July 30 (Bloomberg) -- General Growth Properties Inc., the second-largest U.S. shopping mall owner, agreed to sell its stakes in Brazil’s Aliansce Shopping Centers SA to two buyers for about $690 million to focus on its domestic properties.
Canada Pension Plan Investment Board is buying a 27.6 percent interest in the Brazilian retail landlord and developer for about $480 million, Toronto-based CPPIB said yesterday in a statement. Rique Empreendimentos e Participacoes Ltda. is buying General Growth’s remaining stake, according to a statement by the Chicago-based company.
General Growth is selling its interest because it was a “distraction” for management and represented only 2 percent of the landlord’s net operating income, Chief Executive Officer Sandeep Mathrani said on a conference call with analysts. Two General Growth entities own about 40 percent of Aliansce combined, according to data compiled by Bloomberg. The U.S. company in October bought a 14 percent stake from Pershing Square Capital Management LP for $195.2 million.
“A year ago, I thought that it could be 10 percent of our business,” Mathrani said on the call. “As we focused on the U.S. business and seen our growth here and looked at emerging markets and how difficult it is to consolidate, it’s only 2 percent of our NOI today. We couldn’t see over the next five years of how it would get to 10 percent of our NOI.”
General Growth will have $450 million in net proceeds from the sale, Chief Financial Officer Michael Berman said on the call. The company expects the transactions to be completed in the third quarter.
Aliansce shares rose 4 percent to 21.91 reais in Sao Paulo. General Growth climbed 1.1 percent to $21.44 in New York.
Simon Property Group Inc., the largest U.S. mall owner, is “cautious” on Brazil, CEO David Simon said on a conference call yesterday. The Indianpolis-based company has yet to build any outlet centers with its partner in the country, BR Malls Participacoes SA, under a joint venture announced in April 2012.
“Long term, Brazil’s a great country with a lot of dynamic growth to it,” Simon said on the call. “But we’re very cautious on a market like that and we haven’t found the right deal, and thankfully in hindsight, our decision not to invest aggressively there has been the appropriate one.”
Brazil’s real dropped to a four-year low today, adding to concern that inflation will undermine efforts to stimulate Latin America’s largest economy. The real has tumbled 12 percent in the past three months, the biggest drop among 24 emerging-market dollar counterparts tracked by Bloomberg. The depreciation pushes up the price of imports and threatens to further fuel inflation, which helped spark nationwide street protests last month.
Aliansce, based in Rio de Janeiro, has 17 shopping centers and two development projects around the country. Formed in 2004, the company owns or manages properties totaling more than 800,000 square meters (8.6 million square feet). The assets are located in areas including Sao Paulo, Rio de Janeiro, Salvador, Belem and Belo Horizonte.
CPPIB’s purchase gives it assets in the economically dominant Southeast and fast-growing Northeast regions of Brazil, said Peter Ballon, the pension fund’s vice president and head of Americas real estate investments. The company has stakes in Brazilian real estate valued at more than C$900 million ($877 million), including retail, office and warehouse properties.
CPPIB plans to buy more real estate in Brazil in partnership with local companies, Ballon said.
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