The mere name of mall developer General Growth Properties Inc. seems like an oxymoron these days. The once high-flying REIT is sputtering as the value of its stock has lost more than 99% of its value this year as credit has dried up, demand for commercial space has waned, and it holds nearly $19 billion in debt with $900 million in mortgages due next week. Now, The Wall Street Journal reported Thursday that General Growth has hired bankruptcy counsel Sidley Austin LLP to restructure its debt to avoid a bankruptcy filing.
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General Growth has warned it may file for bankruptcy if it cannot extend terms of its debt. The Wall Street Journal reported General Growth is negotiating with Deutsche Bank AG, Goldman Sachs Group Inc. and Wachovia Corp. to extend its Nov. 28 deadline of $900 million in mortgage debt. Should General Growth file for bankruptcy, the Journal says it would be "the biggest real estate failure in recent memory."
The news puts into question the survival of several high-profile projects the company is involved in, which are in varying stages around the U.S., including the redevelopment of the South Street Seaport in lower Manhattan and construction of a mixed-use complex in East Harlem.
But should General Growth go belly up, the collateral damage obviously won't be pretty. As a desperate plea for help, some suggest that General Growth should lobby, although it hasn't publicly done so, for some of the $700 billion Troubled Asset Relief Program money. But with the TARP bailout line seemingly getting longer (with the automakers the latest to beg for money) and the Treasury holding the aid strictly for banks right now, General Growth's prospects are worsening quickly, and any handout may come too late for a reversal of fortune. - Gerald Magpily
Dealscape: General Growth may look to sell-offs to pay debt
