In an escalation of its international growth, Simon Property Group Inc. became the first U.S. retail developer to commit to the fastest-growing economy in the world as it joins forces with Morgan Stanley Real Estate Fund and SZITIC Commercial Property Co., to develop shopping centers in China.
Previously, Simon had talked of working in Japan and Korea, with China being a more long-term goal. But with giant malls going up all over the country — including projects developed by its Mall of America co-owner Triple Five Group — Simon has decided to move in.
Each project in the joint venture will be an urban, multi-level, retail destination of between 430,000 square feet and 750,000 square feet, anchored in all cases by a Wal-Mart. Warner Theaters may also be an anchor tenant in some of the projects. Simon and Morgan Stanley will be the preferred partners of SZITIC CP for each project that SZITIC CP proposes to develop in the Yangzte River delta, which includes the cities of Shanghai, Nanjing and Hangzhou.
“We are very excited about the retail development opportunities in China and we believe that being the first U.S.-domiciled REIT to enter this critical 21st century market further solidifies our position as one of the world's preeminent retail real estate companies.” Simon CEO David Simon said in a statement. The company declined to comment further on the announcement.
The venture's first project will be a 500,000-square-foot mall in Hangzhou, a city of 6 million people located two hours from Shanghai. Construction will begin in October with a scheduled completion in spring 2007. More than a dozen other potential projects have already been identified, which have a combined area of about 8 million square feet.
China is undergoing a massive wave of construction. It is consuming about 25 percent of the world's steel and 40 percent of its cement as cities of 1 million or more people appear almost overnight. For example Shenzhen, in the Guangdong province, had 70,000 residents in 1980. Today it is a city of 7 million people.
To date, the majority of the retail construction has been completed by indigenous firms. Four malls in the country are larger than the Mall of America. Beijing's $1.3 billion Golden Resources Shopping Mall is 6 million square feet. Along with the South China Mall, it is one of two projects in China larger than the West Edmonton Mall in Alberta, which had been the largest mall in the world. By 2010, China will be home to 7 of the 10 largest malls in the world.
Simon has been active in Asia since it acquired Chelsea Property Group, which owns several outlet centers in Japan. In May, Simon announced the opening of its Asia office in Hong Kong. It also has plans to develop in South Korea. Other international ventures include projects in Italy, Poland, France, Portugal, Mexico and Canada. Taubman Centers also has a Hong Kong office and is also partnering with Morgan Stanley.