General Growth Files Biggest U.S. Property Bankruptcy
Bloomberg reports: General Growth Properties Inc. filed the biggest real estate bankruptcy in U.S. history after amassing $27 billion in debt during an acquisition spree that turned it into the second-largest shopping mall owner.
The owner of Boston’s Faneuil Hall and the South Street Seaport in New York City ended a seven-month effort today to refinance its debt. The company listed $29.5 billion in assets and debts of about $27.3 billion in the Chapter 11 filing. General Growth will continue operating its more than 200 properties.
“We intend to emerge as a leaner company,” General Growth President Thomas Nolan said in an interview today. “We want to come out as a less leveraged company. Our business model remains strong.”
General Growth collapsed after spending $11.3 billion to buy commercial-property developer Rouse Co. in 2004 only to get caught in the credit crunch and a U.S. recession that has cut spending and property values. Banks have reduced lending amid mortgage-related writedowns. Commercial real estate prices in the U.S. dropped 15 percent last year, according to Moody’s Investors Service. Retail sales in the U.S. unexpectedly fell in March as soaring job losses forced consumers to pull back.
The filing lists Eurohypo AG, a unit of Commerzbank AG, as General Growth’s largest unsecured creditor with claims totaling $2.59 billion under two loans. Noteholders are owed about $4 billion.
Simon Gains?
The bankruptcy may remake the nation’s mall business and allow General Growth competitors including Simon Property Group Inc. to buy properties and strengthen its position as the No. 1 mall owner, said Dan Fasulo, managing director at real estate research firm Real Capital Analytics.
“I think Simon’s going to be able to pick up some of these assets on the cheap,” Fasulo said in an interview.
General Growth’s filing is the “beginning of the distress cycle” and may lead other companies to fail.
“This is kind of the beginning of the end,” Fasulo said. “This bankruptcy will drive down the values of mall assets in the United States. It’s going to put, I believe, more supply on the market than can be absorbed by investors.”
View the full article on Bloomberg: General Growth Files Biggest U.S. Property Bankruptcy
Posted by: Mark Alferman