When something works, it is human nature to keep going back and doing the same successful thing again. Mall landlord Simon Property Group (SPG 0.93%) has seen material success in its efforts, with partners, to buy troubled retailers.

But there's a subtle and important difference with the rumored bid Simon and its partners have made for retailer Kohl's (KSS -1.69%). Is Simon taking a good thing too far?

The timing was right

Simon Property Group is a real estate investment trust (REIT), not a retailer. The relationship here is important, with Simon making money by collecting rent from retailers. They are two very different businesses, but Simon does have a very good view into what is and isn't working in the retail space at its roughly 200 malls and outlet centers. It also has a front-row seat from which to view the financial situations at the retailers within its collection of malls. 

Three people with bags shopping in an outdoor retail area.

Image source: Getty Images.

This is why it made some sense for Simon to work with mall peer General Growth Properties and American Brands Group to buy Aeropostale out of bankruptcy in 2016. The logic for the team-up here was pretty simple. American Brands Group provided the retail expertise, with Simon and General Growth chipping in cash and getting to keep a rent-paying tenant up and running.

The partnership has changed slightly since that point, with General Growth Properties subsequently bought by Brookfield Property Partners. Then Brookfield Property Partners was taken private by Brookfield Asset Management (BN -1.14%). So now this partnership is made up of Brookfield Asset Management, Simon, and American Brands Group.

This joint investment worked out well enough for the group to jump back into the retail-acquisition game during the depths of the pandemic, buying a raft of well-known retailers, including Forever 21, Brooks Brothers, and Lucky Brand, among others. Simon and Brookfield also worked together to buy JCPenney, later bringing in American Brands Group.

CEO David Simon noted during Simon Property Group's fourth-quarter 2021 earnings conference call that these investments have been very good: "... if you were to look at it, you know, on a private equity basis, right, you know, we've made 20x on our investments. And they're continuing to grow."

It's hard to argue with success, but...

That's an impressive backdrop for Simon's rumored push to buy Kohl's, a competitor of JCPenney. The basic idea, according to the rumor mill, is for Kohl's and JCPenney to be operated as separate brands but that they would share some internal functions, thus allowing for cost savings. And, of course, another retailer would get a second breath of life, allowing it to keep paying rent to landlords like Simon.

That's great and, assuming the success David Simon attributes to the partnership's other investments is even close to accurate, it sounds like a solid plan.

Only there's a major difference in approach here. When Simon and its partners stepped in to buy the other retail brands it owns, the brands were in serious financial trouble and few others wanted to take the risk of touching them. In other words, Simon bought at dirt-cheap prices.

Kohl's isn't bankrupt. In fact, Simon is actually one of several entities looking at an offer. So Simon probably isn't going to get a great price here, which raises the bar for success. To be fair, Kohl's is likely to be in better shape than some of the bankrupt names that were previously acquired, but in a competitive retail sector, that may not be as important as getting in on the cheap. The upshot here is that Simon and its partners might be trying to bite off more than they are used to chewing.

Watch with caution

It appears that Simon, Brookfield Asset Management, and American Brands Group have achieved material success with their retailer investments. However, the offer for Kohl's is fundamentally different because the company is not bankrupt and the acquisition price is not going to be as cheap as previous buys were. Investors need to keep a closer eye on this deal, since these key differences could end up making it a dud. It is very possible that Simon is going back to the well one time too many.