Back in February, mall REIT (real estate investment trust) giant Simon Property Group (NYSE:SPG) launched a special purpose acquisition company, or SPAC. Now, Simon Property Acquisition (NYSE:SPGS.U), which raised about $300 million in its IPO, is still searching for a target. In this Fool Live video clip, recorded on July 1, Millionacres editor Deidre Woollard and senior real estate analyst Matt Frankel, CFP, discuss what type of business this blank-check company might be targeting.
Deidre Woollard: Oh, I like this one for you. Jenny asked, "What do you think of the Simon Property Group's SPAC?"
Matt Frankel: I always get the SPAC questions.
Woollard: I know.
Frankel: I don't own it just because I pared down the number of SPACs that I have. It's sponsored by Simon Property Group. I love the ability they've shown to allocate capital in a responsible way. They've done a great job of buying up retailers that were distressed. The Aeropostale acquisition a few years ago is already profitable. The Forever 21 acquisition that they made last year is already returning something like 50% of their original cost annually, that's a great return on investment. I'm optimistic. I think the SPAC space in general is very crowded right now. There are about 400 different ones looking for deals, so they have a lot of competition. They bring a lot of value to the table with just their connections. Their connection with Simon Property Group adds a ton of value for a struggling retailer that might want to go public through their SPAC. I think they're going to find a target that's worthwhile.
Woollard: But do you think it's absolutely going to be a retailer?
Frankel: I think it's going to be some type of business they can incorporate into their mall. That doesn't necessarily mean a retailer. I think it could be a hotel operator, it could be a co-working business, it can be an entertainment operator, it could be a restaurant chain. I would not be surprised to see them take a privately owed restaurant chain public through their SPAC at all because that's a big component of Simon's Property. A big selling point is you can eat at nice restaurants here than you normally wouldn't see in malls. A lot of mall operators are trying to think outside the box and then having a real association and investment in a non-retail company could be a good way to use that. Don't quote me on this, I think they raised about $300 million in their IPO, so they have a good war chest to go shopping with.