GGP Wholesale Asset Disposition Not in Game Plan, Chief Says
- Apr 16, 2009
General Growth Properties will not undertake a large-scale asset disposition as the result of its filing this morning for Chapter 11 bankruptcy protection, according to Tom Nolan, General Growth’s president & COO. “Of our top 25 properties, as part of our restructuring, we may look at selling one or two,” Nolan said in a press conference this afternoon. But, overall, selling a “substantial amount” of the company’s assets is not being contemplated, he said. Nolan said that the REITs properties are performing well, with occupancy levels at 92.5 percent at the end of last year, which he said is the highest level since the company went public 15 years ago. He also said that net operating income at the firm’s properties were greater in 2008 than in 2007. General Growth’s problems are in large part due to the REIT’s inability to refinance maturing debt, because of the credit crisis, a problem that intensified last October. General Growth has assumed a massive level of debt in recent years, which has grown to approximately $27 billion. The company spent $11 billion to acquire developer Rouse Corp. in 2004. Nolan said that a massive sale of its properties would be counterproductive, as the REIT’s size and its mall locations are looked at favorably by tenants. “We have properties that retailers want to be in,” he said. The filing may open the door to other retail REITs to expand their market share. “The Chapter 11 filing creates a compelling opportunity for larger, regional mall REITs to potentially acquire some of GGP’s properties,” said Steven Marks, a managing director & senior REIT analyst for Fitch Ratings. But Marks also speculated that General Growth’s bankruptcy will affect the market in another way. As the REIT sells some of its prize properties to satisfy its creditors, those properties will likely fetch discounted prices, that will, in turn, push down prices of regional malls and even non-mall retail assets, at least in the short term. “It probably will have a broader market impact, and that impact will be misguided,” Marks said. “Malls are unique properties. They are typically in very strong market locations.” Some of the REIT’s properties, that are owned in joint venture partnerships, or do not have significant debt-maturity issues, were not included in the bankruptcy filing, but Nolan said that whether or not they were included in the filing will have no effect on whether they will be sold. Among the high-profile General Growth holdings included in the filing are Boston’s Faneuil Hall Marketplace and the Grand Canal Shoppes, located within the Venetian resort on the Las Vegas Strip. Despite the filing, Nolan said, he wanted the bankruptcy to be “invisible to shoppers,” and said that the $375 million the REIT received in debtor-in-possession financing from Pershing Square Capital Management L.P. will enable General Growth to continue daily operations. “We are open for business,” Nolan said.Additional reporting by Paul Rosta Log on to www.cpnonline.com for continued coverage of General Growth’s reorganization.