General Growth Closes Part 1 of $1.8B Loan

Chicago-based General Growth Properties Inc. has wrapped up the initial phase of a new secured mortgage loan facility that is expected to total $1.75 billion. The retail REIT pocketed $875 million with the closing of the first segment of the loan. General Growth’s loan facility is for an initial three-year term and allows for two one-year extensions. The funds the company just borrowed carry an annual interest rate of 5.64 percent. With the closing of the first part of the transaction, General Growth repaid all but one of its remaining loans scheduled to mature in the third quarter of this year. Repayment of the outstanding $73 million property loan before its September due date would have resulted in a prepayment charge. However, the company plans to rid itself of that debt, too, if all goes as expected with the second part of the loan facility, which would also provide funds for the repayment of soon-to-mature loans on up to six additional properties, and for other general corporate purposes. General Growth has a portfolio of 200 owned and managed regional shopping centers spanning 44 states, and despite the damper the downturn in the economy has put on the retail market, the REIT’s assets continue to thrive. The company’s portfolio had an average occupancy level of 92.9 percent at the close of the first quarter, just a negligible decline from the 92.7 percent level at the close of the first quarter of 2007. The average national occupancy level for shopping centers was 90.8 percent in the first quarter of this year, according to a report by real estate services firm Colliers International. Additionally, with rents still on the rise for shopping center properties and the average vacancy rate expected to remain under 10 percent, General Growth properties may be able to weather the economic storm. Additional financing transactions may be on the horizon for General Growth in the near future. Last month, the company announced that it was working on two financial deals to accommodate debt maturities scheduled for this year and next. In addition to the $1.75 billion term loan, a deal for a private commercial mortgage backed securities issuance ranging from $1.5 billion to $3 billion was also in the works. General Growth stock opened today at $30.36.