General Growth Closer to Break-Up (GGP)

General Growth Properties, Inc. (NYSE: GGP) may soon need to change its name to General Break-Up.  The mall REIT operator Spinco, Inc. (“Spinco”), has filed a registration statement with the SEC for its Spinco, Inc. unit so that it can become its own independent company that will be distributed to shareholders.

Under the existing bankruptcy reorganization, this newly formed Spinco, a public real estate company, will specialize in the development of master planned communities and “other strategic real estate development opportunities.”

General Growth noted that ‘substantially’ all of Spinco’s common stock will be spun-off in a distribution to GGP’s common stock.  More importantly, General Growth will not retain any ownership of this spin-off.

The current General Growth has ownership and management of more than 200 regional shopping malls in 43 states.  Its portfolio totals approximately 200 million square feet of retail space and includes more than 24,000 retail stores.  It also has ownership in planned community developments and commercial office buildings.

A brief finance note on Spinco: “For the year ended December 31, 2009, our net loss attributable to controlling interests and Adjusted EBITDA were $703.6 million and $21.5 million, respectively, and for the six months ended June 30, 2010, our net loss attributable to controlling interests and Adjusted EBITDA were $48.6 million and $10.7 million, respectively.”  The two groups of Spinco are listed below and quoted from the SEC filing:

• Master Planned Communities: “Our Master Planned Communities segment consists of the development and sale of residential and commercial land, primarily in large-scale projects. We currently own four master planned communities (including four separate communities in Maryland that are commonly, and collectively, referred to as the “Maryland communities”) with over 14,000 acres of land remaining to be sold in desirable locations, which in some cases have no land suitable for large-scale residential development nearby. Residential sales, which are made primarily to home builders, include standard, custom and high density (i.e.,  condominium, town homes and apartments) parcels. Standard residential lots are designated for detached and attached single- and multi-family homes, ranging from entry-level to luxury homes. Commercial sales include parcels designated for retail, office, services and other for-profit activities, as well as those parcels designated for use by government, schools and other not-for-profit entities.”
• Strategic Development: “Our Strategic Development segment is made up of a diverse mix of near, medium and long-term real estate properties and development projects, some of which we believe have the potential to create meaningful value. For example, the Hawaii Community Development Authority (“HCDA”) approved a 15-plus year master plan that will permit us to transform 60 acres of land at our Ward Centers project in Honolulu, Hawaii into a vibrant and diverse neighborhood of residences, shops, entertainment and offices. Our Strategic Development segment includes nine mixed-use development opportunities, four mall development projects, seven redevelopment projects and eight other property interests, including ownership of various land parcels and certain profit interests.”

Last week’s approval of the disclosure statement was one more step to the completion of the company’s restructuring process.  Before its Chapter 11 filing, GGP had almost $28 billion of mostly short-term debt and a broad range of real estate assets. After the bankruptcy, GGP will be two focused companies with $15 billion of extended maturities and approximately $7 billion of equity capital provided by new investors.

GGP will remain one of the nation’s largest REITs with a more focused business strategy concentrating on high-quality regional shopping centers.

Spinco, will have a diverse collection of assets with development opportunities and a new board of directors and management team.

Also disclosed last week was that the court scheduled a hearing regarding confirmation of its Plan of Reorganization for October 21, 2010.

JON C. OGG