US property company General Growth Properties has expanded quickly since it floated as a real estate investment trust (Reit) for the second time in 1993. Specialising in owning and managing regional shopping malls, the company had 21 centres at the time of its flotation. By the end of 1996, it held all, or part, of the equity in a further 33 centres.
In total, the company owns interests in and/or manages 115 malls in 38 states across America, comprising around 8.5m m2, and has total assets of $1.8bn.
The origins of the Chicago-based group lie in a private property company founded by the late Martin Bucksbaum and his brother Matthew, pioneers of regional shopping centres in the US. The company opened its first shopping centre in 1956 and went on to build a portfolio of malls across the US, floating as a real estate investment trust in the early 1980s. In 1985, the brothers bought in the shares of the Reit, sold the properties to Equitable Life, and began building a new portfolio, as a private company.
With the rise in popularity of the Reit market during the early 1990s, General Growth was one of a number of privately-owned companies to take advantage of the buoyant market to recapitalise itself and hit the expansion trail.
|
Year to Dec 31 $000 |
1996 |
1995 |
|
Total revenues |
363,388 |
228,964 |
|
Operating expenses |
156,087 |
85,686 |
|
Net operating profit |
207,301 |
143,278 |
|
Net interest charges |
98,775 |
62,064 |
|
Funds from operations |
108,526 |
81,214 |
|
Net profit per share ($) |
2.12 |
1.69 |
In 1994, the company paid $182m for a 40% interest in CentreMark Properties, a portfolio of 19 shopping centres owned by The Prudential Life Assurance Co of America. It subsequently sold out to its partner, Australian fund Westfield Holdings in three stages, disposing of its final tranche of equity in the portfolio in January this year.
In 1995, General Growth participated in the $1.85bn purchase of Homart Development Co, a subsidiary of the retail group Sears Roebuck, which owned a portfolio of 26 shopping centres. General Growth invested around $200m, for a 38% interest in the shopping centres, which added up to 1.9m m2 of retail space. Its partners in the transaction were: New York State Common Retirement Fund; Equitable Life Insurance Co; USG Annuity and Life Co; and the Trustees of the University of Pennsylvania.
General Growth has an active development programme, aiming to open two or three major new centres each year, while carrying the expansion and renovation of existing centres. In the last quarter of 1996, six projects at existing centres were completed, adding 33,165 m2 to the portfolio. The occupancy rate of the centres, excluding new developments, was 86% at the year end.
Two large developments are due for completion during 1997: the 92,900 m2 Brass Mill Center in Waterbury, Connecticut; and the 8,361 m2 Coral Ridge Mall in Coralville, Iowa. Other projects are due for completion next year in Texas, Michigan and Florida.
The Bucksbaum family and a number of other investors have retained a private interest of around 40%. The properties are owned by a limited partnership, General Growth Properties LP, of which the Reit owns 60%. The remaining 40% is privately owned through the issue of operating units.
The market capitalisation of the publicly traded shares was $970m at January 31, implying a total value for General Growth Properties of $1.5bn, according to the National Association of Real Estate Investment Trusts. This makes it the third largest retail mall Reit in the US, behind Simon Debartolo Group ($4.5bn) and Taubman Centers ($1.9bn).
General Growth has recorded steady profits growth. In the fourth quarter of 1996, earnings net of interest charges (funds from operations), increased by 37% compared with the same period in 1995, to $32m. For the year as a whole, earnings were up 34% to $108.5m. Since the flotation, FFO on a per share basis has increased by 15.5% per annum. Debt as a percentage of total market capitalisation was 49% at the end of 1996.
While a number of Dutch funds own shares in the company, General Growth has no plans to expand its operations to Europe, although it is keen to court European retailers who are expanding in the US.
General Growth Properties
55 West Monroe, suite 3100
Chicago
Illinois 606603
USA
tel 1 312 551 5000
fax 1 312 551 5475
