling stock and debt at a time many real estate companies are begging for money. The result: Simon now has $6 billion in “dry powder” it can use for acquisitions, according to a report by J.P. Morgan.

The Prime Outlets portfolio includes properties in Ohio, Illinois and Michigan, but none in Indiana. The largest concentration of properties is in Florida, with a total of six outlets in cities including Orlando and Naples. As of June 30, the properties were 92 percent occupied and generated $370 in sales per square foot.

"Prime Outlets is an excellent opportunity for Simon as it represents a strong strategic fit for our existing Premium Outlet portfolio and enhances our leadership position in the outlet business,"  Simon CEO  David Simon said in a statement.

Simon's existing Chelsea Premium Outlets portfolio includes 12 outlets on the West Coast, while the Prime Outlets portfolio includes only two. Chelsea has two centers in Indiana, in Edinburgh and Michigan City.

The move comes as Simon maneuvers to take over its nearest mall rival, Chicago-based General Growth Properties Inc., which is going through bankruptcy reorganization. Simon has been buying the company's debt in anticipation for an eventual bid.

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  1. I took Bruce's comments to highlight a glaring issue when it comes to a state's image, and therefore its overall branding. An example is Michigan vs. Indiana. Michigan has done an excellent job of following through on its branding strategy around "Pure Michigan", even down to the detail of the rest stops. Since a state's branding is often targeted to visitors, it makes sense that rest stops, being that point of first impression, should be significant. It is clear that Indiana doesn't care as much about the impression it gives visitors even though our branding as the Crossroads of America does place importance on travel. Bruce's point is quite logical and accurate.

  2. I appreciated the article. I guess I have become so accustomed to making my "pit stops" at places where I can ALSO get gasoline and something hot to eat, that I hardly even notice public rest stops anymore. That said, I do concur with the rationale that our rest stops (if we are to have them at all) can and should be both fiscally-responsible AND designed to make a positive impression about our state.

  3. I don't know about the rest of you but I only stop at these places for one reason, and it's not to picnic. I move trucks for dealers and have been to rest areas in most all 48 lower states. Some of ours need upgrading no doubt. Many states rest areas are much worse than ours. In the rest area on I-70 just past Richmond truckers have to hike about a quarter of a mile. When I stop I;m generally in a bit of a hurry. Convenience,not beauty, is a primary concern.

  4. Community Hospital is the only system to not have layoffs? That is not true. Because I was one of the people who was laid off from East. And all of the LPN's have been laid off. Just because their layoffs were not announced or done all together does not mean people did not lose their jobs. They cherry-picked people from departments one by one. But you add them all up and it's several hundred. And East has had a dramatic drop I in patient beds from 800 to around 125. I know because I worked there for 30 years.

  5. I have obtained my 6 gallon badge for my donation of A Positive blood. I'm sorry to hear that my donation was nothing but a profit center for the Indiana Blood Center.

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