Summerlin developer, mall owner sees stock fall again

By Jeff Pope (contact)

Wednesday, Sept. 24, 2008 | 2:58 p.m.

The turmoil in the U.S. economy is taking its toll on Summerlin developer and Las Vegas mall owner General Growth Properties Inc. of Chicago.

Its stock tumbled 25 percent Monday to close at $16.08 after it said it may sell assets or execute other strategic moves to bolster its finances. It closed at $15.84 Wednesday, even after the stock was added Tuesday to the government's list of stocks to be protected against short sellers. The $15.84 price compares to General Growth's 12-month high of $57.84.

In Las Vegas, General Growth owns the Howard Hughes Corp., developer of the massive Summerlin planned community. It's also the largest mall owner in Nevada. In Las Vegas, it owns the Fashion Show, Meadows and Boulevard malls, along with the Grand Canal Shoppes at the Venetian and the Shoppes at the Palazzo. It's also developing the Summerlin Centre mall. That mall was due to open in 2009, but General Growth is delaying the opening until 2010 because of the slow economy.

General Growth's primary business is its mall properties, so it likely would consider selling its land holdings, said Rich Moore, an analyst with RBC Capital Markets.

But a land deal at this time may be difficult, he said. The value of General Growth's Summerlin land has dropped too much for the company to receive a fair price for the planned community development.

"People are not paying up for land right now, so I don't think you'd get a pretty good price whether you're General Growth or anybody else. Especially land for housing," he said. "I don't think that they would accept a low-ball price."

The addition of General Growth stock to the government's list of securities protected against short sellers may have temporarily boosted its stock price Tuesday. Short sellers are blamed for much of the turmoil on Wall Street.

They borrow stock at current prices with plans to repay it later, betting its price will fall so they can earn a profit. This tends to hurt share prices.

General Growth's stock fell Monday when it announced plans to evaluate its alternatives, both financial and strategic, "in an effort to align the market value of the company's common stock more closely with the intrinsic value of the company's stable, high quality portfolio of real estate assets in good locations with significant barriers to entry."

General Growth said it's "developing a comprehensive, strategic plan to generate capital from a variety of potential sources including, but not limited to, both core and non-core asset sales, the sale of joint venture or preferred equity in selected pools of its assets, a corporate-level capital infusion, and/or strategic business combinations."

This means that General Growth would consider selling assets to pay down debt and may consider a merger or other business combination.

"I would put a low probability that they would want to sell the company. It's a family business and it's something they would probably not prefer to do. They would do that only as a last resort," Moore said.

General Growth officials could not immediately be reached for comment.

Besides its malls, General Growth operates five neighborhood shopping centers in Las Vegas including the Center Pointe Plaza, Charleston Boulevard and Town Center Drive; Canyon Pointe, 10800 West Charleston Blvd.; and Trails Village Center, Village Center Circle and Trailwood Drive.

General Growth was mentioned during the Summerlin South (homeowners) Association board meeting on Sept. 18 at The Willows Community Center.

One resident, who did not identify himself, expressed concern over the nation's shaky economy and whether it might affect General Growth Properties.

"Does this board have some kind of contingency plan in place to assure that we will continue management operations?" if something were to happen to General Growth, the resident asked.

"This board is here to make sure that the day-to-day business of the Association gets completed," said Randy Ecklund, executive director of Community Association Management for the Summerlin Council, which manages Summerlin public amenities and events. "If for some reason we weren't here, someone else would be here in our stead."

Jeff Pope can be reached at 990-2688 or jeff.pope@hbcpub.com. Reporter Jeff O’Brien contributed to this story.