Bill Ackman made a killing selling the commercial real estate company General Growth Properties (GGP) to Simon Properties, after investing in GGP during the depths of commercial real estate fears during 2009.
While Mr. Ackman has proven himself a smart man, the buyer, David Simon of Simon Properties isn’t a fool either.
In fact, he was ranked by Harvard Business Review as America’s 46th most successful CEO based on wealth creation.
It’s also important to note that Mr. Ackman is a financial investor, who came in to grab GGP at a time when liquidity was scarce. Mr. Simon is seasoned retail industry investor. Thus he clearly sees a rebound ahead for U.S. commercial real estate.
Mr Simon seems to have concluded that recent economic data are good enough to justify a bet on a sector highly exposed to retailing—or at least the relatively smart bit of retailing in which both Simon Property and General Growth specialise. Sales at malls rose in the past two months on a year-on-year basis, ending a string of declines.
Simon Properties’ GGP acquisition could even be the catalyst for commercial real estate strength since the new combined Simon/GGP behemoth will control one third of the market according to The Economist. Mr. Simon is probably aware of the bargaining power this consolidation will give him over retail tenants.
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