General Growth will acquire a portfolio of 18 shopping centers with 10.3 million sf and 26 community centers with 3.4 million sf, 83% leased at an average rent of $16.20 per sf. The larger REIT's overall occupancy is 91%, and the average rent in the new properties is "significantly lower" than the rest of General Growth's portfolio. Besides Utah, the JP Realty portfolio includes holdings in Arizona, California, Idaho, New Mexico and Washington, which are expected to produce a 10% return.

"One of the things that is so attractive to us about this portfolio of shopping centers is the dominance that they enjoy in this particular region," says chief executive officer John Bucksbaum, noting they tend to be the only mall in town. "This is something we're accustomed to and particularly like."

While sales at JP Realty's centers and malls are $260 per sf, that is nearly $100 per sf less than General Growth's level. "One has to recognize the markets and what is the level of profitability for the retailers," Bucksbaum says. "Retailers don't have to do $400 per sf to make a profit."

Adds president and chief operating officer Robert A. Michaels, "One of the real upsides here is there are a lot of national retailers who aren't in these properties but want to be."

General Growth may decide later to sell off some of the 26 community centers and 1.3 million sf of industrial space, most of it in the Salt Lake City area, Bucksbaum says, after the REIT gets "a better understandings" of those holdings, which make up 15% of the deal.

The 18 shopping centers have very little deferred maintenance, Bucksbaum says, even though some may present redevelopment opportunities.

"We view this as a good old-fashioned opportunity to make money," Bucksbaum says. "There's nothing exotic about this. It's a straight-forward black-and-white kind of deal, the kind we've been successful with."

General Growth will put up $440 million in cash, assume $576 million in debt. JP Realty stockholders will receive $26.10 per share. Chief financial officer Bernard Freibaum says General Growth has $300 million in hand but can quickly raise the rest.

"Our shareholders will receive a favorable premium over the Company's historical trading price and net asset value, and our tenants, employees and other capital providers will benefit from the strengths of a newly expanded General Growth, which is already one of the largest owners of shopping centers," says JP Realty chairman and chief executive officer John Price.