GGP Looks Beyond Retail

By Mark Ruda
Globe St. Retail
May 10, 2006

CHICAGO-The second-largest US retail REIT is not afraid to branch out into other sectors. Chief executive officer John Bucksbaum says General Growth Properties Inc. is looking at its 200 properties, which total 175 million sf, for potential residential, office and hotel development or redevelopment opportunities.

“All of these alternatives are good for the long-term viability of our malls,” Bucksbaum said during his company’s earnings conference call Tuesday. “Changing demographics and changing lifestyles are increasingly driving the desire of people to live, play, work and learn in more self-contained developments.” At the same time, Bucksbaum added attitudes of local municipalities are helping drive General Growth Properties to look within the boundaries of its own holdings rather than stake out new development sites. “It is through mixed-use and higher densification of our land where we’ll see growth in the future,” Bucksbaum says.

Residential development is a component in the $170-million Victoria Ward and $104-million Ala Moana redevelopments in Honolulu, as well as the 328,197-sf expansion of a mall in Natick, MA, a $230-million project. Condominiums also are a part of the plans for a 1.1-million-sf shopping center in Allen, TX.

General Growth Properties has 14 Federated Department Stores locations that are being redeveloped, says president and chief operating officer Robert A. Michaels. Half of those locations are being redeveloped by others, while General Growth Properties is converting the other half into new retail space. “The uses are still to be determined in cases where we’ll be redeveloping them,” Michaels says. “In every case, the new use will be more complementary to the project.”

Meanwhile, sales at General Growth Properties malls jumped nearly 7% in the first quarter to a record $444 per sf, company officials report. Occupancy also hit a high at 91.1% in the first quarter. Net operating income at the mall properties increased 9.2% over the same period in 2005.