GGP Gains Summerlin Ownership – Analyst Blog

General Growth Properties Inc. (GGP), a real estate investment trust (REIT) that owns shopping malls in the U.S., has recently obtained the remaining stake of a residential development project in Las Vegas called Summerlin for $230 million. With the deal, General Growth would gain full ownership of the property from the legal heirs of its erstwhile owner Howard Hughes.

 

According to the terms of the deal, General Growth would pay $220 million either in cash or stock within 30 days of its exit from bankruptcy later this year, and $10 million in cash for advisers’ fees. The company expects to emerge from bankruptcy proceedings in November 2010.

 

Earlier in April 2009, General Growth had voluntarily sought relief under Chapter 11 of the U.S. Bankruptcy Code to reduce and restructure its debts after several months of negotiation with the lenders who failed to offer a viable long-term solution. During the bankruptcy proceedings, the company continued all its day-to-day operations in all the shopping centers and other properties, while exploring strategic alternatives for available sources of capital to emerge from bankruptcy as quickly as possible.

 

Post-bankruptcy, General Growth has proposed to divide its holdings into two groups, the namesake and Spinco. According to the restructuring plan, both the companies would be publicly traded, and current shareholders in General Growth would receive common stock in both Spinco and the namesake company.

 

The restructuring plan to emerge out of bankruptcy proceedings of General Growth is funded with investments from Brookfield, Fairholme Capital Management LLC, and Pershing Square Capital Management LLC. These investment firms have committed to providing $8.55 billion in new capital. The restructuring plan suggests that all these companies would also be investors in Spinco.

 

General Growth is the second largest shopping center owner, manager, and developer in the U.S. The company owns and manages a portfolio of more than 200 regional shopping malls in 43 states. The aggregate portfolio amounts to 200 million square feet of retail space including over 24,000 retailers nationwide.

 

The rating on General Growth is currently Neutral with a Zacks #3 Rank, which translates into a short-term Hold recommendation and indicates that the stock is expected to perform in line with the overall U.S. equity market for the next 13 months.