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by Kris Hudson
Online.WSJ.com

Simon Properties Group Inc., already the nation’s largest shopping-mall owner, made a $10 billion bid to acquire rival General Growth Properties Inc., which is seeking to emerge from bankruptcy proceedings, in a takeover effort that could alter the retail landscape in hundreds of American communities.

In a signal of consolidation in commercial real estate, Simon Properties has bid to buy fellow mall operator General Growth for about $10 billion. John Spence of MarketWatch discusses.

If its bid is successful, Simon, which started in 1960 with a single property in Bloomington, Ind., would sit atop an empire of 550 malls—at least a third of the U.S. market. More important, it would own nearly half of the country’s 319 best-performing malls in terms of sales, giving it unmatched power over retailers and control over the look and feel of the shopping experience.

Its size would mean that retail chains such as Gap Inc. and AnnTaylor Corp. would have only one landlord to deal with when negotiating leases and opening stores at many high-end malls. A mall owner with hundreds of properties can pressure retailers into opening stores in struggling locations as a condition of getting space at its choicest sites. In addition, a retailer is less likely to fight a giant landlord over rent and other lease terms for a single store if the standoff might influence lease negotiations at the landlord’s other properties.

“I don’t think it’s good for the industry,” said Greg Maloney, chief of Jones Lang LaSalle’s brokerage operation for retail properties, which represents buyers, sellers and retailers. “It’s going to make a lot of retailers uncomfortable to know they have this one, huge developer they’ll have to go through to get deals done.”

The proposed takeover is hardly a shoo-in, however. Late Monday, Simon won a key ally when the committee representing General Growth’s unsecured creditors endorsed its bid. But any deal would also require the approval of General Growth’s board and the judge overseeing its bankruptcy case.

General Growth responded late Tuesday in a letter to Simon that it will evaluate Simon’s bid along with its other options. It said Simon’s bid “is not sufficient to preempt the process that we are undertaking to explore all avenues to emerge from Chapter 11.”

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