The mall moguls: Melvin Simon & Associates is the country's number one developer of shopping centers.

• Author: Pockrass, Steven
• Position: Cover Story

The Mall Moguls

Melvin Simon & Associates is the country's number one developer of shopping centers and is opening the country's largest mall next year in Minneapolis. Circle Centre in hometown Indianapolis should be a snap.

As pacesetters in the shopping center business, brothers Melvin and Herb Simon have spent the last three decades building an empire and amassing a fortune. But after years of upward growth, the Indianapolis-based mall magnates now find themselves in the unfamiliar and uncomfortable position of having to tighten their belts around an expanded midsection.

While their industry grapples with a midlife crisis, the Simon siblings are restructing their overextended company, trimming fat and retrenching.

"For three years, we kept building up, building up," says younger brother Herb, 55, who is president of Melvin Simon & Associates Inc. and is most involved in its day-to-day operations. Instead of maintaining a large standing army, he says, the company now needs a "rapid deployment force" that can respond quickly to crises and take advantage of opportunities.

But even with a Schwarzkopf-style battle plan and a Rambo-inspired physique, the Simons will face difficult challenges in the years ahead. They struck some big deals during the past decade--deals that today seem even more daunting because of upheaval in the financial and retail communities.

Simon, for example, is the managing partner in the $625 million Mall of America development, which is scheduled to open near Minneapolis in August 1992. It will be the country's largest enclosed retail and entertainment complex.

The brothers also are part of a partnership that is transforming rundown railroad property in New Jersey into a $10 billion planned community known as Newport Centre on the west bank of the Hudson River, across from New York City.

In downtown Indianapolis, they are moving forward on Circle Centre--a mix of retail, office and hotel space with a potential price tag of $1 billion.

While the brothers spend time, money and resources on these high-profile endeavors, they also must refine existing projects. As developers of standard regional malls, they have been quite successful. But with an oversaturated suburban market, the Simons and other industry leaders are focusing more attention on urban and mixed-use developments. And in these areas, the road to success has been long and bumpy.

Melvin and Herb Simon entered the fledgling shopping center industry on the ground floor and climbed the stairs until they got to the penthouse. Mel admits their ascent didn't follow any grand scheme. "I had a lot of ambitions, but I never planned that far in the future. I just do what I want to do and have to do now."

"I really would like to say we're trendsetters," Herb comments. "But I really don't think we are."

Although the Simons have not necessarily been the first to take certain risks, they have kept a keen eye on the cutting edge. Today, their privately held company manages and has an ownership interest in 167 shopping centers in 35 states. The brothers also own the Indiana Pacers basketball team and have a combined net worth estimated by Forbes magazine at $900 million or more.

In terms of gross leasable area, Melvin Simon & Associates is the number one developer, number two manager and number two owner of enclosed malls and strip centers in the country, according to annual rankings released in the January 1991 issue of Monitor, a trade publication.

Monitor reports that MSA developed and opened 13.15 million square feet of gross leasable area during the three-year period that ended Dec. 31. As of the end of 1990, the company managed 71.19...