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Key Drivers Contributing to SPG’s Evolution

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Geographic diversification leads to new opportunities

Simon Property Group (SPG) has been increasingly making investments outside the US to take advantage of booming real estate markets abroad. It also helps achieve a hedge against downturns in the US market. Its international portfolio consists of:

  • 17 Simon Premium Outlets in Canada, Japan, Korea, Malaysia, and Mexico
  • One Designer Outlet each in Austria, Canada, France, Germany, Italy, the Netherlands, and the UK
  • 8 million square feet total
  • SPG has 20.5% interest in Klépierre, a public company in Paris with an agreement of shopping centers in 16 countries in Europe
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Expansion, development, and redevelopment

Simon Property Group is committing billions of dollars to both new developments and redevelopment projects that could diversify and expand its quality and reach.

Its extension design incorporates adding new wings, including key retailers and eateries, and updating the common areas. These investments could improve the shopping experience for shoppers and retailers.

The company’s renovation initiative is narrower in scope and is involved with updating its properties. These projects include updated food courts, client conveniences, new flooring, skylights, redesigned lighting, upgraded entrances, painting, new RMUs, holiday décor, and resurfacing parking areas. Simon Property Group’s capital expenditure increased ~15.0% in 2Q17 while it decreased ~1.2% in 3Q17.

Major competitors of Simon Property Group based on similar business and strategies in the regional mall REIT space, along with their earnings per share (or EPS) for 3Q17, include:

  • Chicago-based General Growth Properties (GGP): $0.23
  • California-based Macerich (MAC): $0.96
  • Michigan-based Taubman Centers (TCO): $0.86

Simon Property and Equity Residential make up ~7.8% of the Vanguard REIT ETF (VNQ).

The next article highlights Simon Property Group’s strengths.

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