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S&P Affirms Ratings on Plaza Las Americas Bonds; Outlook Stable
June 25, 2002
NEW YORK -- Standard & Poor's today affirmed its ratings on $248 million tax-exempt bonds guaranteed by Plaza Las Americas Inc., a privately held real estate company based in San Juan, Puerto Rico.
These bonds were issued by the Puerto Rico Industrial, Tourist, Educational, Medical, and Environmental Control Facilities Financing Authority and secured by a first mortgage on the Plaza Las Americas shopping center and a first mortgage on the Plaza del Caribe shopping center. The outlook is stable.
The ratings acknowledge the superior asset quality and market dominance of the assets, qualities that have been enhanced by the recently completed renovation and 530,000 square foot (sq. ft.) expansion of the company's primary asset, the Plaza Las Americas shopping center. However, these assets remain concentrated entirely within the Commonwealth of Puerto Rico.
Plaza Las Americas Inc. was formed in the 1960's for the purpose of developing a regional mall in downtown San Juan, Puerto Rico. In addition to this shopping center, the corporation has controlling interests in a number of partnerships engaged in the leasing and operation of additional real estate in Puerto Rico including the Plaza Del Caribe shopping center in Ponce and the Torre de Plaza office tower in San Juan. The $250 million expansion of Plaza Las Americas has been completed, resulting in a total of almost 1.9 million sq. ft. of retail, restaurant, and entertainment space. Approximately 82% of the 532,000 sq. ft. of newly constructed retail space (including a new 255,000 sq. ft. Macy's) has been leased. Mall performance has historically been outstanding by any measure. Occupancy, which has historically remained over 99%, is 92% today including approximately 98,000 sq. ft. of expansion space presently being marketed. In-line specialty retailers report sales figures of over $670 per sq. ft., which is more than twice the Urban Land Institute's average for malls in the U.S., and many mainland retailers have their best performing stores in the mall, including JCPenney and Sears. Concerns about asset concentration remain, though the company has diversified somewhat by constructing a nine-story office tower in San Juan and the 640,800 sq. ft. Plaza Del Caribe shopping center in Ponce. Both properties are fully occupied and contribute positively to the company's earnings.
The company has historically been conservatively leveraged. Leverage on a book-value basis is 54% currently; however, based upon Standard & Poor's adjusted market value basis, leverage is closer to 36%. In addition, the adjusted market value of the Plaza Las Americas Mall is more than twice the total debt encumbering that property. Plaza Las Americas Inc. has maintained good internal liquidity over the years, with cash and marketable securities of about $93 million currently. The company's very conservative dividend policy results in most cash flow being retained. Historically, strong coverage measures declined during construction due to higher interest expense. However, as expected, coverage levels have improved to 2.9 times with the leasing of newly added space. Debt service reserve funds totaling $9 million also provide additional support and cover the maximum debt service payment due in any future six-month period.