General Growth Wangles Extensions on $900M in Mortgages

General Growth Properties Inc. has reached an agreement with a six-lender consortium to extend the maturity date for $900 million in mortgage loans on the company’s Fashion Show and Palazzo malls on the Las Vegas strip. In an attempt to raise cash, the retail REIT has put both malls on the block, along with a third Las Vegas property, Grand Canal Shoppes. Six lenders holding pieces of the mortgage loans agreed to the two-week extension after General Growth failed to make a scheduled payment last Friday, Nov. 28. Negotiations for the extension lasted all weekend when Citigroup Inc. refused at first to agree to the extension, according to a report in the Wall Street Journal. The report did not provide details on Citigroup’s position. Other lenders involved in the negotiations include Bank of America, Deutsche Bank and Wachovia. General Growth owes approximately $27 billion, a debt load created to finance acquisitions, including its $12.6 billion acquisition of Rouse Co. in 2004. According to the Journal report, General Growth’s payment schedule requires a payment of $58 million in bonds due today, $3.3 billion next year, $4.5 billion in 2010 and $8.4 billion in 2011. The financial strategy responsible for the onerous debt load was developed and put into effect by former General Growth CFO Bernard Freibaum, who left the company in October. Long-time company CEO John Bucksbaum stepped down in October along with president Robert Michaels. Adam Metz and Thomas Nolan, two independent directors of the company, have taken on interim responsibilities as CEO and president, respectively. Chicago-based General Growth, the nation’s second largest mall owner, has an ownership interest in or management responsibility for a portfolio of more than 200 regional shopping malls in 44 states. The portfolio spans 200 million square feet and plays host to more than 24,000 retail stores. General Growth also owns master planned community developments and commercial office buildings.