The nation's largest owner of malls announced Tuesday it is acquiring Prime Outlets Acquisition Co., the Baltimore-based owner of outlet shopping centers, from Lightstone Group in a $2.33 billion deal.

Under the agreement, Simon Property Group would become the owner of 22 outlet malls owned by Prime around the country, including Prime Outlets Hagerstown and Prime Outlets Queenstown in the Baltimore area. Simon will assume Prime Outlets' debt and preferred stock.


Retail analysts said that Prime is a good match for Simon, which has been expanding its outlet business in recent years. It bought outlet mall owner Chelsea Property Group in 2004 for $3.5 billion. In 2007, it partnered with hedge fund Farallon Capital Management LLC to buy The Mills Corp., which owns Arundel Mills in Hanover, in a $7.9 billion deal that included debt and preferred stock.

"It is a very good integration into their family of centers," said Mark Millman, president of Millman Search Group, an Owings Mills executive search firm specializing in retail.


Steve Sterrett, the CFO of Simon Property, said the company has been happy with its outlet business, particularly in light of the bad economy as more shoppers look for bargains. He said Prime Outlets properties would enhance the company presence in areas where it already owns malls, including Orlando, Fla. It will also put Simon into new markets, such as Williamsburg, Va.

"The outlet sector is a very good business for us," Sterrett said. "We've had a lot of success in it. The Prime Outlets portfolio is a very good strategic fit."

It is unclear whether the acquisition would mean a loss of jobs at Prime's Inner Harbor headquarters. Prime Outlets did not return calls about how many people it employs in Baltimore.

"The ink is barely dry on the deal and it won't close for several months," Sterrett said. "Let's give it a little bit before we get into the weeds."

Millman predicted there would be losses in areas such as human resources, legal and leasing because of a duplication of jobs. He said the company consolidated many jobs when it bought Chelsea.

"There is no way in my opinion that they would keep two sets of outlet leasing people who are calling on the same retailers," Millman said. "It makes no sense whatsoever."

Prime Retail struggled financially until 2003, when Lightstone acquired the company, took it private and invested millions of dollars to refurbish the centers. As of June 30, the centers were 92 percent occupied and generated annual sales per square foot of $370, according to the company.

Lightstone executives weren't available for comment Tuesday.


"The complementary fit of our two businesses and Simon's skills in property management offer a significant value creation opportunity," David Lichtenstein, Lightstone CEO and founder said in a statement.

Retail experts said that Lightstone was looking to raise cash to help recover losses from a hotel company it bought right before the commercial real estate market crashed. Others said Lightstone is in the business of making investments and selling them when they've reached their potential.

"They're not looking to operate retail companies," said Rene Daniel, a principal with retail brokerage Trout Daniel & Associates. "They're looking to grow retail companies and sell them."

Simon has also said it is looking to buy malls from bankrupt General Growth Properties. GGP owns several malls in the Baltimore area, including Mondawmin Mall, White Marsh Mall, Owings Mills Mall, Towson Town Center and The Mall in Columbia.