General Growth Properties Inc. [GGP] has lived up to its name in the recent real estate run-up, expanding to the second-largest mall owner in the U.S. The problem is the company has accumulated $18.7 billion in debt over the last couple of years to fuel its growth, and the bill will be due over the next four years, The Wall Street Journal reports. The company now is looking to unload some assets to pay for its upcoming bills.
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Sound familiar? In the commercial office property front, Harry Macklowe got himself in the same predicament and was forced to put his trophy, the GM Building, on the auction block to pay back creditors.
The problem for General Growth and other REITS is they may not be able to attract the prices they want for some of their properties because other companies are unloading their inventory as well, causing a glut, increasing the supply and pushing down the price in some cases.
General Growth may also be hurt by the rising tide of bankruptcies of national retailers such as Sharper Image Corp. and Movie Gallery Inc., which may have leases in its malls. That means General Growth's bottom line will be affected by its suffering tenants, who want to get out of their leases.
The spotlight will be on General Growth, and its next test will be its first-quarter earnings results on April 29, when investors can truly see what damage may be under its roof. - Gerald Magpily
See Wall Street Journal article
See Dealscape: Moguls fancy Macklowe's GM building
