Simon Property Group Inc. announced two major transactions for a combined $3.5 billion. The first deal gives the REIT a 28.7 percent stake in a major European retail owner. The second buys out its joint venture partner on the Mills portfolio, Farallon Capital Management.
In the European deal, Simon signed a definitive agreement under to acquire a 28.7 percent equity stake (54.43 million shares) in Klépierre from BNP Paribas for €28.00 per share ($37.08 per share), or a total transaction value of approximately €1.5 billion ($2 billion).
Klépierre is a Paris-based real estate company that focuses on the ownership, management and development of shopping centers, retail properties and offices across Continental Europe. Klépierre’s portfolio includes 271 shopping centers in 13 countries, with 50 percent of its properties in France and Belgium, 25 percent in Scandinavia, and the balance in Central and Southern Europe.
Simon will receive payment of Klépierre’s dividend to be declared in April 2012.
“We are very excited to become the largest shareholder in Klépierre, which has a collection of unique retail assets in strong markets in Europe,” Simon Chairman and CEO David Simon said in a statement. “The investment in Klépierre represents an attractive opportunity for SPG as we seek to broaden our global footprint. We have long been admirers of Klépierre, its pan-European footprint and growth potential, and we look forward to working closely with the Klépierre management team.”
As part of the Klépierre transaction, David Simon will become the chairman of Klépierre’s nine member supervisory board. Two additional Simon representatives will join the Klépierre Board as well.
Klépierre, a listed real estate company, held assets valued at €16.2 billion ($21.5 billion) as of December 31, 2011. Klépierre specializes in designing, managing, and enhancing the value of its real estate assets via its subsidiaries, Ségécé and Steen & Strøm, Scandinavia’s number one owner and manager of shopping centers. Klépierre is listed on Euronext Paris™ and belongs to the SBF 40, CAC Large 60, and EPRA Eurozone indexes.
The Klépierre transaction is expected to close next week. Simon has no current intention to acquire additional shares of Klépierre.
Taking control of Mills
Simon also announced that it has signed a definitive agreement with its joint venture partner Farallon Capital Management LLC under which Simon is acquiring Farallon’s stake in 26 assets of The Mills L.P. in a transaction valued at $1.5 billion, which includes repayment of The Mills’ senior loan facility and mezzanine loan, and the retirement of preferred stock.
Simon and Farallon bought Mills Corp. for $7.9 billion in 2007.
“The Mills transaction is a compelling opportunity for SPG to expand our investment in a portfolio of assets we know well and already manage, which are well-located in key metropolitan markets, have considerable consumer brand equity and large trade areas, and generate significant cash flow and total sales volumes,” David Simon said in a statement. “We were pleased to have partnered with Farallon since our initial investment in 2007, and we have made significant progress improving The Mills’ assets. We look forward to a continued strengthening of these high-quality, well-positioned properties, and will continue to pursue redevelopment opportunities throughout this portfolio.”
A list of the 26 assets are included in Simon’s press release.
Simon said it has sufficient cash on hand and current available capacity on its existing credit facilities to fund these transactions.
Lazard, J.P. Morgan Securities LLC and Goldman, Sachs & Co. are serving as financial advisors to Simon on the Klépierre transaction. Bank of America Merrill Lynch is serving as financial advisor to Simon on The Mills transaction.