The largest owner of U.S. malls is paying off an upcoming $1.1B debt maturity with the issuance of new debt.
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Simon Property Group, led by Chairman and CEO David Simon, plans to sell $1.5B of senior notes, broken into a $700M loan due in 2030 at about a 4.4% interest rate and $800M maturing in 2035 paying interest at 5.1%.
The Indianapolis-based REIT plans to use the new debt to repay $1.1B of corporate loans that mature next month, but its interest payments are likely to be higher. The $1.1B in outstanding principal carries a 3.5% interest rate.
The offering is expected to close on Aug. 19, according to a release. Remaining proceeds will be used for “general corporate purposes,” including repaying other unsecured debt.
Combined, the two issues have a weighted average term of 7.8 years and a weighted average coupon rate of 4.8%.
BBVA Securities, J.P. Morgan Securities, TD Securities and Wells Fargo Securities are the joint book runners of the public offering.
Simon issued the debt as the company has benefited from a strong resurgence in the retail sector. It has a 183M SF portfolio, which generated revenue of $1.5B in the second quarter, a 2.8% year-over-year increase and about $110M above analyst expectations, according to the company’s second-quarter earnings call at the beginning of August.
Simon generated nearly $1B in net income over the first six months of the year, and it boosted its expected funds from operations — a key REIT metric measuring cash flow — after the strong first half. Occupancy at its malls rose 50 basis points to 96%, with a base rent average nearing $59 per SF as of June 30, according to the company’s SEC filings.
Last week, the company announced David Simon’s eldest son, Eli Simon, was promoted to chief operating officer, with plans to eventually move him up to lead the company.
In other moves, the company closed the second quarter by purchasing a majority stake in the Brickell City Centre Mall in South Florida for $512M. The company is hoping to announce a few more deals before the year closes out, David Simon said on the call.
“We'll keep finding opportunities where we can grow our platform, but we're going to be picky on what we buy and what we want to do,” he said.
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