General Growth eyes dividend; Hughes trades

By Reuters
Posted Nov. 10, 2010 at 10:45 a.m.

General Growth Properties plans to resume paying dividends early next year, after the second-largest U.S. mall operator emerged from bankruptcy and spun off a new company, Howard Hughes Corp.

Citing a higher-than-expected cash stake, General Growth also said it expects to retire $570 million of obligations by paying cash, avoiding the potential issuance of more than 50 million common shares.

Shares of General Growth rose as much as 5.4 percent in morning trading on Wednesday, a day after the company exited bankruptcy. General Growth reorganized into a new company, and shareholders of the old General Growth received common stock in the new company and in Howard Hughes. Shares of the new General Growth and Howard Hughes began trading on Wednesday.

General Growth expects to pay a 10 cent-per-share quarterly dividend beginning in the first quarter of 2011.

It also expects in the first quarter to pay a one-time dividend, 90 percent in shares and 10 percent in cash, to keep its real estate investment trust status.

The $570 million of payments include $220 million owed to heirs of Howard Hughes, the billionaire eccentric who died in 1976, to settle a dispute over a Las Vegas property.

They also include $350 million to repay a note owed to the hedge fund Pershing Square Capital Management LP.

“We are fortunate the cash position in General Growth exceeds that which was expected several months ago,” General Growth Chairman Bruce Flatt said in a statement.

Separately, General Growth agreed to sell the Gateway Overlook Shopping Center in Columbia, Maryland for $90.1 million, as part of its plan to shed unwanted assets. It did not identify the buyer.

General Growth operates roughly 183 malls in 43 U.S. states, including Faneuil Hall Marketplace in Boston, Harborplace in Baltimore and Water Tower Place in Chicago.

It filed for bankruptcy protection in April 2009 after being unable to refinance billions of dollars of debt.

General Growth restructured $15 billion of debt and obtained $6.8 billion of capital from investors including Pershing Square, Canada’s Brookfield Asset Management Inc (BAMa.TO), Fairholme Funds Inc and the Teacher Retirement System of Texas.

Howard Hughes assets include planned residential communities and properties such as the South Street Seaport in Manhattan. Shareholders of General Growth prior to the spinoff received new common stock in both companies.

In morning trading, General Growth shares were up 44 cents, or 3.1 percent, at $14.44, after earlier rising to $14.76. The old General Growth stock had closed at $17.39 on Tuesday.

Howard Hughes shares fell $1.00, or 2.7 percent, to $35.50 on Wednesday morning.

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