BofA Analysts Upgrade GGP

CHICAGO-At least one pair of retail real estate analysts believes General Growth Properties Inc.’s common stock has been oversold, and is upgrading its recommendation to a “buy” signal. “We believe the recent sell-off in the shares driven by short-term risks has been overdone,” says Bank of America’s Ross Nussbaum and Christy McElroy in upgrading General Growth Properties from a “neutral” rating.

Reasons for the sell-off included the mall REIT missing fourth-quarter earnings targets, mostly related to the $7.2-billion merger with Rouse Co. in 2004, as well as a delay in filing a report with the Securities and Exchange Commission after tax accounting issues were raised. In addition, an up-tick in interest rates affected General Growth Properties’ stock price, as 26% of the company’s debt is floating rate, the analysts say.

Helping drive the upgrade is the belief class A malls are more likely to outperform lesser grade shopping centers, which could see a larger number of store closings by struggling retailers, according to Nussbaum and McElroy. “Specialty retailer square footage growth is expected to remain healthy, with 4% growth in 2006,” they say. “Highly-productive, market dominant malls should capture most of this demand. Class A malls should be well insulated from store closings.”