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ROUSE DEAL BOOSTS GGP’S PROFILE

BY DONNA MITCHELL

General Growth Properties' pending $12.6 billion acquisition of The Rouse Co. would put it not far behind Simon Property Group in terms of square footage owned.

If successful, this deal, which awaits the approval of Rouse shareholders, would make Rouse a wholly owned General Growth affiliate. The transaction would confer to General Growth about 40 million square feet of retail and mixed-use space, bringing its total to about 190 million square feet. In addition, General Growth gets 9 million square feet of office, industrial and other kinds of commercial space, as well as several large community developments, including Columbia in Maryland.

Simon, for its part, owns or holds interests in 247 shopping centers and some office and hotel space in North America and Puerto Rico, all of which amounts to about 192 million square feet of gross leasable area. The firm owns a further 9.1 million square feet of retail in Europe and will gain an additional 16.7 million square feet when its acquisition of Chelsea Property Group closes in the fourth quarter. At that point Simon will own a total of about 218 million square feet of real estate.

The acquisition will give General Growth interests in 37 regional malls, four community centers and six mixed-use projects. The portfolio includes such world-class properties as Faneuil Hall Marketplace, Boston; Fashion Show, Las Vegas; Park Meadows, Denver; New York City’s South Street Seaport; and Water Tower Place and Oakbrook (Ill.) Center, both in the Chicago area. Sales in these retail properties average $439 per square foot, and occupancy is approximately 92 percent.

Morgan Stanley says the price puts a 5.4 percent cap rate — slightly above market — on Rouse’s shopping center portfolio, which the investment bank describes as among the best in the mall sector.

Rouse’s properties “have always been considered to be among the most highly productive properties in our business, noted General Growth CEO John Bucksbaum, SCSM, in a conference call with analysts.