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Simon Property To Develop First Brazil Outlet Centers

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04/10/2012 | 10:01pm CET

--Simon's first foray into Brazil

--Joint venture expected to open 12 outlet centers until 2019.

--Sandler analyst says Simon found "ideal entry point" in Brazil

(Updated to add analysts' comments from Sandler O'Neill and Credit Suisse.)

By A.D. Pruitt and Rogerio Jelmayer


Simon Property Group Inc. (>> Simon Property Group, Inc) joined forces with Brazil's largest shopping center operator, BR Malls Participacoes SA (BRML3.BR), to develop and own Outlet Centers across Latin America's largest nation.

The joint venture will be equally and jointly owned by Simon Property, the world's largest mall landlord, and BR Malls. The deal marks the U.S.-based real-estate investment trust's first foray into Brazil.

The first outlet center of the joint venture is expected to open in the country's largest state of Sao Paulo in 2013, the companies said in a joint statement late Monday.

"We already welcome large numbers of Brazilian visitors to our outlet centers in the United States, such as Woodbury Common Premium Outlets, Orlando Premium Outlets and Sawgrass Mills, and we look forward to also serving these valued shoppers in Brazil," said John Klein, president of Simon's Premium Outlets division, in the statement.

Alexander Goldfarb, an analyst at Sandler O'Neill + Partners, said it is too soon for the nascent venture to have a material impact on Simon's earnings or portfolio of 337 retail properties, but it provides the company an ideal entry point into the country.

"Outlets are in their infancy in Brazil," Goldfarb said. He added there is a growing consumer base in Brazil and the outlets are likely to cater to rising demand for foreign brands at affordable prices. "Now looks to be an opportune time" to build outlet centers in the country, he said.

According to the local financial newspaper Valor Economico, the companies plan to invest a total of 1.5 billion Brazilian reais ($825 million) to open 12 outlet centers until 2019.

A representative from Simon wasn't immediately available to comment.

BR Malls declined to comment beyond the statement.

So, far the competition is relatively small in Brazil given the only major outlet operator in country is General Shopping, the owner of the Outlet Premium Sao Paulo.

"We believe this is an important step for BR Malls, as it could mean the beginning of a long-term relationship with a big international player in the industry," said Credit Suisse in a report.

The firm added that it bodes well for the company's acquisition strategy as well because "it places the world's largest shopping mall operator as an ally instead of a competitor for the existing assets."

-By A.D. Pruitt, Dow Jones Newswires; 212-416-2197; angela.pruitt@dowjones.com

Stocks mentioned in the article : Simon Property Group, Inc
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Financials ($)
Sales 2016 4 824 M
EBIT 2016 2 964 M
Net income 2016 1 976 M
Debt 2016 25 328 M
Yield 2016 3,64%
P/E ratio 2016 29,73
P/E ratio 2017 26,96
EV / Sales 2016 16,9x
EV / Sales 2017 15,8x
Capitalization 56 362 M
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Mean consensus OUTPERFORM
Number of Analysts 23
Average target price 224 $
Spread / Average Target 25%
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David E. Simon Chairman & Chief Executive Officer
Richard S. Sokolov President, Chief Operating Officer & Director
Andrew A. Juster Chief Financial Officer & Executive Vice President
David Schacht Chief Information Officer & Senior Vice President
Karen N. Horn Independent Director
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