Simon Property Group (SPG) announced today that it will acquire an 80% stake in The Taubman Realty Group L.P. for $3.6 billion in cash, based on a payment of $52.50/share to Taubman shareholders and unitholders.  The deal represents an underwritten capitalization rate of 6.2% for Taubman's group of 24 super-regional mall properties in the U.S. and Asia.  Simon noted that it expects the deal to be "at least" 3% accretive to Simon FFO/share upon closing.  SPG also said that it expects to fund the equity investment from incremental borrowings, resulting in a pro forma increase in Net Debt / NOI to 6.1x from 5.2x today.

Although SPG will own a majority stake in Taubman, the deal is being structured as a partnership with the Taubman organization continuing to manage its existing properties, governed by a six-member board with equal representation from Simon and Taubman.  In its transaction disclosure, Simon noted that the investment in TRG would be accounted for as an equity investment.  The Taubman family, which currently owns 29% of the company, will sell a portion of their holdings in the transaction but retain an approximate 20% interest valued in excess of $900 million.

The transaction is subject to voting approval by Taubman shareholders and is expected to close in mid-2020.