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Can This Mall Operator Win the SPAC Game?

By Matthew Frankel, CFP® - Mar 13, 2021 at 7:01AM

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Although the SPAC space is getting crowded, this retail giant could have a unique advantage.

It seems like companies in every sector are launching their own SPACs these days. And one of those companies is mall operator Simon Property Group (SPG -1.09%). But in this Fool Live video clip, recorded on March 4, contributor Matt Frankel, CFP, tells listeners why this one could be different. 

Matt Frankel: One that I own and that has not announced a deal yet is Simon Property Acquisition Corporation (SPGS.U). This is a SPAC that was launched by Simon Property Group, which is by far the biggest mall operator in the world. They are a publicly traded REIT, Simon Property Group itself, that ticker symbol is SPG.

Simon Property acquisition recently went public, it's the newest of the four SPACs to the market. It just went public in February. It raised $300 million in its IPO, it is currently trading for just over $10, it was $10.15 last I looked. It's still trading in the form of units which if you've heard us talk about SPACs before -- after 52 days of being public, don't ask me why it's 52 days -- a SPACs separates into common shares and warrants.

Warrants are similar to options, will talk a little bit more about that later. But for a few couple of months, they trade as these units which are common share and a little piece of a warrant. Simon is trading for next to $10 still with that little piece for attach, which is kind of interesting. This is a SPAC run by mall operator, CEO David Simon of Simon Property Group is the SPAC's Chairman. His son, Eli Simon who is also an executive at the company is the SPAC's CEO.

And a previous SPAC without even a rumored deal like the one Dan was just mentioning, is really a bet on management. You're really betting on management to be able to allocate capital in the right way, and Simon has proven time and time again, that in the retail real estate space they are the best capital allocators. They used the pandemic to scoop up rival Taubman Centers at a discounted valuation. They've been buying these retailers that went bankrupt, and are making great returns on them. They bought Aeropostale a few years ago. They said that's been a profitable acquisition. They acquired companies like Forever 21 during the pandemic.

Forever 21, by the way, Simon announced where they're fourth-quarter results, that they've already achieved profit equal to half of what they put into Forever 21. That's a pretty great return, 50% return on investment less than a year. So that's a pretty impressive capital allocation.

Looking past just the Simons' involvement, each SPAC has a couple of board members that they used to help find a deal. Just which kind of gives you a close because SPACs are intentionally vague on what kind of companies are going to be looking for. Simon Property Acquisitions Board includes the CFO of accompanied called Rent the Runway which my wife absolutely loves. You can get high-end fashion stuff you rent and send it back. Kind of like a Stitch Fix (SFIX 0.85%) for high-end designers. They also have the hospitality CEO who is the Founder of a company called Graduate Hotels. We have a Graduate Hotel in Midtown, Columbia, South Carolina, it's very popular, very trendy, so hospitality. I think they're going to end up with something in the retail space just because that's a real core competency.

But like I said, they're great capital allocator. I wouldn't bet against Simon and putting that money to work in the right way. So that's more than I'm watching, and right now, like I said, it trades for just over that $10, so it's a nice margin of safety.

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Simon Property Group Acquisition Holdings, Inc.

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