NEW YORK -- Standard & Poor's downgraded its rating on Simon Property Group and its affiliates. The CreditWatch placement followed the public shopping center REIT’s proposed acquisition this week of 13 regional malls from Rodamco North America.
Simon plans to finance the $1.55 billion transaction by assuming $570 million of existing mortgage debt and preferred stock and $980 million in cash.
Standard & Poor's described the acquisition as "a good strategic fit" for Simon, noting that it would beef up Simon’s presence in key markets and add high-quality assets to Simon’s portfolio. Those assets include Copley Place, The Galleria in Houston, and The Florida Mall (already 50% owned by Simon).
"However, these transaction benefits are tempered by concerns regarding the initial highly leveraged nature of the transaction, Simon's increased exposure to short-term debt, uncertainty surrounding the retail environment at this point in the economic cycle, and, to a lesser extent, the risks inherent in executing such a complicated transaction," S&P said in a statement.
The transaction is expected to close in mid-April, at which time S&P will re-evaluate the CreditWatch listing.
— Staff and wire reports