DeSoto Square owners purchase Prime Outlets

MANATEE — The owner of DeSoto Square mall has just increased its retail footprint in Manatee County by almost a half-million square feet.

Simon Property Group Inc. announced Tuesday it is buying the Prime Outlets Acquisition Co., which owns Prime Outlets-Ellenton, along with 21 other outlet centers across the United States, in a $2.3 billion deal. Simon is paying $700 million and assuming the company’s debt and preferred stock.

The purchase means the company now will own two very different types of properties in Manatee County. DeSoto Square, with 679,354 square feet of enclosed retail space, is considered a regional mall; Prime Outlets-Ellenton, with 476,850 square feet, is a premium outlet, drawing customers from Tampa to Fort Myers.

It is the largest purchase in five years for Simon Property Group, the largest U.S. shopping mall owner. Stock for the company was up to $74.68 at the close of stocks Tuesday, an increase of 78 cents.

“It is a good deal for Simon Property Group,” said Les Morris, spokesperson for the Indianapolis company. “We are excited to add Prime Outlets and expect the acquisition to be completed by late first quarter or early second quarter.”

Whether the purchase will mean changes for either mall in Manatee County is unclear.

“The ink is barely dry on the agreement, we don’t have details on that yet,” Morris said.

Local business and government leaders were uncertain about the ramifications.

Manatee County Commission Chair Gwen Brown voiced concerned about what impact the purchase will have on attention to DeSoto Square. The vacancies there are threatening to make the mall “an eyesore to the community,” she said. “I have more concerns about how they maintain it (the mall). I haven’t seen any action on their part.”

Neither Manatee Chamber President Bob Bartz nor Economic Development Director Eric Basinger would comment on the acquisition.

Steve Knopik, Bealls Inc.’s chief executive officer, said he didn’t think the purchase would affect his stores.

“Given that our stores are generally located in strip centers or power centers, not in malls or outlet malls, I don’t think it will have any impact one way or another on Bealls,” he said.

Because of the economy, Knopik said, the acquisition isn’t unusual.

“The commercial/retail property marketplace certainly is dealing with very challenging times, so consolidation like this is no real surprise,” he said.

Once the deal is completed, Simon will have 63 outlet centers with about 25 million square feet.

Simon acquired DeSoto Square in 1996 when it purchased DeBartolo Realty Corp., also a mall owner, in a deal analysts then valued at $3 billion.

Simon also owns regional malls and other assets. At the end of the third quarter, the company owned 387 properties with 262 million square feet, including sites in Europe and China.

In October, Simon reported funds from operations improved in the third quarter on lower expenses, but occupancy at regional malls and premium outlets slipped about 1 percent.

The company tried to make up some of lost revenue by charging more rent per square foot.

Funds from operations grew to $473.1 million, or $1.38 per share, from $463.9 million, or $1.61 per share, a year earlier. Funds from operations adds depreciation and amortization expenses, as well as other non-operating items, back to net income. Analysts polled by Thomson Reuters had expected $1.32 per share.

Meanwhile, net income declined 7 percent to $105.5 million, or 38 cents per share.

In a separate announcement on Tuesday, Simon said it entered into a new unsecured corporate credit facility providing an initial revolving borrowing capacity of $3.57 billion.

Quarterly reports show Simon Property Group malls were 91 percent occupied as of Sept. 30 and its premium outlet centers had an occupancy rate of 97.5 percent.

Prime Outlets in Florida which are part of the Simon Property Group purchase include malls in Orlando, St. Augustine, Florida City, and Naples.

— The Associated Press contributed to this report.

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