General Growth mulling street-level real estate: CEO

NEW YORK Wed Jun 8, 2011 9:18pm EDT

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NEW YORK (Reuters) - General Growth Properties Inc (GGP.N), owner of some of the highest income-generating malls in the United States, is considering adding street-level urban retail real estate in the future, the company's CEO said on Wednesday.

"Is it something I aspire to? Yes," Chief Executive Officer Sandeep Mathrani told about 100 investors and analysts attending General Growth's session at the National Association of Real Estate Investment Trusts annual Investor Forum here.

Mathrani became CEO of the No. 2 U.S. mall operator in January, two months after the company emerged from bankruptcy protection.

General Growth, based in Chicago, owns 125 of the top 600 U.S. malls by revenue. It has been selling some assets and may spin off or sell some of its weaker malls.

Mathrani said he was keeping an eye on Australian Westfield Group's (WDC.AX) efforts to sell 17 of its lower-grade malls, to help him determine the prices General Growth could command for some of its properties.

General Growth owns or has stakes in 169 U.S. malls. But Mathrani has said he planned to trim that to about 150. On Wednesday, Steve Douglas, General Growth's chief financial officer, said that number could be about 125.

General Growth has been aggressively leasing its properties that had suffered while it operated under bankruptcy protection for 18 months.

Mathrani said the company planned to spend about $1.5 billion over the next three to five years to redevelop its properties, adding more retail space for high paying specialty store tenants.

General Growth recently did a property swap with Macerich Co (MAC.N), exchanging a noncontrolling ownership interest in Superstition Springs Mall and Arrowhead Towne Center, both in Phoenix, Arizona, for six big box anchor stores that Macerich owns in General Growth malls in Arizona, California, Illinois and Utah.

The swap allows General Growth to control the anchor stores for possible redevelopment. For example, the company plans to shrink a 120,000 square foot Neiman Marcus NMRCUS.UL at Oakbrook Center in Chicago to about 90,000 square feet, leaving 30,000 square feet for new stores, Mathrani said.

Mathrani said he could see redeveloping some of the lower performing malls into outlet centers if that were the best use for the property. However, General Growth would probably do so with joint venture partners.

Several mall operators, including Macerich and Taubman Centers Inc (TCO.N), have entered the outlet center business. Simon Property Group (SPG.N), the largest U.S. mall operator, has a portfolio of 99 outlet centers in the United States and abroad.

The chief executives of Simon and Macerich said on Tuesday that their redevelopment plans could include a hotel or residential properties. But Mathrani was cold to the idea.

"I'm not a big believer in putting condominiums on top of my shopping centers," he said.

Shares of General Growth closed up 3 cents at $16.18 on the New York Stock Exchange on Wednesday.

(Reporting by Ilaina Jonas)

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