CHICAGO-General Growth Properties, Inc. has lined up nearly $9.8 billion in variable-rate debt, with an initial rate of approximately 4.3%, to close its much-anticipated acquisition of the Rouse Co. Rouse stockholders are scheduled to vote on the merger Nov. 9, with a closing of the $13.5-billion expected Nov. 12.
In a Securities and Exchange Commission filing, General Growth Properties officials say they have arranged the variable-rate financing with a group of lenders, and will use the loan to buy the Rouse Co. as well as refinance existing debt. General Growth Properties officials also report in this week's earnings conference call that they are refinancing $2 billion in variable-rate mortgages on some of their shopping centers with fixed-rate loans. The company is aiming to reduce its variable-rate debt from 30% of its total to about 15%, says chief financial officer Bernard Freibaum.
In addition to a 40-million-sf shopping center portfolio that includes Water Tower Place on Michigan Avenue and Oakbrook Center in Oakbrook, The Rouse Co. also owns office buildings and is involved in community development projects near its home base in Columbia, MD as well as Summerlin, NV and Houston. Until August, Rouse holdings also included an interest in the Westin New York hotel.
General Growth Properties chief executive officer John Bucksbaum says his REIT still has to complete an asset-by-asset evaluation of the Rouse Co.'s asset, but expects "business as usual" at the additions to his company's portfolio after the closing. He indicates the company's approach to the Rouse Co.'s non-retail assets will be similar to its strategy used with JP Realty's industrial portfolio inherited in a 2002 merger. It held the $45-million collection of assets, Bucksbaum says, filled large vacancies, and now has a $63-million portfolio for sale.
"Our enthusiasm for this deal gets greater with each passing day," says Bucksbaum of the transaction that will increase his company's market capitalization from $19 billion to $32 billion. The merger creates a REIT with 69 centers in 21 of the Top 25 US markets, including 60 in the top 17, he adds. "We can't wait for this transaction to close."
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