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Analyst: Not Enough Demand for Two Outlet Malls in Chesterfield

A financial analyst with investment website Seeking Alpha called the competition between Taubman Prestige Outlets and St. Louis Premium Outlets a gamble with no clear victory.

With the battle for outlet mall supremacy in Chesterfield heating up, some financial analysts are doubting assertions that there is enough consumer demand to support success for both projects.

Writing in investment website Seeking Alpha, Brad Thomas called it “a gamble” by both Taubman Centers (Taubman Prestige Outlets) and Simon Property Group (St. Louis Premium Outlets) that is being waged “with no clear victorious outcome.”

While acknowledging that the market may be underserved, Thomas said there simply isn’t enough demand to support the combined 800,000 square feet of retail space that will open in August.

Thomas comments were in light of a recent earnings conference call held by Taubman, in which executives with the companies defended their moves in Chesterfield Valley.

Robert Taubman, CEO of Taubman Centers, has acknowledged that having both the Taubman Prestige Outlets and St. Louis Premium Outlets built within a few miles of each other will “modestly impact returns” since the consumer market will be split between the two.

He re-iterated an often made talking point by both developers that the St. Louis area is a “terrific market” that will still be capable of delivering attractive returns, despite the competition. However, the company has adjusted their forecast downward in light of the competition from the Simon project.

Thomas noted that of the two, Simon is the much larger company, with a market cap of around $49 billion compared to Taubman’s $4.9 billion. With the outlet mall market expected to grow in the coming years, Thomas said it’s likely that competition for prime slices of consumers, such as in St. Louis, will only become more intense.

With construction well underway, the two developers are now engaged in a fierce battle for tenants. The St. Louis Business Journal recently reported that two prize retailers -- Polo and Nike -- will be split between the two with Polo signing for Taubman and Nike secured by Simon. 

A spokesperson for Simon also told the Business Journal that the St. Louis Premium Outlets are now 90 percent leased and talks have begun concerning a second phase of development. 

About the Outlets:

St. Louis Premium Outlets is set to open Aug. 22. The $100 million, 350,000-square-foot complex will include 85 stores located on the south side of Highway 40 just east of the Daniel Boone Bridge. It is being developed by Indianapolis-based Simon Property Group and Forth Worth, Texas-based Woodmont Outlets.

Taubman Prestige Outlets is set to open Aug. 2. The $150 million, 450,000-square-foot project will include more than 100 stores on North Outer 40 east of Boone’s Crossing. It is being developed by Bloomfield Hills, Mich.-based Taubman Centers and Warren, N.J.-based OutletPartners LLC. 

Michael Sword February 26, 2013 at 02:43 PM
This is about greed from Chesterfield politicians who only see tax revenue but fail to recognize the long-term impact on Chesterfield Mall for one and after the initial hype and fanfare, maybe 24 months, the ultimate VACANCY's in the outlet malls due to too much competition and simply lack of enough business. I would love to be proven wrong but St.Louis Mills was hyped as a "tourist attraction" prior to opening. Take away Cabela's and the fact that the Blues practice there, what else is there? Perhaps one, maybe, perhaps one outlet mall but two? The greed of unwise, short-sighted simpletons.
Karen Taylor-Rosner February 26, 2013 at 07:45 PM
I agree with you, Michael. The residents of Chesterfield are going to be seeing a lot of empty buildings once the hype from TWO outlet malls wears off. Did we need a financial analyst to tell us this? This is what many Chesterfield residents have been stating all along.
Dick Hrabko February 26, 2013 at 08:09 PM
If the City would have denied the zoning to either developer they would have exposed themselves to massive lawsuits which they would probably lost and still have been required to grant the approvals. The City's long standing Comprehensive Plan calls for commercial uses in the Valley including retail. Political subdivisions cannot make zoning decision contingent on their views on the economic viability of the projects. The Mall developers are both sophisticated and successful and apparently believe the projects are both feasible.
Frank Johnson February 26, 2013 at 08:20 PM
Dick, thank you so much for your comment, which clears up what I think is a widespread misunderstanding about this issue. In fact, city officials have repeatedly told Patch and other media outlets that they would have liked only one outlet mall to be built. Simon and Taubman are both engaged in expanding rapidly internationally and, for whatever reason, chose Chesterfield as a head-to-head battleground.
brenda shaw February 26, 2013 at 08:45 PM
Where were our elective officials? Were they not elected to be protect Chesterfield and our future?
D. Todd Williams February 27, 2013 at 03:59 AM
Dick, If you take a look at the Chesterfield City Council minutes the Simon property applied for what is called a CID and that requires the vote of City Council, it passed 6-1 with one absention. The Taubmann property applied for a TDD which goes through the Circuit Court system has nothing to do with the City Council. You will probably be asking why the Chesterfield Mall will be asking for a handout in the next few years when the playing field has been altered like it has by this tragic move. The whole country is watching this experiment and since I have been a resident for over 16 years I truly hope the City Council has not made a huge mistake by picking winners & losers.
Michael Sword February 27, 2013 at 11:52 AM
So Dick and Frank, if I understand you correctly, because of the potential for a lawsuit, elected officials of Chesterfield, for lack of a better word, have been essentially blackmailed into allowing these centers to be built? Are you saying that because of a Comprehensive Plan, they simply had to bend over and say, "We'll just be forced to accept this added tax revenue and we'll just have to deal with empty buildings and empty spaces at Chesterfield mall when and if that happens." Is that the story here? Were the elected officials hands tied? Did they have no recourse? Are you saying that no blame can be given because the Chesterfield elected officials had no authority to stop this from going forward? Simon and Taubman had all their ducks in the row, are big players, with lawyers, and Chesterfield elected officials became eunuchs, and had to go to the corner of the room and cower in the fetal position? It seems to me THAT is what you are saying?
Steve March 30, 2013 at 01:38 PM
Michael, are you looking for the City of Chesterfield to spend all of your tax dollars in court fighting development? What other developments would you like to stop? This is private property and they have the right to build on it. We must guide that construction with the use of our elected officials and that is what we have done. What else do you envision being in a flood plain if it isn't commerical or retail?
Michael V May 10, 2013 at 01:45 PM
What I would expect in a flood plain is corn, maybe baseball or soccer fields.

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