Simon Property Reaches Settlement in Antitrust Investigation by New York -- Update
August 21 2017 - 7:16PM
Dow Jones News
By Esther Fung
New York state Attorney General Eric Schneiderman and retail
property giant Simon Property Group Inc. reached a settlement in an
antitrust case that requires Simon to end practices that the
attorney general alleged protected Simon's popular Woodbury Common
Premium Outlets from competition.
Simon Property, the largest shopping mall owner in the U.S.,
agreed to pay the state $945,000 and revise existing leases to end
restrictions that deterred retailers from opening additional outlet
stores, according to a press release from the attorney general. The
company didn't deny or admit to wrongdoing, the statement said.
Mr. Schneiderman said the settlement was a victory for New York
regional shoppers. "No business should be allowed to stifle an
entire industry at the expense of consumers -- but for years,
that's exactly what Simon Property Group did to New Yorkers," his
written statement said.
But Indianapolis-based Simon issued a statement after the
settlement was announced describing the two-year investigation by
the attorney general's office as "meritless." Simon also said the
probe "has become an unnecessary distraction" and that the company
believes its time "is best spent focusing on providing the best
shopping and working environment to the Woodbury Common
community."
The settlement and the subsequent public relations battle
provides a glimpse into the world of brass knuckle negotiations
between retailers and owners of the country's most popular shopping
locations. Retailers and owners of competitive shopping centers
have long complained that owners of the top spots extract onerous
lease terms for their choice real estate.
But landlords argue they're doing nothing wrong. "Simon has
never sought to limit competition," the company's statement
said.
One of the controversial lease terms -- the so-called "radius
restriction" -- was at the heart of the attorney general's lawsuit.
Generally, the provision prohibits tenants of a shopping center
from opening shop within the specified radius.
The 60-mile radius provision had been in place since 1985,
before Simon Property bought the outlet center as part of its 2004
acquisition of Chelsea Property Group.
Woodbury Common, an open air center with 240 stores across
910,000 square feet of retail space, generates more than $1.3
billion in annual sales and is a major tourist attraction. It
includes tenants such as Kate Spade, Tory Burch and Gucci.
The attorney general's office said it investigated Simon because
the mall owner allegedly had "monopoly power" in the outlet center
space in the New York City area. Retailers at Woodbury Common were
prevented from opening other outlet stores within a 60-mile radius
with the threat of substantial penalty, the statement said, adding
that several developers had attempted to develop outlet centers in
New York City but were thwarted in signing up retailers due to the
radius restrictions.
The settlement required revisions to existing leases that would
now allow stores in Woodbury Common to open a second outlet store
in Brooklyn, the Bronx, Queens and Staten Island. But Simon noted
in its statement that lease provisions "will continue to cover
Woodbury Common's essential trade area, extending to all of
Manhattan."
Analysts said they don't expect the outlet center to face major
competition from this settlement, noting that it takes time and
expertise to build a successful shopping center.
"It's not the radius restrictions that make Woodbury Common.
It's the lineup of tenants, sales productivity that makes a
dominant mall dominant. It's pretty tough to replicate," said
Alexander Goldfarb, a managing director at Sandler O'Neill +
Partners.
But one potential competitor applauded the settlement "This is a
huge win for New York City residents who have for years demanded
easier access to affordable shopping," said Don Capoccia, principal
of BFC Partners and developer of Empire Outlets, an outlet center
currently under construction on Staten Island's North Shore.
Write to Esther Fung at esther.fung@wsj.com
(END) Dow Jones Newswires
August 21, 2017 20:01 ET (00:01 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Simon Property (NYSE:SPG)
Historical Stock Chart
From Mar 2024 to Apr 2024
Simon Property (NYSE:SPG)
Historical Stock Chart
From Apr 2023 to Apr 2024