Largest real estate failure in US history!

[thewiseguy]

General Growth Properties, one of the largest mall operators in the nation, filed for bankruptcy early Thursday morning in one of the biggest commercial real estate collapses in United States history.

Despite bargaining for months with its creditors, General Growth faced dwindling options for handling its more than $25 billion in debt, largely in the form of short-term mortgages that will come due by next year. The company has been severely wounded by the trouble in the financial markets, which has wreaked havoc on its ability to refinance that debt.

The filing by the Chicago-based company, made in federal bankruptcy court in Manhattan, included most of the company’s malls, which will continue to operate. General Growth’s reorganization efforts will likely focus on selling off properties. It has already suspended its stock dividend, cut its workforce by 20 percent and stopped virtually all new development. (Read the filing after the jump.)

http://dealbook.blogs.nytimes.com/2009/04/16/general-growth-properties-files-for-bankruptcy/

This is a big one folks with huge implications.

[NightWatcher]

1. four malls around Atlanta are threatened and one in Savannah

you can go to their website and search to see how many malls near you that they own and are in danger of closing. No one wants to hold the note on commercial rental property. Strip malls are replacing centralized malls everywhere I see. These same new strip malls are mostly empty.

http://www.ggp.com/Properties/

[Lex]

2. They'll re-organize

and come back in some form or another.

[jobycom]

3. In Austin, this is the second major mall failure in a week.

Earlier this week, another mall, completely separate from GG as far as I know, announced foreclosure proceedings because they could not get long term loans to pay off short term construction loans. This mall is newly constructed and built almost in the middle of nowhere in a region inaccessible to much of Austin, so it's as much about bad planning as lack of finances.

Today GG announces bankruptcy, threatening another Austin mall. The thing about GG's mall here in Austin, though, is that it's been doomed for a while. Bad management and a bad reputation has killed it. It was being boycotted by the NAACP for blatantly racist policies, and was being sued by Dillards for failing to maintain the standards in their contract.

If the rest of GG has been run that poorly, this may be more about bad management and the final death of a dinosaur than about the credit crunch. No doubt more loans may have delayed this, but for Highland Mall, at least, it was just a matter of time. I don't know if that's true of any other of GG's businesses.

The other mall, Hill Country Galleria, has problems not completely unrelated to management and planning, either. I suspect that if they showed promising revenues they'd have found their loans.

So this is an interesting story, and maybe more complex than it looks. It shows that funding is harder to get, but it also shows that unprofitable excesses in business are being cut loose by the lenders who have kept them afloat. That was a market correction a long time coming. So it's a bad sign on one level, but maybe a positive in the long run, in that it shows that banks are interested in cleaning up their books and holding bad borrowers accountable. That's something they've been afraid to do recently, for fear of weakening their own portfolios too much.

At least that's one possible angle to it. I doubt there's only one message to take from it.

[LeftHander]

4. I loathe malls and what they have done to America....

Ruined locally owned retail.
Ruined centralized shopping districts.
Homogenized retail architecture.

My family were retailers for over a century.

When the mall came to town, all the longtime stores folded.

Now my mother and father's hometown is nearly ghost town.

Fuvk the malls and the greedy bastards that bribed their way to riches.

And happy America found how wonderful it was to shop at spencers.