Simon spared no expense with Manhattan residence

David Simon’s wooded estate in Carmel is nice, but when you run the largest real estate company in the entire world, is it really enough?

Simon’s Indiana home certainly seems modest compared with the Manhattan residence he and his wife, Jackie, picked up in late 2011 for $25 million—and where they now spend a significant chunk of their time.

The purchase ranked as the 12th-largest residential sale in New York City last year, according to the real estate website Curbed NY. The 7,500-square-foot abode at 625 Park Ave. occupies the entire fourth floor of the 15-story building, which also is home to famed private equity investor Henry Kravis.

Simon

The limestone-clad building, constructed in 1931, sits just two blocks from Central Park and two miles from Simon Property Group Inc.’s Manhattan office. So you can’t argue with the location.

A Simon Property spokesman did not respond to inquiries about what led the couple to buy the home or how much time they plan to spend there.

But Jackie is from New York and has family there. Plus, David has known his way around the city for a long time. Before joining the family company in 1990, he was a vice president of the Wall Street firm Wasserstein Perella & Co.

To be sure, even if Simon hadn’t bought the high-profile residence, he’d be making regular trips to New York, the deal-making capital of the world, for business. The long-acquisitive real estate company has struck a flurry of joint ventures in recent months to accelerate its expansion into global markets, including Brazil, China, Japan and Korea.

David Simon isn’t the first Indiana executive to look beyond Carmel at the height of his success. Stephen Hilbert, then CEO of Conseco Inc., bought a $6 million condo in New York City in 1993, but sold it a year later after remarrying and moving into a newly built 30,000-square-foot mansion on 116th Street in Carmel.

A Park Avenue address certainly doesn’t break Simon’s bank account. In recognition of the company’s blistering performance under his watch—the 10-year total return tops 600 percent—the board in 2011 granted him $120 million in restricted stock. He can’t collect the full grant, which is on top of the millions he receives in annual compensation, unless he stays with Simon until mid-2019.

That retention bonus was part of a new contract Simon signed in July 2011, just months before he made the Park Avenue purchase.

Language in the 15-page agreement, filed with the Securities Exchange Commission, suggests Simon Property board members wanted to ensure Simon’s desire to spend time in New York wouldn’t make him MIA at the company’s Indianapolis headquarters.

The contract says: “The executive shall perform his services at the principal offices of the company in the Indianapolis, Indiana, area; provided that the executive may perform an agreed-upon portion of his services from New York City pursuant to a workplan developed by the executive and approved by the board, such approval not being unreasonably withheld.”

It isn’t clear what Simon and the board agreed upon. The work plan isn’t included in the company’s SEC filings.

Outlet mall free-for-all

Competition is heating up in the outlet mall business, which has been a huge growth engine for Simon Property Group. But in a conference call with analysts on Oct. 25, David Simon insisted he’s not worried.

Analysts peppered the executive with questions about the company’s recently announced plan to open an outlet mall in Charlotte, N.C.—a project that’s close to a Tanger Factory Outlet project announced one day earlier.

Simon also recently started construction on an outlet mall in suburban St. Louis, even though Taubman Centers Inc. has its own outlet mall under way just down the road.

Investors have absolutely nothing to fear, Simon said, because “we have earned the respect and the confidence of our retailer partners, and when we announce an outlet center development, we expect to lease it, and they have all the confidence in the world that we’ll be able to do so.”

Pressed further later in the call, Simon added: “Look, I can only answer from our perspective. We will not make any outlet mistakes. OK? The reason we won’t is, we are the best franchise in this business. I just know that we won’t make a mistake. I can’t say the same for others. That’s not my job to worry about what others do.”

On a separate conference call the same day, Taubman CEO Bobby Taubman was more circumspect about the competing St. Louis projects.

“Well, obviously, if two projects are built, that’s going to fragment the market,” he said. “It will reduce sales productivity, which would modestly impact the returns. But the returns would still be attractive.”•