Update: A Reuters report indicates three more GGP malls may have been turned over to special servicers. It mentions Town East Mall, in Mesquite, Texas, the Southland Mall in Hayward, California, and the Deerbrook Mall in Humble, Texas.
So this really may be it for GGP. Perhaps today’s the day we see the Chapter 11 filing.
Citigroup Inc. and other lenders have filed court papers to foreclose on General Growth Properties Inc.’s Oakwood Center mall in New Orleans, which has a $95 million mortgage that came due Monday and wasn’t paid.
It was unclear early Friday afternoon what the foreclosure action means for other loans among General Growth’s $27 billion in debt. The owner of more than 200 U.S. malls already has more than $1 billion in debt that is past due, though the lenders haven’t demanded immediate payment. Another $4 billion could be called due if those lenders so choose. A foreclosure could cause General Growth’s lenders to declare a cross default and demand payment of their loans.
The Oakwood foreclosure action comes as General Growth is trying to coax most of its holders of $2.25 billion in bonds into an agreement to abstain from demanding payment of principal and interest on those bonds through the end of this year. Of those bonds, $395 million were due Monday. General Growth set a deadline of 5 p.m. EDT Friday for bondholders to agree to the consent-solicitation pact. If not enough bondholders agree, General Growth could be forced to seek Chapter 11 bankruptcy protection.
Moody’s has published the latest update on its commercial real estate indices. Not surprisingly, the data shows continued declines just about across the board.
Leaving General Growth this week are Jean Schlemmer, chief development officer; Alex Berman, senior vice president of the mall owner’s international division; human-resources chief Judy Herbst; and investor-relations director Tim Goebel. None returned messages seeking comment Thursday. Their departures follow that of Thomas D’Alesandro, General Growth’s senior vice president of development, who left Feb. 27.
The changes are the latest implemented by Adam Metz and Thomas Nolan after the former board members took over as General Growth’s CEO and president, respectively, last October. Mr. Metz replaced John Bucksbaum, who remains chairman. Mr. Nolan replaced Bob Michaels, who remained as chief operating officer. In another change this week, Mr. Nolan took over as COO from Mr. Michaels, who now is the company’s vice chairman handling the mall owner’s relationships with retailers.
Moody’s Investors Service lowered its ratings on debt-laden mall owner General Growth Properties Inc. (GGP) and some of its subsidiaries to C, the last stop before default, after the company let a $395 million bond payment pass without a payment earlier this week.
The nation’s second-largest mall owner by number of properties, which is trying to coax its bondholders into a nine-month extension, is hoping holders of the past-due bonds will forgo filing an involuntary bankruptcy petition against it and instead allow it to restructure its $27 billion debt load out of court.
Meanwhile, the company is facing yet another deadline to get an extension from its lender or else file for Chapter 11.
Some of the nicest malls around could be in Chapter 11 within hours, unless parent General Growth Properties Inc. wins another last-minute reprieve from its lenders.
Everybody has heard about toxic assets, those bad loans clogging the nation’s financial system. General Growth has the flip side: great assets, drowning in debt.
This Chicago-based real estate giant has stopped paying some of its bills, and has avoided bankruptcy so far only because the lenders have cooperated. But it has billions of dollars in loans coming due, and a deadline Friday for a partial extension. Without it, a costly court-supervised workout may be inevitable.
