General Growth Properties, Inc. GGP, teaming up with Jeff Sutton, a landlord, has acquired The Crown Building in New York City for $1.775 billion. This reputed asset adds another feather to the company’s high-quality portfolio.
Located on Fifth Avenue, one of the most popular shopping destinations in the U.S. which attracts tourists and wealthy shoppers, this premium 26-story property has both retail and office segments.
The $1.775 billion acquisition was partly funded with $1.25 billion of secured debt. General Growth Properties and Jeff Sutton have further plans to redevelop, lease and manage the property’s retail section, spanning around 100,000 square feet. The retail space is presently occupied by tenants like Bulgari, Piaget and Mikimoto.
On the other hand, the 290,000 square feet office tower would be handled by Vladislav Doronin’s Capital Group and Michael Shvo. The owners intend to redevelop this section into luxury residential condominiums.
We expect this Crown Building purchase will enable General Growth Properties to capitalize on the growing fundamentals of this well-known shopping street, and command high rents for space in this area and thereby, drive its profitability.
General Growth Properties is slated to release first-quarter 2015 earnings on Apr 27, after the closing bell. The first-quarter Zacks Consensus Estimate for funds from operations (“FFO”) is currently pegged at 32 cents.
General Growth Properties currently has a Zacks Rank #3 (Hold). Investors interested in the retail REIT industry may consider stocks like National Retail Properties, Inc. NNN, Realty Income Corp. O and STORE Capital Corp. STOR. All these stocks carry a Zacks Rank #2 (Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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