General Growth getting $500M from Texas teachers

By Reuters
Posted July 12, 2010 at 11:44 a.m.

General Growth Properties Inc., the second-largest U.S. mall owner, said it has won a $500 million equity investment from a large Texas pension fund and still expects to emerge from bankruptcy by October.

The Teacher Retirement System of Texas, which oversees $96.7 billion of assets, will pay $10.25 each for shares of a reorganized General Growth, according to a joint statement issued Monday.

This supplements a $6.55 billion equity investment that General Growth won in May from Canada’s Brookfield Asset Management Inc, Fairholme Funds Inc and Pershing Square Capital Management LP to fund its exit from Chapter 11.

That beat out a bid by Simon Property Group Inc, the largest U.S. mall owner.

The Texas fund investment requires approval by the U.S. bankruptcy court in Manhattan.

Based in Chicago, General Growth owns or has stakes in more than 200 malls in 43 U.S. states, including Faneuil Hall in Boston and Harborplace in Baltimore.

The company filed for bankruptcy in April 2009 after being unable to refinance maturing debt. It has since been slashing debt and raising equity so it can operate outside Chapter 11.

In a statement Monday, Chief Executive Adam Metz said General Growth had obtained enough capital commitments to emerge from bankruptcy, but that the Texas fund investment offered “attractive” terms.

“We continue to make excellent progress with our restructuring plan and are well on our way to exiting Chapter 11 by October,” Metz said.

General Growth in May posted a first-quarter profit, helped by an improved economy, higher sales for retail tenants and stabilizing occupancy rates.


In a court filing, General Growth said it has already restructured $14.71 billion of secured mortgage debt, reorganizing a majority of its operating entities and obtaining confirmed plans for 262 affiliates.

Separately, General Growth said it agreed for Jones Lang LaSalle Inc to take over its third-party leasing and management business for 18 malls in 11 states, including the Burbank Town Center in California and The Shops at Georgetown Park in Washington. Terms were not disclosed.

An Aug. 4 hearing has been scheduled to approve the Texas fund investment, which expires on Dec. 31, 2010 unless extended and has a $15 million breakup fee, the court filing shows.

The investment does not include a stake in a new company being spun off to shareholders.

UBS Investment Bank, Miller Buckfire & Co and Weil Gotshal & Manges LLP advised General Growth on the investment.

General Growth shares were flat on the New York Stock Exchange.

The case is In re: General Growth Properties Inc et al, U.S. Bankruptcy Court, Southern District of New York, No. 09-11977.

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