Simon General

Property Growth
Group Properties

Simon General
Property Growth
Group Properties

Debartolo Homart
Realty Development
Corp Co.

Simon
Property
? General
Growth
Group Properties The
Chelsea Rouse
Group Co.

Chelsea The
Property Rouse
Group Co.

Ginsburg
Craig TrizecHahn
Associates (Mall Portfolio)

88 May05 R ETA I LT RA F F I C
General Growth and Simon Property are now two nearly-equal giants.
How they play their hands will shape the retail real estate industry.

By Jennifer Popovec
After decades of consolidation, it has come to this:
The mall industry is dominated by two gigantic com-
panies, Simon Property Group and General Growth
Properties. Indianapolis-based Simon, which controls
203 million square feet of retail space in 175 malls, 67
community centers and four mixed-use projects, has
long been the No. 1 mall REIT. But with its $12.6
billion acquisition of The Rouse Co., Chicago-based
General Growth is suddenly a very close second—
operating 209 malls totaling 180 million square feet.
The next biggest U.S. retail REIT, Developers
Diversified Realty, is about half the size.
There’s more than bragging rights—or the family
honor of two dynastic corporations—at stake as these
mega-REITs face off. Increasingly, it will be these two
companies that shape the retail real estate industry.
Where they build, what they buy and which tenants
they choose to deal with will determine what lesser
developers can do—and, perhaps, which national
retailers will thrive. They will have the power to make
or break retailers and, in many places, determine where
new development occurs and where it does not.
“It’s brutal,” says Mark Lichtman, one of the found-
ers of the Bos Group, which has run up against General
Growth as a competitor for retailers in Rogers, Ark.,
near Wal-Mart’s headquarters in Bentonville. He has

RE TAIL TRAFFIC May05 89

 already signed up many tenants, however, and
expects to be David to General Growth’s
Goliath.
General Growth acknowledges that its
new heft gives it greater leverage with retail-
ers. CEO John Bucksbaum says that the
company now expects to get at least 50 per-
cent of any national retailer’s store expansion
program. “We don’t control 50 percent of the
space,” he concedes, but he believes that the
REIT is in the position to demand a dispro-
portionate share of new leases. “A primary
reason for building the national platform
from which we operate is that we’re in a
national business,” says Bucksbaum. “We’re
dealing with national retailers.”
Not all developers are afraid of the duo in
the mall business. “I don’t think that the
General Growth/Rouse deal will dramati-
cally change the landscape,” says Stephen
Lebovitz president of Chattanooga, Tenn.-
based CBL Properties Inc, which ranked
sixth on Retail Traffic’s list of retail real estate
owners. Lebovitz, whose company owns 70
primarily middle-market malls mostly in the
Southeast and Midwest, views the Rouse
acquisition as just one more in the string of
acquisitions that will occur as the maturing
mall industry rationalizes and consolidates. “I
3?
Who Will Developers
Diversified
Be No. Realty Corp.
Credentials: Developers Diversified’s portfolio contains 107
million square feet of space, ranking it as the third-largest
owner of retail property in the country. Through a series of
joint ventures with Macquarie Bank, Kuwait Finance House,
Coventry Real Estate Fund and Prudential Real Estate
Investors, it has enormous access to capital. It has used
these relationships adeptly to build its portfolio from 35.7
million square feet at the end of 1999 to its current level.
Drawbacks: It is the dominant force in community centers
and has done some mixed use, but it doesn’t own regional
malls, so is it really in the same league as Simon and
General Growth? It doesn’t target the same tenants. So
even if the firm grows to the same size as the two giants, it
would likely be on a different playing field.
90 May05 R ETA I LT RA F F I C
General Growth
now expects to get
at least 50 percent
of any national
retailer’s store
expansion program.
do think, however, that for General Growth
it’s a watershed transaction and takes them to
a new level.” (See how smaller REITs feel
about the challenge, starting on page 104.)
Fomenting Dissent
Even before it swallowed the 37-center
Rouse portfolio, General Growth was accused
of using strong-arm tactics, including intimi-
dating retailers who were considering open-
ing shops in competing centers. Last year, Los
Angeles-based developer Rick Caruso of
Caruso Affiliated, sued General Growth after,
he says, the giant REIT helped create the
community opposition to his attempt to
build a $264.2 million lifestyle center across
from General Growth’s Glendale Galleria.
While that suit is still in the courts, Caruso
spent millions of dollars fighting the devel-
oper who tried to stop the project, ultimate-
ly forcing the city to hold a special election
to decide its fate. Caruso won by a narrow
margin and his Glendale project, Americana
at Brand, is under construction.
“We strongly believe they are violating
anti-trust laws, and I think we have a good
suit,” says Caruso. “We have strong evidence
of them calling retailers and telling them if
they went into our center, they wouldn’t be
allowed to go into other General Growth
properties where they wanted to be. This is
bad for the industry, and bad for business.”
Bucksbaum, interviewed before Caruso,
wasn’t available to comment on these claims
at press time. In the past, the company has
had no comment.
In a similar situation, Taubman Centers
accuses Simon of derailing its plans to add a
new upscale center in New York’s Long
Island, one of the most affluent areas in the
nation. Simon owns four malls on Long
 How They Got Here:
General Growth Properties Inc.
1954
The Bucksbaum brothers—Martin and Matthew—expand their family
grocery operation by building Town and Country Center in Cedar
Rapids, Iowa, one of the first Midwest shopping centers.
1964
The Bucksbaums, now owners of five properties, become majority
stockholders in General Management Corp. They exchange the stock
for shares in a REIT called General Growth Properties. They form
General Growth Cos. to plan, develop and manage the REIT’s assets.
1972
GGP is listed on the New York Stock Exchange.
1984
General Growth sells 19 malls with 8 million square feet of space to
Equitable for $800 million—at the time, the largest single real estate
transaction in U.S. history. The REIT is liquidated, but General Growth
Management Inc., the management arm of General Growth Cos.—
continues as a third-party management business.
1989
General Growth buys The Center Cos., making it the fourth largest
owner of malls. However, it ranks as the second-largest manager of
mall properties.
1993
General Growth goes public for the second time. It raises about $220
million through its IPO. At the time, its ownership portfolio had dwin-
dled to 21 malls, but it manages 75 centers.
1994
With Westfield Holdings, General Growth Properties acquires
CenterMark Properties in a $1 billion deal. General Growth puts up
$200 million for a 40 percent ownership stake.
1995
General Growth sells its interests in the Centermark portfolio to
Westfield in two transactions. In turn, it goes on with four investment
partners to buy Homart Development Co. from Sears, Roebuck and
Co. in a $1.85 billion deal, setting a new record. It sells off 12 million
square feet of community centers in a $500 million deal with
Developers Diversified Corp. General Growth moves its corporate
headquarters from Des Moines to Chicago.
1996
General Growth acquires General Growth Management Inc., integrat-
ing its ownership and management arms into a single entity. It also
continues acquiring malls, mostly in one-off deals.
1998
General Growth goes on a buying spree. In a few months it acquires
the U.S.-assets of MEPC, a U.K.-based firm for $871 million. It also
buys a portfolio from Prime Property Inc. in a $625 million deal. In
September, the acquisition of four malls in Louisiana and Florida push
its owned portfolio to more than 100 million square feet.
1999
John Bucksbuam becomes the company’s CEO, succeeding his father,
Matthew Bucksbaum.
2002
General Growth comes close to acquiring Netherlands-based
Rodamco North America, before a consortium of Westfield Holdings,
Simon Property Group and The Rouse Co. sweep in with a $5.3 billion
bid. Later in the year General Growth acquires JP Realty. It also buys
Hawaii-based Victoria Ward Limited for $250 million.
2004
General Growth buys The Grand Canal Shoppes at the Venetian casino
in Las Vegas for $766 million. It once again sets a record for the larg-
est real estate acquisition, this time with the $12.6 billion purchase of
The Rouse Co. At the end of the year, General Growth’s owns more
than 200 regional malls with a combined 180 million square feet of
space. Its managed portfolio stands at 200 million square feet.
Source: General Growth Properties Inc.
92 May05 R ETA I LT RA F F I C
Island including the sprawling Roosevelt
Field project. Taubman’s project is stalled as it
continues to fight litigation from community
dissenters, who it alleges were incited and
supported by Simon.
It remains to be seen exactly how the two
giants will behave differently, but it is clear
that they have dealt themselves what poker
players call a “nut hand”—an unbeatable
combination of assets, resources and relation-
ships. Together, they dominate other public
and private retail owners and developers. In
addition to their sheer size—they control 20
percent of all the malls in the nation—they
have the highest concentration of Class A
fortress malls, well-established regional cen-
ters like The Galleria in Houston. As the
name implies, such properties have virtually
unassailable positions in their markets.
Going From B to A
This is not the kind of turf that General
Growth has always held. “General Growth for
a long time had mostly a class B portfolio,” says
REIT analyst Lou Taylor of Deutsche Bank.
“With the acquisition of Rouse and some
other assets they’ve brought that into a more
even mix of As, Bs and some Cs,” he says.
Officially, the arrival of General Growth
in Simon’s class is no big deal, say Simon
executives.
“Being big is important today, but wheth-
er you’re first versus second is irrelevant,” says
Michael McCarty, president of Simon’s com-
munity center division.
Still, no No. 2 has ever come this close.
“No one ever thought they would see the
day when there are two owners that own
more than 200 malls each,” says Greg Maloney,
CEO of Jones Lang LaSalle Retail.
In many respects, the companies are simi-
lar. Both were family run businesses that
became REITs in the 1990s. Both are headed
by scions of the founding entrepreneurs
(John Bucksbaum is the son of Matthew
Bucksbaum and Simon Properties CEO
David Simon is the son of Melvin Simon).
Both families still hold major chunks of their
companies.
Culturally, however, the companies
couldn’t be less alike. Simon is known for
being more introverted, while General

3
Who Will
Westfield
Be No. ? Group
Credentials: Westfield is the fifth-largest owner of regional
malls with a portfolio of 63 million square feet of U.S.
assets. It is part of a global operation worth $32 billion with
108 million square feet of properties. As an Australia-based
firm, it has benefited from the decline of the U.S. dollar and
has a cheap cost of capital.
Drawbacks: Since the end of 1998, Westfield’s U.S. portfolio
has barely moved up going from 60.8 million square feet to
63 million square feet. In the same time, Simon has grown
its portfolio by about 67 million square feet while General
Growth has added almost 109 million square feet.
Growth is more extroverted. Industry players
joke about the idiosyncrasies of both Simon
and General Growth, which reflect the per-
sonalities of David Simon and John
Bucksbaum. David Simon rarely gives inter-
views, leaving executives like McCarty to
represent the company in public. Even Wall
Street analysts say they have trouble getting
anything from the tight-lipped leader.
Bucksbaum, on the other hand, is generally
available and even chatty.
Although both companies downplay their
rivalry, industry watchers say there is no love
lost between the clans. “Everybody knows
that they don’t like one another,” notes one
industry player who didn’t want to be identi-
fied. “But I don’t think either one goes out of
the way to antagonize the other.”
That may be harder to do in the future. In
the past they could keep away from each
other, but now they are of such a size that
they are competing in the same markets
more and more.
In Las Vegas, for example, the companies
have dueling properties on the Las Vegas
strip. General Growth acquired the Grand
Canal Shoppes at the Venetian last year. Its
$900-plus in sales per square foot figures are
second only to the $1,400 that Simon is
pulling down a few doors away at the Forum
Shops at Caesars Palace. Both properties
94 May05 R ETA I LT RA F F I C
have an abundance of luxury retailers and
target the same high-end shopper.
In Austin, Texas, General Growth has
started to encroach on Simon’s turf, thanks to
the Rouse deal. Rouse owned Highland
Mall, one of the oldest malls in the city.
Simon has been the undisputed leader in the
capitol region, owning two of the three
regional malls: Barton Creek Square and
Lakeline Mall. And it operates the only life-
style centers in the city: Arboretum at Great
Hills and Gateway Shopping Centers.
When rumors began circulating that
General Growth planned to expands its pres-
ence in Austin by developing a project on the
West Side of town, Simon made moves to
strengthen its grip. In addition to developing
Wolf Ranch, a 750,000-square-foot open-air
center in Georgetown, a suburb of Austin, it
also has announced that it will participate in
the development of The Domain, a
750,000-square-foot open-air center set on
50 acres formerly occupied by IBM Corp.
Moreover, in a southern suburb, Buda, Simon
is in predevelopment for Buda Town Center,
another lifestyle center. And Simon’s outlet
arm, Chelsea, is developing Round Rock
Premium Outlets, a 430,000-square-foot
outlet center in the northern suburb of
Round Rock where Dell Inc. is based.
Rodamco Battle
The highest-profile run-in between General
Growth and Simon began in late 2001 when
General Growth came close to nailing a deal
to acquire Netherlands-based Rodamco
North America N.V. The deal was so close,
in fact, that General Growth refinanced its
main line of credit and sold 9.2 million
shares of company stock to Lehman Brothers
Inc. to raise $344.5 million in cash. But
Simon came in at the last minute, along with
Westfield America Trust and The Rouse Co.,
and trumped General Growth’s bid. After a
legal battle in Dutch courts, the joint ven-
ture divided up Rodamco’s assets in a $5.3
billion buyout.
General Growth emerged from the fight
with a bruised reputation (several analysts
criticized company management for misplay-
ing its hand). But its second-place finish in
the Rodamco race sent it on a vigorous buy-
 How They Got Here:
Simon Property Group
1960
Three Brooklyn-born brothers, Melvin, Herbert and Fred Simon
start Melvin Simon & Associates with the aim of developing and
owning Midwest shopping centers. Later that year they open their
first property: Southgate Plaza in Bloomington, Ind.
1964
The company opens its first enclosed mall, the University Mall in
Fort Collins, Colo.
1992
Melvin Simon & Associates opens two of the country’s most unique
retail properties. With Triple 5, it opens the 5 million-square-foot Mall
of America. With Gordon Group, it opens The Forum Shops at Caesars,
considered the highest-grossing retail property in the country.
1993
Simon Property Group is formed through the then-largest REIT
IPO in U.S. history. It sells 37.75 million shares, generating $840
million in cash.
1996
In March, Simon announces a merger with DeBartolo Realty Corp.
worth $3 billion, giving the re-christened Simon Debartolo Group Inc.
more than 110 million square feet of retail space.
1997
Simon Debartolo forms an alliance with Chelsea Property Group
to develop and acquire upscale outlet centers with 500,000
or more square feet.
1998
Simon acquires Corporate Property Investors for $5.8 billion.
The deal makes the newly named Simon Property Group two-and-a-
half times larger than its nearest competitor. After the deal,
the firm’s portfolio contains 222 retail properties and 8 office
buildings containing 175 million square feet.
1999
Simon acquires 14 regional malls through a joint venture with JP
Morgan Investment Management’s Strategic Property Fund, New
York State Teachers Retirement System and Teachers Insurance and
Annuity Association.
2000
Simon Business Network is established as a separate business -to-
business division, with the largest on-the-ground service network
alliance focusing on shopping centers and retail chain stores.
2001
With two institutional partners, Simon acquires a 34 percent stake in
European Retail Enterprises B.V. to pursue development in Europe. It
eventually opens five malls in Poland and three in France.
2002
In a joint venture partnership with The Rouse Co. and Westfield
America Trust, Simon jointly acquires the real estate assets of
Rodamco North America N.V. in a $5.3 billion deal. Also, Simon is
added to the S&P 500 Index, the fourth REIT in the index.
2003
In June, Simon increases its ownership in Kravco Investments,
a Philadelphia-based owner of seven regional malls, to 80 percent
and Kravco Co., its affiliated property management company, to
50 percent for a total of $300 million. One month later Simon forms
a joint venture with Rinascente Group. Gallerie Commerciali Italia
S.p.A. is created for the ownership, management and development
of shopping malls in Italy.
2004
Simon Property Group acquires Chelsea Property Group in a
transaction valued at $3.5 billion. At the end of the year, Simon’s
owned portfolio stands at 203 million square feet while its managed
portfolio is 212.62 million square feet.
Source: Simon Property Group Inc.
96 May05 R ETA I LT RA F F I C
ing spree that lasted for the next three years.
Using the cash it had earmarked for
Rodamco, General Growth completed two
big acquisitions in 2002: JP Realty for $1.1
billion and Hawaii-based Victoria Ward Ltd.
for $250 million. General Growth kept the
spree going through a series of one-off deals,
including whoppers like its $766 million
acquisition of the Grand Canal Shoppes. The
company was able to top it all off with the
record $12.6 billion Rouse deal, made all the
more sweet by the fact that Rouse was one
of the companies that had taken a piece of
the Rodamco deal.
Now that the Rouse has turned General
Growth into Simon’s most powerful rival,
smaller developers are less interested in the
effect it will have on the No. 1 than the pres-
ence of two giants will have on the market.
“Through mergers and acquisitions, REITs
have gotten tremendous influence and power
with retailers and the whole industry,” says
developer Caruso. Whether that’s good for
competition or good for the industry overall,
“just depends on how they want to use it,”
he says.
Caruso’s claims have yet to be heard, much
less proved, in court. But the mere presence of
giants like Simon and General Growth in
many markets puts smaller developers on the
defense.That’s why many have turned to retail
consultants or third-party management firms
like Jones Lang LaSalle or Chicago-based
Urban Retail Properties Inc. to help them go
toe-to-toe with the big boys.
One example is Fort Smith, Ark.-based
Nelson and Beatty Co. LLP. It’s developing a
$300 million “Main Street” retail project in
Rogers, Ark., where it has partnered with
Urban Retail Properties. Work on Centre
Pointe at Pleasant Grove, which will include
350,000 square feet of retail, 70,000 square
feet of commercial space, a hotel and more
than 180 residential condominiums, is sched-
uled to begin this summer.
Centre Pointe at Pleasant Grove competes
directly with Pinnacle Hills Promenade, a
$100 million, 980,000-square-foot project
being developed by General Growth and its
partner,The Pinnacle Group.The project will
feature 106 acres of dining, entertainment,
office and recreation center that includes a
 155,000-square-foot, two-level Dillard’s. The
project is expected to open in Spring 2006.
“Smaller developers and owners need the
relationships that guys like a Jones Lang or an
Urban provide,” says one industry leader.
“Mostly though, they just need someone
who can stand up to the big guys.”
On the other hand, even as many industry
players attest to having seen signs of Simon
and General Growth throwing their weight
around, there are questions about how effec-
tive they have been. “They try to leverage
their size in a lot of different areas, but how
successful they are is a question,” says
Maloney.
A retail broker, who asks not to be identi-
fied, says that Bucksbaum’s claim that he has
the muscle to demand half of all new leases is
wishful thinking. “That’s ridiculous,” he says.
“Which retailers is he talking about? And
how can [General Growth] make that hap-
pen when some retailers don’t want to be in
malls, period?”
Indeed, says Richard Moore, real estate
analyst for KeyBanc Capital Markets, “I’m
not sure that Simon and General Growth
being as big as they are really matters to the
other guys.”
The folks who are in a position to tell—
the retailers—are mum on the subject, for
obvious reasons. Retailers contacted by Retail
3?
Who Will
Be No. Macerich
Co.
Credentials: The Santa Monica, Calif. firm commands a
portfolio of 65.3 million. Last year it emerged as the sur-
prise winner in the sweepstakes for Wilmorite Properties’
$2.3 billion portfolio. The deal came at a time when Macerich
was being mentioned as a potential acquisition target.
Instead, it has emerged as an acquirer. It also won big in
2002 when it bought Westcor Realty LP for $1.5 billion.
Drawbacks: Unlike most of the other candidates for no. 3,
Macerich has yet to explore overseas opportunities. The
Wilmorite deal also came with an expiration date. The firm
has the option to purchase back five of the malls at a later
98 May05 R ETA I LT RA F F I C
The strength of
the family-run
business remains
in place today ...
you’re not going
to see the mission
statement splat-
tered across the
front door.
Traffic for this story, declined to comment.
“When you ask retailers about it, most of
them laugh it off, but there is an element of
truth about the so-called packaging of deals,”
says an industry expert who specializes in
retail tenant representation. “It’s widely
known that Simon and General Growth, and
every mall owner for that matter, has some
bad assets in their portfolio. So they dangle
the carrot of being in a great mall like Ala
Moana Center or The Forum Shops and tell
them they can have the space they want as
long as they take the space in the turd buck-
ets too.”
In fact, the two mall giants have reached
a position of maximum power when
their bread-and-butter properties—regional
malls—are facing maximum challenges. The
department stores that anchor these centers
are under siege and continue to consolidate.
The retailers are feeling a bit squeezed. “They
can’t afford to be leveraged anymore,”
Maloney asserts. To cut their costs, they and
other retailers have made the decision to go
off-mall, muting the power of the mall land-
lords to dictate terms.
The list of mall defectors includes Sears,
which helped develop dozens of malls, but
whose new management is betting heavily
on a new off-mall format to take on the
discounters. Meanwhile JCPenney, in
announcing its strategic plan for 2005, told
investors that it will grow the chain “without
dependence on new mall development.” It
expects to have 22 off-mall stores by the end
of this year and says that there is potential for
up to 200.
As both companies add to their portfolios,
 3?
Who Will CBL &
Be No. Associates
Properties
Credentials: CBL has elevated itself from being a regional
player with B properties in secondary markets to being one
of the big boys. It first entered the top 10 on the Retail
Traffic ownership list in 2000. Since then it has more than
doubled its portfolio from 34.9 million square feet to 71.4
million square feet.
Drawbacks: Its portfolio is dominated by second-tier malls
and second-tier markets. It has carved a successful niche
specializing in those assets. But as a result, it doesn’t have
the same high profile as the other REITs its size. It also has
not made any move to go international.
the way they do business must change, espe-
cially internally, Maloney says. “Trying to
manage that many malls and trying to do it
the same way that it’s always been done is
going to strain any company,” he asserts.
Competing Cultures
Nonetheless, McCarty says that Simon main-
tains its entrepreneurial nature, where indi-
viduals are given opportunities to take risks
and are rewarded for their successes while
being held accountable for their failures.
“The strength of the family-run business
remains in place today,” he says, but notes that
“you’re not going to see the mission state-
ment splattered across the front door.”
In contrast, General Growth widely shares
its vision, “People Creating Special Places &
Experiences” and mission statement, both
internally and externally. Bucksbaum says
that customer satisfaction, individual devel-
opment and corporate integrity are top pri-
orities. “We hope [our vision and mission
statements] give a clear indication of the kind
of people that we are and the type of com-
pany that we operate here,” he says.
Currently, Bucksbaum is focused on get-
ting his arms around the Rouse assets, as well
as paying down and restructuring the bur-
densome debt taken on to make the acquisi-
tion. According to Moore, the debt burden is
100 May05 R ETA I LT RA F F I C
the biggest challenge confronting the REIT.
“General Growth has really stuck its neck out
with this Rouse acquisition,” he says.
“They’re terrific properties, but it’s danger-
ous, and they haven’t taken the necessary
steps to correct that.”
General Growth has, however, made sig-
nificant progress in its plan to reduce its
floating-rate loans, including setting up $2
billion of fixed-rate replacements last
year. And many analysts feel the company
will achieve its goal of restructuring its bal-
ance sheet in the next couple of years.
Still, it’s a good thing Bucksbaum says
another big acquisition isn’t in the cards. He
contends that redeveloping the Rouse prop-
erties will keep him busy. “That will receive
tremendous emphasis,” he says. “Most of
these properties have not received much
redevelopment, so there’s a tremendous
amount of that.”
Moreover, Rouse’s acquisition also brought
General Growth into the community devel-
opment business. “That’s a fascinating and
very profitable business that few companies
in the U.S. do well,” Taylor says. Now,
General Growth owns several master-
planned communities including: The
Woodlands and Bridgelands outside of
Houston; Summerlin, in suburban Las Vegas;
and Columbia, Md.
General Growth has taken steps to make
sure that it benefits from the community
development business. The REIT recently
hired Thomas J. D’Alesandro IV to oversee
its master-planned community development
portfolio. Specifically, he focuses on evaluat-
ing redevelopment potential when there is
an opportunity to transform a General
Growth retail center into a mixed-use
property. D’Alesandro joined General
Growth from The Woodlands, a 27,000-acre
master-planned community, where he spent
two years as CEO of The Woodlands
Development Co.
In addition to redevelopment and com-
munity development, General Growth’s
recent expansion has allowed it to more
effectively sell access to its common areas to
national brands. Bucksbaum reports that the
REIT has tapped the growing business,
cementing deals with American Express,
 Pepsi, Fox Movie Studios and others. “Size
has contributed to giving us those opportu-
nities,” he says.
Bucksbaum also acknowledges the impor-
tance of international growth. “You’re seeing
more globalization with foreign retailers
entering the U.S. and U.S. retailers going
3
Who Will
Mills
?
Be No. Corp.
Credentials: Mills entered the top 10 of Retail Traffic’s Top
75 Owners list for the first time this year. It now has a port-
folio of 47 million square feet. Mills has successfully diversi-
fied from its entertainment megamall focus to become an
owner of regional malls. It also has been a pioneer interna-
tionally and has invested in Spain, Italy and Scotland. It is
not afraid of doing new things, as evidenced by the 5-mil-
lion-square-foot Xanadu Meadowlands project now under
construction.
Drawbacks: Mills is still a relative newcomer to owning
regional malls and they make up only a percentage of its
overall portfolio. With a lot of money tied up in development,
Mills may not be as aggressive an acquirer in coming years.
3?
Who Will
Be No. Taubman
Centers
Credentials: Taubman’s portfolio is one of the most highly-
regarded in the business and is loaded with grade A proper-
ties. It boasts the highest sales-per-square-foot marks of
any REIT making it an annual cash cow.
Drawbacks: Taubman is much smaller than the other con-
tenders with a portfolio containing just 23.6 million square
feet. It is mentioned more often as an acquisition target
than an acquirer, though its successful defeat of Simon’s
hostile bid has quelled some of that talk. It also took a hit
last year when General Motors Pension Trust sold nine malls
Taubman had developed and still managed to Mills Corp.
102 May05 R ETA I LT RA F F I C
abroad,” he says. “For the same reason our
platform is beneficial here in the U.S, for
domestic retailers, our belief is that we can
provide similar opportunities to international
retailers and, going forward, to establish
opportunities abroad.”
Simon is growing outside of the United
States, largely due to its 2004 acquisition of
Chelsea Property Holding Inc. for $3.6 bil-
lion. “When they bought Chelsea, they
bought not only a company with outstanding
earnings growth, they also bought an inter-
national presence,” Moore says. “And inter-
national is going to be important.” Chelsea
has projects in Japan, Mexico, and as a result
of a joint venture in April, in South Korea.
Chelsea’s management, which stayed on
through the acquisition, will also beef up
Simon’s team, Moore notes. “You put the
two together and you have great properties,
including some international, great manage-
ment and a conservative balance sheet com-
pared to General Growth,” he says.
On the homefront, Simon wants to bring a
mixed-use element to its existing properties
and new developments.The REIT rolled out a
strategy that is a critical component of its asset
intensification program. Dubbed Version 5.0, it
focuses on adding hotel, office and other uses
to Simon’s retail properties, McCarty says.
The REIT’s new St. John’s Town Center
in Jacksonville, Fla., is a Version 5.0 prototype.
“If you look at the five or six properties we
have under construction right now, every
one of them has one if not two other real
estate uses being combined with retail,”
McCarty points out.
Both Simon and General Growth have
been up front about their overall growth
objectives. But, there are doubts in the indus-
try about their future expansion. “We all
wonder how much bigger they can get
before they take their eye off the ball,”
Maloney says. “It’s a huge challenge to man-
age that size of a group effectively.”
In the meantime, the pot keeps getting
richer, and in the high stakes game of mall
ownership, neither Simon nor General
Growth is bluffing, and it’s unlikely that
either will fold.
—With reporting by Patricia Kirk
and Mark Henricks.