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General Growth Monitoring Westfield Sales to Choose Own Strategy

General Growth Properties Inc CEO Sandeep Mathrani
General Growth Properties Inc Chief Executive Officer Sandeep Mathrani. Photographer: Jin Lee/Bloomberg

General Growth Properties Inc. Chief Executive Officer Sandeep Mathrani said he’s watching rival mall owner Westfield Group’s planned sale of 17 U.S. properties before choosing a strategy for trimming his company’s holdings.

“We want to evaluate what they do to decide in which direction we head,” Mathrani said in an interview yesterday at a National Association of Real Estate Investment Trusts conference in New York. “We do want to pare down the number of assets we have.”

Mathrani said if Sydney-based Westfield sells properties at a capitalization rate of 7 percent, “I’m going to sell,” and if it’s 9 percent, “I’ll re-evaluate.” Capitalization rates fall as prices rise. The investment-yield measure is calculated by dividing net operating income by purchase price.

Westfield, which also owns malls in the U.K., Australia and New Zealand, plans to sell some properties, mainly in the U.S., Peter Lowy said in a February interview. He became co-CEO of the world’s biggest shopping-center owner in March.

“We think the market is good to be able to recycle capital,” Mark Stefanek, Westfield’s chief financial officer for the U.S., said during a presentation at the conference yesterday. The company is marketing 17 properties in the U.S. and, with General Growth also considering sales, “I’d rather be out there first than not,” he said in an interview.

Offices, Strip Malls

At General Growth, the second-largest U.S. mall owner, Mathrani has planned to sell $2 billion of office buildings, strip malls and lower-quality regional malls, and use a portion of the proceeds to pay down debt.

The company made $300 million of property sales since coming out of bankruptcy in November, and had an additional $387 million under contract for sale, Mathrani said on an April 27 conference call. General Growth planned $350 million in additional sales for the rest of the year, he said.

The mall owner is considering spinning off 35 properties into a real estate investment trust, Reuters reported June 3, citing people familiar with the plan.

“We’re going to evaluate all our options,” Mathrani said yesterday when asked about the possibility of a spinoff.

General Growth filed for Chapter 11 protection in April 2009 after weighing itself down with $27 billion in debt that it was unable to refinance because of the credit crisis and collapse of the commercial mortgage-backed securities market. It completed its bankruptcy reorganization on Nov. 9.

The company obtained $743 million in new mortgages as part of a refinancing of debt and used $139 million of excess proceeds to pay down loans on four properties, it said June 6.

General Growth also sold its one-third ownership in two retail centers in the Phoenix area to Macerich Co. and acquired six properties from the Santa Monica, California-based company as part of the deal, according to a separate June 6 statement. General Growth received $75 million in cash in the transaction.

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