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Mall operator considers buyout

General Growth Properties, Inc., owner of over 220 U.S. shopping centers including Providence Place Mall, received an unsolicited $10 billion bid last month from rival company Simon Property Group, Inc., according to David Keating, senior director of corporate communications at General Growth.

Simon, the most successful mall operator in the country, has discussed the possibility of increasing its offer since the initial bid, said Jeff Green, a retail real estate analyst.

General Growth filed the country's largest-ever real estate bankruptcy last April to pay off more than $25 billion in debt, The Herald reported last April. The company is currently in an "exclusivity period," during which its leadership is "certainly reviewing all proposals that are sent our way" but not responding to any offers, Keating said. He declined to speculate "what-ifs or hypothetical situations" in regard to how accepting the bid might affect Providence Place and General Growth's other properties.

But Green said that Simon buying off General Growth would negatively affect retailers as well as the industry.

"My hope is that Simon does not buy General Growth," he said. "That's creating a little bit of a problem for competition."

If the country's largest retail real estate company were to buy General Growth, its largest competition, Green said, "it's almost that they would create a monopoly, because the more centers you have, the more leasing power you have."

He added that "if they own the number one company and the number two company, they'll basically be running the whole mall industry in the U.S."

This possibility also has dangerous implications for owners of Providence Place shops, Green said, as Simon could "use the leverage of owning so many malls" to pressure retailers to open stores in less favorable locations.

"It's much better for the retail community that there's not a monopoly in the mall business," he said.

The best outcome would be for General Growth to continue as an independent company with the help of private investors, he said. Major investors such as Brookfield Asset Management and Pershing Square Capital Management have offered to lend General Growth money until the company can pay off the debt, Green said.

Green said General Growth could refinance its debt by its April deadline with this help, adding that "their properties are strong" and "they have talented people."

Providence Place in particular is "extremely successful," he said. Sales have decreased by about five percent since the economic downturn, a statistic that is "not bad in our economy."

General Growth considered selling Providence Place in December 2008, but Keating said the mall operator has since dropped the idea.

"That was several lifetimes ago," Keating said. "Providence Place Mall is not up for sale. It's something that we're keeping."

Providence Place "has been business as usual, and our bankruptcy filing has had absolutely no impact on our malls," he added. "Nothing has changed. We're quite proud of that."


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