Simon Property Group has terminated its deal to acquire Taubman Centers, one of the largest office and retail landlord in the US.
The US property company, that operates malls such as Americana at Brand and Oakbrook Center, will instead buy rival mall and shopping centre owner Macerich in a $13.6 billion deal.
Closing on the Macerich deal is expected to take place early next year, a press release said.
The timing of the deal is even stranger, because while Simon Property is now getting out of the American retail sector, Macerich is getting into it.
Simon Property and Taubman had a deal in place through which the US firm would buy out Taubman in an all-cash deal.
But today Simon Property said it will instead acquire Macerich for $81 per share.
Macerich already owns malls such as Fashion Show and The Forum Shops at Caesars.
That means Simon Property will become the third-largest owner of shopping centres in the US.
A major reason Simon Property is now leaving the US retail sector, at least in terms of sales, is because the malls it owns are performing poorly, down by more than 14 per cent on a rolling four-quarter basis, according to the real estate research firm Green Street Advisors.
That trend is especially grim because other, smaller US real estate companies are also having difficulties attracting tenants in the most challenging retail real estate market in decades.
Dollar General had been looking at selling stores in core malls, but then walked away from the deal when its price demanded was not affordable.
Cavco’s plans to unload its mall portfolio in order to focus on being a multifamily real estate investment trust have also hit snags.
Shops are traditionally the top-line activity at shopping centres, as well as the most profitable.
Store closures have put added pressure on mall landlords – putting an even bigger squeeze on the top line of shops than rent or sales receipts.
To help cushion its results, Simon Property has been looking at other avenues to cut operating costs by $250 million by 2020.
It has cut 4,700 jobs over the past few years and shifted some responsibilities to other teams, rather than dealing with layoffs.
Macerich, meanwhile, has been looking to refinance its large debt load, which currently stands at more than $13 billion.
Now Simon Property, which had in the past taken the drastic step of filing for bankruptcy protection from some of its creditors, is running the show.
It has no long-term debt, which means it is not struggling under the same financial and credit crunch that has struck a number of US retailers.
If the Macerich deal had gone through, Simon Property would have become the largest office and retail landlord in the US by a wide margin.
But with its retreat to buy Macerich, its sights are now focused instead on Macerich’s properties, in part because Simon Property’s own retail centres, such as Americana at Brand, remain in demand.
Simon Property’s other malls include Aliso Viejo Marketplace, Westways Mall, San Diego Premium Outlets, Mall of America and The Shops at The Woodlands.