Standard & Poor's Affirms Ratings on Plaza Las Americas Inc.

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Standard & Poor's Affirms Ratings on Plaza Las Americas Inc.
    NEW YORK, Dec. 19 /PRNewswire/ -- Standard & Poor's today affirmed its
single-'A'-plus ratings assigned to $258 million of tax-exempt bonds
guaranteed by Plaza Las Americas Inc., a privately held real estate company
based in San Juan, Puerto Rico.
    The bonds were issued by the Puerto Rico Industrial, Tourist, Educational,
Medial, and Environmental Control Facilities Financing Authority and are
secured by first mortgages on the Plaza Las Americas shopping center and the
Plaza del Caribe shopping center.
    The ratings reflect the company's historically conservative leverage, a
good degree of internal liquidity, and the substantial unrealized market value
of the Plaza Las Americas Mall. These strengths are somewhat tempered by the
company's concentration of assets and the expected, temporary decline in debt
coverage measures.
    Plaza Las Americas Inc. was formed in the 1960s for the purpose of
developing a regional mall in downtown San Juan. In addition to this shopping
center, the corporation holds substantial ownership 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 the Plaza Las Americas shopping center is
substantially completed and has resulted in almost 1.9 million square feet
(sq. ft.) of retail, restaurant, and entertainment space. About 532,000 sq.
ft. of newly constructed retail space, including a new 255,000 sq. ft. Macy's,
is being leased quickly. Mall performance has historically been outstanding by
any measure. Occupancy has historically remained over 99% and tenant retention
is a very strong 98%. In-line specialty retailers report sales figures of over
$700 per sq. ft., which is more than twice the Urban Land Institute's average
for malls in the U.S. Many mainland retailers have their best performing
stores in the mall, including JC Penney and Sears. Concerns about asset
concentration remain, even 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 now fully
occupied and contribute positively to the company's earnings.
    The company has historically been conservatively leveraged. Leverage on a
book-value basis is currently 57%. However, based upon Standard & Poor's
adjusted market-value basis, leverage is closer to 44%. 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 $102 million currently.
The company's very conservative dividend policy results in most cash flow
being retained. Interest income from liquid investments alone has historically
covered interest expense, and this is expected to continue. The company has
historically maintained strong and stable coverage measures. Generally, both
debt service and fixed-charge coverage ratios have been maintained at or above
3 times (x) dating back to 1990. However, as expected, coverage levels have
dipped to about 2.1x currently due the additional interest expense incurred
during the expansion and renovation. As the additional retail space is leased
and contributes to earnings, coverage measures are expected to return to the
3.0x range. Debt service reserve funds totaling $9 million also provides
additional support and cover the maximum debt service payment due in any
future six-month period.
    OUTLOOK: STABLE
    Standard & Poor's anticipates that the very strong sales performance of
the Plaza Las Americas mall, its high tenant retention, and the strong leasing
of the newly constructed retail space will continue to provide for strong and
stable cash flow and improving debt coverage measures. Standard & Poor's also
acknowledges that the private nature of the company is an important
determinant to overall financial policy, which has historically been very
conservative. Standard & Poor's will revisit the ratings should the company's
structure, dividend policy, or ownership be altered in the future. --
CreditWire
SOURCE Standard & Poor's
http://www.standardandpoors.com/ratings
CONTACT:
James Fielding of Standard & Poor's,
212-438-2452