Simon Property Group Inc, the largest owner of U.S. malls and outlet centers, will spin off its strip malls and smaller shopping centers into a publicly traded REIT to focus on its larger retail properties.
Simon Property said the spin-off, through a distribution to shareholders, would boost its sales per square foot, net operating income and occupancy rates.
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The company's shares rose 2.4 percent before the bell.
The new company is expected to initially own or have an interest in 54 strip malls as well as in 44 smaller enclosed malls with annual net operating income of up to $10 million each.
The new company's funds from operations are expected to be about $300 million, or 80 cents per share, in the first year, Simon Property said.
Real estate investment trusts (REITs), which must pay out at least 90 percent of their taxable income to shareholders as dividends, are subject to lower taxes and pay higher dividends than other companies.
Simon Property said the REIT's dividend was estimated to be at least 50 cents per share in the first year, representing 100 percent of taxable income.
Richard Sokolow, Simon Property's president and chief operating officer, will be the chairman of the new company's board. Chief Executive David Simon will be a director.
Simon Property's portfolio includes Roosevelt Field Mall and Woodbury Common Premium Outlets in New York, Forum Shops at Caesars Palace in Las Vegas and Lenox Square Mall in Atlanta.
BofA Merrill Lynch and Goldman Sachs acted as financial advisers to the company.
Simon Property shares closed at $148.37 on the New York Stock Exchange on Thursday. The stock has fallen 6 percent this year to Thursday's close.