GGP: Smaller, Leaner…but a Survivor
In a very anti-climactic fashion, the nation’s second largest mall operator General Growth Properties, Inc (GGP) filed for Chapter 11 bankruptcy protection last Thursday. This filing had been expected for months and was a result of the company’s inability to refinance its enormous debt, or otherwise find a way to satisfy its long list of creditors.
This is certain to be a long and complicated bankruptcy as the list of creditors includes holders of commercial mortgage backed securites (CMBS) that are tied to GGP mortgages on its mall properties. The is the first bankruptcy in commercial real estate that includes a large CMBS element. Pay close attention as this may determine the fate of others that follow.
The central question is what kind of GGP can emerge from Chapter 11? I think they will be smaller and leaner but they are probably only going to be able to sell a small number of assets, perhaps +/- 15% of the portfolio or about 25 malls. These could be sold to the likes of Simon Property Group, Taubman, Westfield, etc. I can’t see a stock swap with Simon because of the debt load that would have to be absorbed. But I can see Simon and other leading mall operators stepping up to the table to buy a few select assets at reduced rates.
Hunter has an excellent overview of the bankruptcy for those looking at the investment side here.
Tags: bankruptcy, general growth, mall reit, Retail Real Estate Posted in
