The real estate market is sinking, and many say it's the perfect time to make
a deal. That's why the Indianapolis-based real estate investment trust Simon
Property Group has laid the foundation for dealmaking. Simon, the largest
retail REIT and developer of malls with a market cap of $22.8 billion,
increased its borrowing capacity from $3 billion to $3.5 billion in early
October.
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Simon CEO David Simon has been entirely candid about the increased credit.
He's been quoted as saying "so we can be ready and able to take advantage of
what's out there." And there's plenty out there for the cheap. Public REIT
valuations have sunk from their heydays of the real estate boom, which ended a
few months ago with the subprime credit crunch.
As a matter of fact, Simon has already capitalized on the trouble of others.
In February, Simon teamed up with Farallon Capital Management LLC to pick up
troubled Mills Corp., a Maryland operator of upscale malls,
for
$1.6 billion.
Here's a couple of plays that may look enticing for Simon:
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Latin America commercial properties and REITs have been a hub for deals
lately because of the slowdown in the U.S. Overall, Latin America property
yields have hit 9% to 15% a year, compared with roughly 5% to 8% in the U.S,
according to Investors Business Daily.
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Developer's Diversified Realty has a diverse retail portfolio that includes
a recent push into South America with the purchase of 50% interest in Sao
Paulo, Brazil-based Sonae Sierra Brazil, which owns nine retail assets,
noted Investors Business Daily. Simon could make an aggressive move for
Developer's whose stock has slipped nearly 17% since January.
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Troubled Feldman Mall Properties is seeking a buyer. A discounted deal could
be had for Simon considering the Great Neck, N.Y.-based company's financial
quagmire. Feldman suspended its dividend and owns a total of seven malls
around the U.S. The retail REIT
announced
in June that it hired Friedman, Billings, Ramsey & Co. to assist the
company in exploring strategic alternatives, which includes a possible sale.
—
Gerald Magpily
See
Indystar.com article
See
MartketWatch article
See
Investor's Business Daily story via CNNMoney.com
See
Feldman Mall press release on strategic alternatives
See The Deal.com's Auction Block listing (subcription required)
