General Growth Fights to Survive $27B Debt

Chicago-based retail REIT General Growth Properties is battling to survive billions of dollars in maturing debt during a period of frozen credit markets by soliciting the sale of up to $2 billion in preferred shares to investors.About $1.2 billion in debt will mature in November with another $1.3 billion following in December, according to the company’s second quarter financial report. All told, GGP’s debt totals about $27 billion. The current GGP effort follows a suspension of dividend payments and the replacement of the company’s CFO at the beginning of October. Following those actions, Fitch Ratings, Moody’s Investor Services and Standard & Poor’s cut the company’s rating. In addition to preferred stock, the company could also attempt to sell some of its more than 200 mall properties on the open market or to sell properties to joint ventures. “GGP does have joint ventures with large, institutional joint venture partners,” said Steven Marks, an analyst with Fitch. GGP’s institutional partners include the New York State Common Retirement Fund, Teachers Retirement Fund of Illinois and a Morgan Stanley Real Estate fund, continued Marks. Can GGP save itself? “The company needs the debt capital markets to start functioning,” Marks said. “And it needs a lot of things to go right.”GGP owns, develops, operates and/or manages shopping malls in 44 states. As of January, 2008, the firm had ownership interests in and/or management responsibility for more than 200 regional shopping malls totaling approximately 200 million square feet of retail space.