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Simon Property-Pinstripes Tie-Up to Aid Counter Retail Blues

Zacks Equity Research

Simon Property Group Inc. SPG recently joined forces with Pinstripes, Inc., a reputed company in entertainment dining. The tie-up includes new leases for three future locations within the Simon portfolio, as well as its existing Clearfork development in Fort Worth. It also involves a minority equity investment in Pinstripes.

Besides, a number of prospective Pinstripes locations at various Simon assets throughout the United States have also been identified, with announcements regarding those expected to come later.

Founded in 2007 and headquartered in Chicago, Pinstripes is an experiential dining and entertainment concept. It presents special Italian-American cuisine, and curated wine and cocktails, bowling and bocce, as well as event space for groups ranging from 20 to 1,000. Therefore, the addition of Pinstripes is a strategic fit as the move is likely to lure new customers and drive additional traffic to Simon’s centers.

Admittedly, declining mall traffic resulting from the e-commerce boom, store closures and retailer bankruptcies continue to affect retail real estate market fundamentals, and impact retail REITs, including Kimco Realty Corp. KIM, Macerich Company MAC and Taubman Centers, Inc. TCO. However, retail landlords are now making concerted efforts to boost their asset productivity by trying to grab attention from new and productive tenants, and disposing the non-productive ones.

Particularly, Simon Property is navigating through the retail apocalypse by actively restructuring its portfolio, aiming at premium acquisitions and transformative redevelopments. For the past years, the company has been investing in billions to transform its properties focused on creating value and drive footfall at the properties. The transformational plans include addition of hotels, restaurants, residences and luxury stores.

Additionally, the company is undertaking strategic measures to help online retailers fortify their physical presence, besides taking steps to support omni-channel strategy. Simon Property is exploring mixed-use development option which has gained immense popularity in recent years as it helps catch the attention of people who prefer to live, work and play in the same area. Nonetheless, implementation of such measures requires a decent upfront cost and therefore, may limit any remarkable growth in its near-term profit margins.

Simon Property currently carries a Zacks Rank #3 (Hold). However, the company’s shares have declined 8.2% in the past three months as against its industry’s gain of 3.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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