Expect a bigger, improved Cottonwood Mall in Holladay if the merger of JP Realty and General Growth Properties Inc. is completed.
G. Rex Frazier, president and chief operating officer of JP Realty, said Tuesday morning that "a substantial expansion and renovation" of the mall is planned — part of a plan for four company malls that have low tenant occupancy.
Chicago-based GGP, which owns the Newgate Mall in Ogden, plans to acquire Salt Lake-based JP Realty, which has four Utah malls, in a $1.1 billion deal. JP Realty's other Utah malls are the Cache Valley Mall, Logan; Provo Towne Centre; and Red Cliffs Mall, St. George.
Those centers are among 50 properties JP Realty owns or has an interest in, including 18 enclosed regional malls, 25 anchored community centers, one free-standing retail property and six mixed-use commercial/business properties in 10 Western states. It operates through majority-owned Price Development Co. LP.
In a recent filing with the Securities and Exchange Commission, JP Realty indicated that the Cottonwood Mall has tenants occupying 64.6 percent of the mall space. The occupancy figures are higher at the other Utah malls: 92.9 percent at Red Cliffs Mall, 83.4 percent at the Provo Towne Centre and 83.8 percent at the Cache Valley Mall.
The industry average is almost 90 percent. JP Realty properties also have annual sales per square foot of $260, below General Growth's $355 and the industry average of about $300.
John Price, JP Realty's chief executive officer, said the offer from GGP came in early January, and he called the move a "superb merger transaction."
"I saw this as an opportunity to maximize our shareholder value and felt this transaction would be in the best interest of our shareholders," he said during a Tuesday morning conference call. "We have built a great name in the Intermountain region. . . . I am proud JP Realty will merge with General Growth."
Price will resign as chairman of the board and CEO by April 24. He recently became U.S. ambassador to the African island nations of Mauritius, Seychelles and the Comoros Republic.
JP Realty shareholders still need to vote on the merger.
"The company was not for sale," Frazier said during the conference call. "We received an unsolicited offer from General Growth. The management team reviewed it in conjunction with the board of directors. . . . It was determined that this was the best and highest offer."
He noted, however, that the company entertained no other offers after receiving the one from GGP. The management team wanted to be sure of a high expectation of closure on the deal, he said. The transaction is expected to close in the second quarter.
JP Realty's regional malls are usually the top malls, and in some cases the only malls, in their regions. The drawing radius ranges from five miles to more than 150 miles, the company said.
GGP, if it completes the JP Realty merger, will have made five acquisitions since it became a publicly traded real estate investment trust in April 1993. Its portfolio would include ownership interests in 120 regional malls with a value of about $10 billion.
The total price for JP Realty would be approximately $1.1 billion, which includes about $440 million in cash, assumption of approximately $460 million of existing debt and $116 million of existing preferred operating units.
JP Realty stockholders would receive $26.10 per share in cash for all outstanding shares. Each of the limited partners of Price Development would be offered the opportunity to receive either $26.10 in cash or convertible preferred units of GGP Limited Partnership, convertible into GGP common stock based on a conversion price of $50 per share.
JP Realty officials have noted that the offer is above the stock's historical trading price and net asset value.
JP Realty stock closed Friday at $24.43. It was trading at $26.55 early Tuesday, up 2 cents from Monday's close. In the past year, it has ranged from $18.20 to $26.65.
GGP stock was trading at $43.90 early Tuesday, up 68 cents from Monday's close and its highest price during the past year. It has been as low as $32.80 during the past year.
GGP said it expects the acquisition to generate a return of about 10 percent on cost during the first year of ownership.
Last month, the company estimated that funds from operations for 2002 would range from $5.31 to $5.56 a share. If the acquisition of JP Realty closes in the second quarter, GGP said Monday that it will raise the low end of that range, but didn't specify a figure.
General Growth is the country's second-largest mall owner in terms of square feet owned and was looking to expand into the Intermountain West. It recently lost in bidding for Rodamco North American NV, a Dutch-based company that wanted to split up its group of U.S. malls and sell them for $2.2 billion to three U.S. mall owners.
E-mail: bwallace@desnews.com