General Growth acquires JP Realty

DIPPING INTO A CASH PILE FROM its failed Rodamco North America bid, General Growth Properties Inc. will acquire JP Realty Inc. of Salt Lake City for $1.1 billion. The deal, expected to close during the second quarter, will add 18 malls and 26 community centers to the Chicago-based REIT's portfolio.

General Growth has been sitting on a $350 million cash pile since its failed 2001 bid to acquire the portfolio of Rodamco North America. “General Growth has clearly been in the marketplace looking for a home for that money and JP Realty is obviously a good place to put it,” says Ross Nussbaum, retail REIT analyst with Salomon Smith Barney. “We understand they are also looking at a couple of other transactions.”

The total acquisition price of $1.1 billion includes about $440 million in cash, the assumption of about $460 million of existing debt, and $116 million of existing preferred operating units. The acquired portfolio includes 18 regional malls with 10.3 million sq. ft. of GLA, 26 community centers with 3.4 million sq. ft. of GLA, and an additional 1.3 million sq. ft. of industrial properties. The malls posted average sales in 2001 of $260 per sq. ft.

The deal marks General Growth's fifth acquisition since it became a public REIT in April 1993. After the transaction closes, General Growth will have ownership interests in 120 regional malls with an aggregate value of about $10 billion.

In a statement, General Growth CEO John Bucksbaum described JP Realty as the “dominant” mid-market retail property management and development firm in the inter-mountain states region, which includes Utah, Arizona, Nevada, Washington, California, New Mexico, Colorado and Oregon.

Rodamco shareholders OK deal with retail giants

RODAMCO NORTH AMERICA'S shareholders have approved the Dutch company's plans to sell its assets to Westfield, Simon Property Group and The Rouse Co.

According to wire reports, 88% of the Rodamco North America (RNA) shareholders present at a shareholder meeting in Rotterdam, Netherlands on March 25 gave the takeover a green light. A two-thirds majority was required.

A Dutch court had cancelled a scheduled Feb. 26 shareholder meeting on the deal after an activist shareholder group lodged complaints of mismanagement against RNA's board.

Analysts and the REITs themselves had said the shareholder “nuisance suit” posed no threat to the $5.1 billion bid. The transaction, which has now been approved by shareholders for all parties involved, includes 35 high-profile regional malls across the country.

Westfield, Zurich cap World Trade Center insurance dispute at $55M

WESTFIELD AMERICA TRUST OF LOS Angeles and Zurich Financial Services have resolved a dispute over supplementary insurance coverage on Westfield's retail component of the World Trade Center. The firms will enter into binding arbitration to determine exactly how much Zurich will pay Westfield, but agreed to cap the amount at $55 million. The agreement also states that the Zurich policy contains no terrorism exclusion.

Westfield has separate primary coverage for its interest in the 99-year lease on the retail component of the World Trade Center under the $3.5 billion “per occurrence” insurance policies provided by a consortium of insurance companies.

A Westfield America spokeswoman declined to comment, but in a prepared statement Westfield said it remains confident that it has adequate insurance coverage and that the loss of its retail complex in the World Trade Center will not have a material impact on Westfield America Trust. “Westfield's investment was fully insured for loss of both capital and income, including for terrorist attacks,” the firm said.

Westfield finalized a 99-year lease on the 427,000 sq. ft. WTC retail center in July 2001 — just two months before the buildings were destroyed in the Sept. 11 terrorist attacks. According to Westfield, property insurance from Zurich covers the trust's entire shopping center portfolio. The policy automatically covered new properties when notice of their inclusion in the portfolio was provided to the insurer within 90 days of an acquisition.

Zurich had contended that the WTC was not included in the retailer's insurance coverage, but Westfield argued that it gave Zurich formal notice of the inclusion of the WTC shopping center well within the required 90-day window.