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Simon Property Group, McArthurGlen Form Joint Venture

The designer outlet mall sector just got more competitive.

The designer outlet mall sector just got more competitive in Europe.

Simon Property Group Inc. and McArthurGlen said they have signed a definitive agreement to form a joint venture. Simon will invest about 435 million euros, or $565.5 million at current exchange, in McArthurGlen, one of the leading owners of upscale European designer outlets around the world.

Simon will also acquire an ownership interest in six properties and will become a partner in McArthurGlen’s management and development company. Simon’s initial equity investment will include assets in Austria, Italy, the Netherlands, the U.K. and Canada, where an outlet mall is under construction in Vancouver. Simon has an outlet center under way in Toronto.

Simon has been increasing its investments overseas. A retail expert said Simon could leverage its relationships with a broad array of companies to bring more American brands to Europe while helping European brands set up shop in the U.S. The outlet malls will likely have a mix of luxury brands and strong local merchants, he said.

Simon is one of the largest mall operators in Asia. Simon operates Premium Outlet centers in Japan through a partnership with Mitsubishi Estate Co. and Sojitz Corp. Simon has also entered into a joint venture with Shinsegae Co. to build Premium Outlets in South Korea.

The expert said that between the Toronto project and Simon’s joint-ownership of properties in Asia, there was an obvious hole in Europe. The deal with McArthurGlen should go a long way toward rectifying that, he said.

David Simon, chairman and chief executive officer of Simon Property Group, said, “McArthurGlen has one of the best-performing portfolios of high-quality retail real estate assets in Europe. This venture supports and extends our international growth strategy.”

“With this new partnership, McArthurGlen looks forward to continuing our robust expansion in Europe, North America and perhaps new untapped opportunities,” said J.W. Kaempfer, chairman and founder of McArthurGlen.

This is not Simon’s first foray into the European shopping center industry. The Indianapolis-based real estate firm last year paid $2.3 billion for a 28.7 percent stake in Klepierre, Europe’s second-largest publicly traded mall operator, based in France.

Simon in 2009 purchased shares in Capital Shopping Centers Group, then made an unsuccessful bid to buy the U.K. company in 2011. Simon got into a takeover fight with an investment group for General Growth Properties Inc. when the U.S. mall operator was in bankruptcy but the investment group prevailed.