RCA in the commercial property press:

General Growth Gets an Extension

Retail Traffic reports: After a hotly contested hearing at the U.S. Bankruptcy Court in New York, Judge Allan Gropper granted Chicago-based REIT General Growth Properties a four-month extension on its exclusivity period to file a reorganization plan, with the right to request another extension if needed.

In handing out his decision, Gropper cited the need for the REIT to create the highest value for all stakeholders—including both shareholders and unsecured creditors—and expressed his belief that the debtor would be the only party to keep everyone’s interest in mind as it proceeds with the reorganization. The extension to July 15 fell short of the six-month period General Growth initially requested, but was also longer than the 45-day period proposed by the unsecured creditors’ committee, which favors rival Simon Property Group’s $10 billion bid to acquire the company.

The court also approved investment bank UBS as an additional financial advisor to General Growth. The REIT, which has already been using the restructuring services of Miller Buckfire & Co., argued that UBS’ extensive experience as a book manager in REIT equity offerings would help it effectively run a capital raising campaign.

Going forward, General Growth will pursue two tracks simultaneously. It will seek to find ways to recapitalize the company as well as field acquisition bids from suitors.

In spite of obvious disagreements between the parties involved, Judge Gropper expressed a high degree of satisfaction with the progress in the REIT’s bankruptcy case, including the nearly completed restructuring of up to $12 billion in secured debt and the increase in equity value to $4 billion.

Even before General Growth President and COO Tom Nolan revealed the firm had signed up to five non-disclosure agreements with potential investors, the judge noted that the high level of interest the REIT was attracting was a positive sign for its long-term prospects.

Simon and Westfield Group have confirmed that they've signed agreements. Vornado Realty Trust is rumored as another potential bidder. In order to create a level playing field for all interested parties, General Growth has created a virtual data room for potential suitors that gives them access to the REIT’s books.

"We do have to be mindful of the fact that both in terms of general economic trends and in terms of credit markets for real estate specifically, conditions remain fragile," says Sam Chandan, global chief economist and executive vice president with Real Capital Analytics. "The recovery in the economy and in the capital markets is still in its nascence and there is still some degree of uncertainty about the nature, the degree, and the pace of this recovery.”

Articles related to this topic:

 Simon Property Shopping for GGP
 Blackstone Considers Joining Simon Property's Bid for GGP
 General Growth Properties to split into two companies
 Australia REITs Have Funds, Hunger; Eye Overseas Assets
 Canadian Buyers on US Real Estate Shopping Spree

Posted by: Nina Turner

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