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CHICAGO-The $12.3-billion acquisition of Rouse Co. more than doubled General Growth Properties, Inc.'s debt and gave the second-largest US retail REIT 2.3 million sf of office and industrial properties. However, General Growth Properties will refinance debt used to swing the deal more than a year ahead of schedule and is testing the market for the office and industrial assets.
In addition to assuming $5.4 billion in mortgages on Rouse Co. properties, General Growth Properties also borrowed $7.3 billion from several lenders, including Lehman Brothers Inc., Banc of America Securities LLC, Credit Suisse First Boston and Wachovia Capital Markets, LLC. The balance on a $1.1-billion bridge loan comes due later this month while other loans extend as long as November 2008.
General Growth Properties chief financial officer Bernard Freibaum says the company had planned to refinance variable-rate debt used to acquire Rouse Co.'s 67-million-sf retail portfolio to fixed-rate debt by the end of 2006. However, he says it now expects to complete the conversion no later than October.
If refinancing debt on properties results in excess proceeds, the money will be used in some of the company's 10 projects working their way through the development pipeline through 2008. The cost of those projects total $1 billion, company officials say. Among the company's smaller developments include Lincolnshire Commons, a $38.4-million big-box center with restaurant pavilion scheduled to open in the second half of 2006.
Most of the office and industrial assets that may go to market are in the Baltimore market and Pennsylvania, Freibaum says, and carry mortgages totaling nearly $70 million. Rouse Co. officials were unsuccessful in previous attempts to sell the industrial assets, he adds.
The Rouse Co. portfolio also included office space attached to two local retail assets--Oakbrook Center and Water Tower Place. Three buildings in Oakbrook total 240,000 sf of office space while the Michigan Avenue shopping center has 86,000 sf of office space.
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