Teachers’ fund seeks a stake in mall giant
Deal comes as General Growth plans to get out of bankruptcy
The Teacher Retirement System of Texas is buying into the mall business.
The $97 billion pension fund announced Monday that it planned to invest $500 million in the nation’s second-largest mall operator, General Growth Properties Inc.
The $500 million deal is part of the fund’s substantial shift away from traditional stocks and bonds and into alternative investments to improve returns and reduce volatility.
General Growth filed for bankruptcy last year after the credit markets dried up and left the mall operator holding $27 billion in debt. It was the largest commercial real estate collapse in American history.
Now, General Growth is aiming to emerge from bankruptcy in October, with the help of three private investment firms, after rejecting a takeover offer from its biggest competitor, Simon Property Group.
If approved by the bankruptcy judge, the retirement system’s investment would give the fund a 5 percent stake in the reorganized company.
The retirement system’s money is not es-
sential to General Growth’s exit from bankruptcy but does enhance the company’s financial position, according to a company statement.
General Growth has the option of reducing the retirement system’s stake by half with no penalty if it can sell the stock at a price higher than the $10.25 a share that the system is paying.
The mall company would pay the retirement system a $15 million penalty if it found another buyer for all of the 48.8 million shares the pension fund plans to buy.
Steve LeBlanc, who leads the system’s private market team, said General Growth offered high-quality assets, strong management and a clear operating strategy.
“We believe (General Growth) is very well-positioned to create substantial long-term value,” LeBlanc said in a statement.
The company owns more than 200 malls across the country, including some prime properties, such as Westlake Center in Seattle and Faneuil Hall in Boston.
None of its 15 Texas malls is in the Austin area. It was a half-owner of Highland Mall, but that mall is now owned by a different entity.
“The equity investment by TRS is yet another vote of confidence in the future of GGP,” the company’s chief executive officer, Adam Metz, said in a statement Monday.
The retirement system’s shares are priced at 25 percent below what General Growth’s stock was trading for Friday.
On Monday, the shares closed at $13.71, down 4 cents.