Ara Said to Plan Mall Sale With O’Connor Above $380 Million

Consorcio Ara SAB (ARA*), Mexico’s biggest homebuilder, and real-estate firm O’Connor Capital Partners plan to sell nine shopping malls for more than 5 billion pesos ($384 million), two people with direct knowledge of the matter said.

The companies are pushing for a sale agreement by the end of the year, said the people, who asked not to be identified because the details of the sale process aren’t public. While most of the malls are jointly owned by Ara and O’Connor, the sale includes some properties held separately.

The mall sale would allow Ara to focus on its main business at a time when the collapse of competitors including Desarrolladora Homex SAB (HOMEX*) and Corp. Geo SAB has opened opportunities for growth, according to Javier Gayol, an analyst with brokerage Corporativo GBM SAB. Obtaining financing from banks or the bond market has become more difficult, so the sale of assets is the best way to raise funds, he said.

“They should take advantage of opportunities that present themselves,” Gayol said in a telephone interview from Mexico City. “They could accelerate development in areas where competition had previously been an obstacle.”

Alicia Enriquez, an investor relations official for Mexico City-based Ara, declined to comment. Chief Executive Officer German Ahumada Russek said in an Oct. 23 conference call that the company had hired Morgan Stanley to explore a possible mall sale. Rick Matthews, an outside press official for New York-based O’Connor, declined to comment on the sale.

Largest Builder

Ara has turned into Mexico’s largest builder based on market capitalization and third-quarter earnings as output plummets at its three main competitors, including Urbi Desarrollos Urbanos SAB. Third-quarter revenue fell by 15 percent from a year earlier to 1.33 billion pesos ($102 million), compared with a 99 percent drop at Homex.

Government programs created under former President Felipe Calderon to subsidize and finance housing backfired over the past two years as homeowners weary of hours-long commutes abandoned the communities en masse. The government has since shifted policies to favor urban construction, crushing the value of builders’ land inventory.

Ara’s sales were less dependent on subsidies, and it was the least indebted of the four biggest publicly-traded homebuilders. Ara shares have surged 43 percent this year, even as the Habita index of Mexican homebuilders lost 76 percent.

The malls may attract interest from real-estate investment trusts that are flush with cash from stock offerings, Gayol said.

Ara’s Ahumada Russek said in the conference call he expects the company to net at least 1.3 billion pesos from its portion of the mall sales after paying associated debt.

To contact the reporter on this story: Jonathan Levin in Mexico City at jlevin20@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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