Simon Property Group Family Embroiled In Lawsuit Over Real Estate Offshoot

Herbert Simon, the co-founder of Simon Property Group and majority owner of the Indiana Pacers, is suing the family of his late nephew, former Simon CEO David Simon, over the purported dissolution of a private real estate holdings company that Herbert claims stripped him and other equity holders of millions of dollars in shares.

In a lawsuit filed Friday, Herbert Simon and other entities that own preferential distribution rights in the holdings company — S.F.G. Company LLC, or SFG — claim that David Simon, as its manager, made unauthorized changes in the weeks before he died. 

The manager of SFG “unilaterally purported to strip several of SFG’s equity holders of their preferential interests in the company" to dissolve the company in a way that would benefit the defendants, Herbert Simon alleged in the lawsuit filed in Marion Superior Court in Indiana.

The filing claims that the action was “done in secret without notice to or consent from the affected equity holders” and that it directly benefited David Simon and his family members. Inside Indiana Business first reported on the lawsuit. 

The attorney for plaintiffs Melvin Simon & Associates and Simon Hollywood Developers declined to comment on pending litigation. Plaintiff Bank of America also declined to comment. Attorneys for Herbert Simon and the defendants did not respond to requests for comment.

SFG was formed by Herbert Simon and his brother, the late Melvin Simon, in 1995 to hold real estate interests that were not included in Simon Property Group when the mall giant went public, the complaint says. The company allowed certain members to hold preferred shares, and Melvin Simon and Herbert Simon had such shares. 

The complaint alleges that over the past few years, David Simon had engaged Herbert Simon in discussions about liquidating the company when the latter died. In those conversations, it says, David Simon “insisted” on the ability to buy Herbert Simon and his family’s preferred shares at “heavily discounted values,” but Herbert Simon disagreed, and the conversations ceased. 

But two weeks before he died, David Simon allegedly undertook actions in secret to “seize what he had been unable to obtain in negotiations — and then some" to give himself more power after liquidation, according to the complaint.

The plaintiffs are asking the court to declare the purported restructuring invalid, award compensatory and punitive damages, and reinstate one of the plaintiff companies as manager. They are also seeking reimbursement for their legal fees associated with this case.

The Simon family's Simon Property Group is the largest shopping mall owner in the U.S., with properties spanning 241M SF. Following the death of David Simon in March, his son, Eli Simon, became CEO in May.

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