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Mall Innovator Rouse to Be Sold for $7.2 Billion

General Growth, owner of Glendale's Galleria, will get some 'trophy properties' in the deal.

August 21, 2004|From Associated Press

General Growth Properties Inc., a Chicago-based developer of regional shopping malls, is buying Rouse Co., a pioneer of entertainment mall retailing whose properties include Boston's Faneuil Hall Marketplace, for about $7.2 billion in cash.

The deal announced Friday would provide General Growth, which owns the Glendale Galleria, with more leverage in negotiations with top retailers and would give it some of the nation's premier mall sites, including the Fashion Show Mall in Las Vegas.

"They picked up some trophy properties," said Malachy Kavanagh, a spokesman at the International Council of Shopping Centers. Faneuil Hall and Fashion Show Mall "attract well over 1 million people a month."

With the acquisition, General Growth will own or manage a total of 225 malls. That would narrow the gap with rival Simon Property Group Inc., which operates 246 malls.

The board of Columbia, Md.-based Rouse has approved the transaction, which is subject to shareholder approval. General Growth also will assume $5.4 billion in Rouse debt. The deal is expected to close in the fourth quarter of this year.

General Growth will pay $67.50 a share, 33% above Rouse's closing price Thursday and nearly 25% more than Rouse's 52-week high of $53.97.

Shares of Rouse soared almost 32%, or $16.04, to $66.65 on the New York Stock Exchange. But investors' worries about the amount of debt General Growth was assuming pushed down its shares by almost 5%, or $1.54, closing at $30 on the NYSE.

General Growth is borrowing $7 billion to finance the deal, pushing its debt to $23 billion, Chief Financial Officer Bernard Freibaum said.

General Growth Chief Executive John Bucksbaum said Friday that the acquisitions would give the company a commanding presence in key markets, including Denver, Salt Lake City, Texas, Atlanta, Minneapolis and the Baltimore-Washington area. The deal also allows General Growth to enter the markets of New York and New Jersey.

Rouse operates more than 150 properties used for retail, office, research and development and industrial space in 22 states.

Rouse has been credited for its innovative approach to urban and suburban development, building affordable urban housing units, one of the first indoor shopping malls and festival marketplaces such as Harborplace in Baltimore and South Street Seaport in New York.

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