General Growth generally isn’t
Another giant has fallen in the recession forest. All the king’s cash advance and all the king’s quick payday loans couldn’t put them back together again. Stick in your thumb and pull out some debt relief.
Daniel Taub and Brian Louis report for Bloomberg that Real Estate investment trust General Growth Properties Inc. has filed the largest Real Estate bankruptcy in U.S. history. The second largest shopping mall owner in the country, they had accrued $27 billion in debt.
“Our business model remains strong”
“We intend to emerge as a leaner company,” General Growth President Thomas Nolan said in an interview. “We want to come out as a less leveraged company. Our business model remains strong.”
General Growth stepped onto the big boy slide when it dropped $11.3 billion to buy commercial-property developer Rouse Co. in 2004. As we’ve seen, the credit crunch and recession have severely decreased spending and property values. It isn’t surprising then that banks have reduced lending as mortgages writedowns have littered the financial landscape. None of this helped General Growth shoulder their titanic new investment.
According to Bloomberg, Rouse and 165 units are part of the bankruptcy filing. Joint ventures General Growth had a hand in are not included.
The end?
Dan Fasulo of Real Estate research firm Real Capital Analytics tells it like it is when it comes to the shockwaves this will send through the industry:
This is kind of the beginning of the end. This bankruptcy will drive down the values of mall assets in the United States. It’s going to put, I believe, more supply on the market than can be absorbed by investors.
The stock drop has been tremendous. General Growth closed at $1.05 on the New York Stock Exchange in composite trading recently, leaving the company’s value at $329 million. To put that into perspective, their shares once traded at as high a level as $67 in March 2007. Things will not improve significantly for those who own shopping malls until consumers have the capital and confidence to come out strong once more.
Related Video:
Wow. That’s a huge company. Let’s hope they do come out the other side leaner and meaner. This recession has seen bankruptcies of some of the hugest companies – Lehman Brothers went under, Washington Mutual, the biggest savings and loan company to ever fail, and then the biggest real estate company to fail. I hope the predictions that we’re coming to the end of the decline is correct.