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GGP's New CEO Looks To Transform REIT's Portfolio

Sandeep Mathrani, Newly Appointed CEO of General Growth Properties, Rolls Up Sleeves To Remake REIT: "Our Job is Lease, Lease, Lease."
March 9, 2011
Sandeep Mathrani, Newly Appointed CEO of General Growth Properties
Sandeep Mathrani, Newly Appointed CEO of General Growth Properties
Three months into the job, Sandeep Mathrani, the newly appointed CEO of General Growth Properties, has embarked on a plan that would shrink the giant shopping centers owners' portfolio and strengthen its strongest performing properties.

Mathrani, previously president of the retail division at Vornado Realty Trust, held his first quarterly conference call this past week and sketched out GGP's plans going forward.

"It's time to roll up my sleeves to transform and rework our assets," Mathrani said.

One area where Mathrani has the mall owner becoming more active is in the disposition sector.

"Since November 2010, we've reduced our asset base by 3.4 million square feet comprised of eight strips or power shopping centers, and three special consideration properties, totaling $84.7 million of net proceeds and reducing our debt by $213 million," Mathrani said. "We are under contract to sell three additional assets totaling 1.1 million square feet for a contract price of $154.8 million, further adding $143.5 million of net proceeds to our treasury. In total, this activity has produced net proceeds to us of $228 million and has retired non-repos debt of $216 million."

"Our target is to have a portfolio comprised of 150 assets, principally malls. Completing these dispositions would enable us to generate proceeds of approximately $2 billion and pay down approximately $1.6 billion of debt," he said.

GGP currently has 180 malls, 11 of which are expected to be given back to lenders, Mathrani said. That would bring its portfolio down to the 169 and would mean it would still have 19 assets or so to sell.

"We would like to sell our non-core strips and office, again opportunistically," Mathrani said. "We're looking to sell the stand-alone strip shopping centers and the stand-alone office buildings as the market improves."

Mathrani said he hopes to execute the disposition plan by the end of this year.

Another part of Mathrani's plan is to refinance approximately $5 billion in individual mall mortgages and extend the company's overall maturity schedule.

"We've embarked upon a significant mortgage refinancing plan and environment of low interest rate allows us to achieve more favorable terms than we had imagined before," Mathrani said. "Since November, we have refinanced two properties for $315 million. We're in the process of closing a $185 million mortgage and are documenting loans on six additional assets totaling $1.47 billion. So, all in all, we're about halfway to our goal."

The company has also increased its revolving credit facility from $300 million to $720 million with 'accordion' feature permitting it an increase up to $1 billion.

Leasing is another important aspect of Mathrani's plan.

"In 2010, we executed 2,400 leases totaling 7.2 million square feet," he said. "We will look to continue above that pace. We expect to do about 10 million square feet and 4,000 leases in 2011. Our job is lease, lease, lease."

Development is the fourth and future component of Mathrani's transformation plan.

"Now is the time to mine our existing portfolio. We will remain competitive and will continue to invest in our properties," he said. "We estimate that over the next five years there is $1.5 billion to $2 billion of discretionary opportunities that may be available to us."

"Where I see the money to be deployed is to take the better assets and make them stronger," Mathrani said. "We're seeing - I don't want to give names of assets, but there are a dozen that come to mind where we are going to have two anchors and we'll add a movie theater. We'll add a department store or a discount department store and these are in urban markets, whether they'd be in San Francisco or whether they'd be in the New York metro area and whether they'd be in the Mountain states."

"Because we don't see any new mall development in the near term, it just allows us to make the malls we have stronger, because they are very well located. So actually I will start seeing deployment of that capital some time in 2012," he said.

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