Mall REIT (real estate investment trust) Simon Property Group (NYSE: SPG) decided to get into the SPAC game earlier in 2021 by launching its own blank-check company called Simon Property Acquisition (NYSE: SPGS.U).
The SPAC raised $345 million in its IPO, and in the roughly six months since then, investors have been wondering what company Simon would choose to take public. Would it be a retailer? An entertainment business? Or something else entirely?
While we don't have any official news to report just yet, there have been reports that Simon is in talks with a specific business. Here's what we know so far, what the reported target company does, and what investors should keep in mind.
Simon may have found an acquisition target
When Simon Property Acquisition completed its IPO earlier this year, its registration statement was intentionally vague when it came to the type of business it might acquire. It listed industries like food and beverage retail, entertainment, hospitality, and health and wellness, among others, but also listed "other sectors" as a possibility.
Well, it looks like "other sectors" is where Simon is going.
According to sources familiar with the matter, Simon Property Acquisition is reportedly in talks with Kastle Systems, a commercial property security software company. Kastle is already backed by Mark Ein's Venturehouse Group, and Ein himself is a SPAC veteran, having started five of the blank-check companies himself.
What Kastle Systems does
Kastle Systems provides an operating system that enables certain property management functions. For example, its software can be used to facilitate visitor passes and video surveillance. It allows property managers to do things like schedule visitor access or provide self-service kiosks and provides its solutions for multifamily as well as other types of commercial properties.
The company has 16 offices throughout the United States and Australia and has an impressive client list. Among the companies who use Kastle Systems' product are AvalonBay, GrubHub, CBRE, Virgin Hyperloop One, Cousins Properties, Cushman and Wakefield, and the U.S. Securities and Exchange Commission, just to name a few.
What investors need to keep in mind
If Simon Property Acquisition ends up merging with Kastle Systems, it could be a long-term positive for Simon Property Group and the REIT's shareholders. After all, as sponsor of the SPAC, Simon owns 20% of the shares of the blank-check company as well as a substantial amount of warrants to buy more at a later date (which would expire worthless if no deal were to occur).
While the report seems credible, it's important for investors to keep in mind that we don't know anything about the deal just yet. We don't know the valuation Simon Property Acquisition will give Kastle in a potential deal, when it will happen, or any other terms that are being discussed. And it's also important to emphasize that the companies are reportedly in talks, meaning that there is no guarantee whatsoever that a deal will happen at all. SPAC merger talks fall apart quite often, so it's entirely possible it could happen here.
In a nutshell, Simon investors (either in Simon Property Group or Simon Property Acquisition) should continue to monitor the news for an official announcement. But it does appear that this particular SPAC is inching closer to a deal.