GGP Bankruptcy Sees Some Ice Melt, But No Thaw

By George Berkheimer, STAFF WRITER

As properties begin to emerge from bankruptcy on the General Growth Properties (GGP) filing list, company officials are growing increasingly confident of a satisfactory outcome for the company's debt restructuring plans.
Just what that outcome might look like - a public offering of GGP equity, sale of the company to one or more of the suitors interested in acquiring it or something else entirely - still remains a matter of conjecture.
Adding intrigue to the state of affairs is an ongoing online debate between two hedge fund managers over factors that contribute to GGP's actual value.
In a nutshell, Hovde Capital Advisors of Washington, D.C., has taken the viewpoint that consumer spending is not likely to improve in the near future, and that continued declines in rental rates and leasing spreads are likely to drive substantially lower net operating income (NOI) for GGP and other mall-based retailers in the near future.
Hovde also sees GGP's purchases of master planned community segment assets at near peak prices and the subsequent decline in land prices as detrimental to the company's overall value.
William Ackman's Pershing Square Capital Management of New York, on the other hand, argues there is reason to believe that unemployment has peaked and that consumer spending may be trending upward, which will result in stable NOI for GGP and other retailers that are still holding on.
Time and the economy will ultimately decide who's right.

Restructuring Process
A brief recap of the action so far is in order.
GGP currently owns or manages more than 200 regional shopping malls in 43 states, and also has ownership in planned community developments and commercial office buildings. The company's portfolio totals approximately 200 million square feet of retail space and includes more than 24,000 retail stores nationwide.
On Dec. 2, 2009, GGP announced the filing of a reorganization plan and a related disclosure statement with the Bankruptcy Court in the Southern District of New York. That plan encompassed 92 regional shopping centers, office properties, community centers and related subsidiaries associated with approximately $9.7 billion of secured mortgage loans.
By Dec. 17, the company announced the next steps in its restructuring process. That followed court confirmation of reorganization plans for 194 GGP subsidiary debtors owning 103 properties that are associated with approximately $10.25 billion of secured mortgage loans. It also announced pending reorganization plans for 26 additional debtors owning 10 properties associated with an additional $1.7 billion of secured mortgage loans.
In its most recent release, dated Jan. 25, GGP announced completion of the restructuring of 74 secured mortgage loans aggregating approximately $9.4 billion. As a result, 180 GGP subsidiary debtors owning 96 properties are no longer in bankruptcy.
"They have fully emerged from bankruptcy," said Jim Graham, a GGP spokesman in the company's Chicago office.
Restructuring of 16 remaining loans aggregating approximately $2.1 billion is expected to be completed during the next few weeks.

Options Remain Active
As GGP moves forward in its attempts to create a sustainable stand-alone capital structure, "the GGP Board is committed to maximizing value for all stakeholders and will choose the alternative that best achieves this objective," said Metz.
Graham confirmed that, at present, all possible options remain on the table, including consideration of the interest that has been expressed by a trio of suitors.
These include Brookfield Asset Management of Toronto, which reportedly has purchased nearly $1 billion of GGP's unsecured debt in recent months. Indianapolis-based Simon Property Group has likewise been acquiring portions of GGP's debt with an eye to making a possible bid for the company.
Westfield Holdings Group, an Australian mall owner and real estate firm, has also expressed an interest in GGP.

Low Local Impact
GGP's operational results for the third quarter of 2009 were mixed.
"Although comparable and total tenant sales on a trailing 12-month basis continue to be down, third quarter 2009 comparable tenant sales were only down 4.6% as compared to the third quarter 2008," said GGP CEO Adam Metz.
September 2009 comparable tenant sales actually increased .8%, as compared to September 2008 comparable tenant sales, he added.
GGP has not yet released operational results for the final quarter of 2009, but there were some positive indicators.
"We had a good holiday season and our employees remain well focused on maintaining a pleasant atmosphere for both retailers and shoppers," Graham said. "Retail sales [over the holidays] were generally pleasing because our malls had a lot of holiday traffic, but sales as a whole remain sluggish."
Among GGP's Maryland properties that have fully emerged from bankruptcy are Baltimore's Harborplace and The Gallery at Harborplace, as well as Gateway Overlook in Columbia.
The Village of Cross Keys in Baltimore, White Marsh Mall and Owings Mills Mall remain on the list, as does Mondawmin Mall of Baltimore. Columbia properties still on the list include the Parkside, Park Square, Parkview and Ridgely buildings; Running Brook Convenience Center; the Corporate Center properties; the Columbia Association building; and the Columbia Exhibit building.