GGP to Sell 25% Stake in Honolulu Asset to AustralianSuper - Analyst Blog

Retail real estate investment trust (“REIT”) – General Growth Properties Inc. GGP – would reap around $907 million from the sale of 25% equity stake in Ala Moana Center at Honolulu, Hawaii to the pension fund AustralianSuper.

In fact, a joint venture partnership has been formed for owning and operating Ala Moana Center, wherein General Growth would enjoy 75% stake and AustralianSuper would hold the rest. The deal values Ala Moana Center at around $5.5 billion.

With approximately 2.2 million square feet of retail and office space, Ala Moana Center boasts over $1,350 of tenant sales per square foot, ranking among the largest and most productive shopping malls in the world.

The property is currently undergoing massive redevelopment, following which, Bloomingdale’s first store in Hawaii and Nordstrom would anchor an additional 660,000 square feet of retail space.

Importantly, for General Growth, the move is a strategic fit as it would help enhance its financial position by leveraging the improving demand for top-notch assets. The company has already received around $670 million, which it intends to use for repaying a debt of same amount in the next two months. The remaining $237 million would be received in late 2016, after significant accomplishment of the redevelopment work.

Within the next 60 days, General Growth may vend another 12.5% equity interest in Ala Moana Center under same terms. The amount reaped though such moves would be used to fund a pending acquisition.

Considering the improving retail real estate market fundamentals, the company’s solid portfolio will emerge as a gainer. Portfolio-repositioning efforts as well as initiatives to strengthen ties with customers would help the company ride on the growth trajectory.

General Growth currently carries a Zacks Rank #3 (Hold). Investors interested in the retail REIT may consider stocks like Acadia Realty Trust AKR, Agree Realty Corp. ADC and National Retail Properties, Inc. NNN. All these stocks hold a Zacks Rank #2 (Buy).

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