NEW YORK — The development of glamorous new mixed-use projects and lifestyle centers with glitzy entertainment elements may be the public face of mall retail expansion, but new development is only one facet of retail real estate growth.

More and more, the two largest U.S. retail real estate investment trusts, Simon Property Group and General Growth Properties Inc., are turning to the nuts and bolts of property development and management to improve their bottom lines.

With the prohibitively expensive costs of buying properties, both Simon and General Growth, which traditionally have been powerhouse ground-up developers and aggressive acquirers of other retail companies, are concentrated on tightening their operations and revamping their existing properties rather than aggressively seeking acquisitions to significantly enhance their profitability.

“Our focus right now is just making each of our properties the best that it can be,” said Richard Sokolov, president and chief operating officer of Simon, which has an $18.3 billion market capitalization.

Both REITs are putting their muscle behind the building blocks of real estate management: increasing rents and occupancy levels.

“We are obviously focused on growing our rents and occupancy,” Sokolov said. “We continue to increase our rents, but the percentage of sales that our retailers are paying to operate in our properties has remained relatively constant. So we are still able to provide a profitable place for our retailers to operate.”

At the end of the first quarter of 2006, occupancy in Simon’s mall portfolio was 91.6 percent. General Growth, which has an $11.4 billion market capitalization, showed similarly strong occupancy. Its portfolio was at 92.5 percent occupancy at the end of 2005, the most recent statistic available.

“In ’06, and going forward, we expect to be an inactive acquirer of properties,” Sokolov said. “The prices for properties that the market is asking is inappropriate, so we have de-emphasized acquisition. The two most important things that we’re doing right now are enhancing the profitability of our existing portfolio through asset intensification and just leasing to better, more important retailers.”

Simon has about 30 projects where it plans to add upscale retailers and restaurants. Its Village at SouthPark, in Charlotte, N.C., is a prime example. The property, which was acquired as part of the REIT’s $1.6 billion acquisition of part of the Rodamco North America retail portfolio in 2002, was built in 1970 and was undergoing minor expansions when Simon took it over.

This story first appeared in the May 8, 2006 issue of WWD. Subscribe Today.

Since 2002, Simon has added Cheesecake Factory, Maggiano’s Little Italy, California Pizza Kitchen, McCormick and Schmidt’s restaurants and demolished a Sears store and replaced it with a Dick’s Sporting Goods. It added luxury fashion tenants Louis Vuitton, St. John, Tiffany and Burberry, and is adding the region’s first Neiman Marcus and six more fashion retailers, including Hermès, which will open this fall. In a joint venture with the Hanover Co., it plans to add a condominium development on adjacent land.

“In the space of five years, we have fundamentally changed the property’s market potential and the market perspective of all of Charlotte,” Sokolov said. “We will continue to perform this kind of asset intensification for our projects. Our returns on these projects, depending on the scale and the marketplace, range anywhere from 8 to 13 percent.”

General Growth has a similar take on its expansion opportunities, looking inward at its own portfolio rather than externally at acquisitions.

“We don’t ever count on acquisitions to fuel bottom-line growth,” said John Bucksbaum, chief executive officer of General Growth. “The past decade has certainly been a very active period in acquisitions, but there are very few transactions out there today that make financial sense.”

General Growth, which is still digesting the redevelopment opportunities from its $12 billion acquisition of the Rouse Co. in late 2004, has 20 projects in the redevelopment pipeline, totaling more than $725 million in construction. Redevelopment projects outnumber new development by roughly five to one, said Bucksbaum.

“We don’t publicize individual returns from our redevelopments, but reinvesting in our properties on a constant basis is critical to improving returns, more so today than it has ever been,” said Bucksbaum. “There was an earlier era in the shopping center industry where it was build it and they will come, and you didn’t have to reinvest as much because you could be the dominant facility in almost any given community. But today the consumer has many more choices and you have to be far quicker in terms of adapting and accepting the new concepts and recognizing what the consumer wants. If you continually reinvest, you can keep yourself at the top of the retail chain.”