General Growth: A Good Time to Sell?

The news that mall-owner General Growth Properties is looking to sell off its assets isn’t surprising, given its highly publicized debt issues. We’ve also heard rumors that the REIT has had layoffs at its Chicago headquarters.

But is now the best time for the company to try to do this with all of the financial turmoil going on?

Granted, GGP owns several impressive shopping centers that could fetch a lot of money…during better times. But those aren’t the only assets in its 200-mall portfolio, which includes several, well, “normal” malls.

One article we read mentioned Simon Property Group as a possible candidate to acquire some of these properties. But would that huge firm even want to take on a sizable chunk of GGP’s portfolio right now? We haven’t exactly seen anyone make huge transactions in the retail sectors lately.

What do you think the future brings for GGP?

16 Responses to “General Growth: A Good Time to Sell?”

  1. 1 JG September 23, 2008 at 9:25 am

    REIT’s live on buying not selling so it will be tough for them, especially on the ego. However, if it solves the debt issue and makes the stock rise it would be a good thing. They will certainly not get top price but they have little for alternatives right now.

  2. 2 Benjamin Viloski September 23, 2008 at 9:27 am

    They need to stabilize their rent structure. The recent push to obtain annual 4% increases and lower the breakpoints to collect % rent sooner is driving tenants to reconsider mall space as too expensive. Some will go to open air centers where ancillary costs are less; others will commence purchasing outparcels where effective costs will be less than the proposed Rent costs from ggp. In the end GGP wil be the loser of better tenaants in their Mall space and then fail to attract the other in-line tenancies to complete the shopping experience demanded by the customer. The pendulum has swung too far in the opposite direction which will create change that may not be beneficial to the landlord and wall street performance will tell the tale. Tenants need to see a return as well and tenants can only drive sales to a point, may that point cannot be of no return?!

  3. 3 kin powell September 23, 2008 at 10:07 am

    I think the press release was misinterrupted. the purpose was to assure the investment community that management would do/consider any reasonable stepto move through this period of uncertanty. Management owns more of this company than any other group & is not going to to do anything rash. Oh by the way Ian, with a 94% occupancy this management is doing a GREAT JOB!

  4. 4 TeenyTiny September 23, 2008 at 11:55 am

    They don’t have an option regarding timing, the lenders are forcing the issue: you want your refinanced debt, then sell properties. Just like Centro Properties Group.

    Landlords can now have the unfavorable position of having their hand forced. Similar to what they’ve been doing to tenants for the last 7 years. Although, I must admit, of all the mall Landlords, GGP is the most humane (not quite sure that says much, given the company they keep).

  5. 5 MallMaven September 23, 2008 at 12:45 pm

    Simon is the likely buyer, if they want to see their stock drop like hotcakes.

  6. 6 Retail is Not Fun Anymore September 23, 2008 at 12:52 pm

    4% gross increases every year on rent: that includes the NNN charges (common area charges, taxes, and insurance). Unbelievable. Their argument is that with 3% increases on NNN’s and 5% increases on rent, the cash flow dollars are about equivalent, which is true. But they forget, tenants who are following Generally Accepted Accounting Principles have to accrue Deferred Rent each year, which throws off their Expenses and decreases their Profit to the point where their proforma no longer hurdles. Try to explain that to them, and you’ll get a blank stare and a reply, “No other tenants have complained.” WELL START COMPLAINING!!!!!!!!!!!!!!!!!!!!!!!!!!!!11

  7. 7 TeenyTiny September 23, 2008 at 12:54 pm

    Oh, by the way, they have $18 BILLION worth of debt to refinance in the next three (3) years.


  8. 8 James September 24, 2008 at 2:11 pm

    Horribly bad time to sell anything but with something this big I’d look overseas. The finer one hones tolerances in any machine the more powerful it becomes, and paradoxically, the more delicate.

  9. 9 MikeF September 25, 2008 at 8:53 am

    Probably just a coincidence, but the stock was at around $32 dollars when they let all their field marketing staff go, and now they are at around $15. Like I said, probably a coincidence, but I’d bet there are a lot of former marketing directors out there saying “I could have added to the bottom line through sponsorship or generating programs for percentage rent….oh welll!!

  10. 10 FrugalFran September 29, 2008 at 12:36 pm

    The amount of corporate debt taken out since 2002 is simply STAGGERING! Only the cautious executives did not fall prey to what every major OWNER/DEVELOPER was doing: Refurbishing, Redeveloping their existing centers. Well, some of the centers needed it, but others were just a bandwagon phenomenon. Now, all of these Landlords must pay, and they’re quickly running out of Tenants to squeeze. This go round, they were much TOO GREEDY, and they will PAY DEARLY, probably with their jobs, errrrr their subordinates jobs, somehow, the execs manage to hang on, like old, rotting fruit.

  11. 11 Don Papi Cassano September 30, 2008 at 2:28 pm

    The overseas investor may be a player with purchasing stakes, I don’t see them buying the entire portfolio as the market is right now. SWF funds would be a good stake player and may see these funds increasing their presence as the US market fluxes in turmoil.

    I work with two European funds and one SWF fund and their still agressive, but their appetite for these types of deals, at the present time, as an entire buy out wouldn’t be to their liking if the economy keeps going south, these properties will be picked up much cheaper later.

    Who would believe thast in our lifetime in just 15 short years we are back at this again but in worse shape. Great time to have cash.

    Just my take on the article and some of the responses.

  12. 12 MallMaven October 7, 2008 at 1:16 pm

    Gee, their stock dropped to $3.61, today, not surprising with all the debt taken out. One article mentioned the execs were selling.

  13. 13 NeedlessMarkups October 10, 2008 at 7:03 pm

    Analysts are saying, they will more than likely have to file for BK. We’ll see, Centro Properties Group has been hanging on all this year, thanks to the excellent leadership during a crisis of Glenn Rufrano. Centro’s stock has been a penny stock for most of the year, now at $0.06 (six cents). We’ll see if GGP’s executives are worth their pay (which, I’m sure, they’re all overpaid anyway – CEO pay in the US is at 344 times the average worker, compare that to about 20 times for CEO’s in Europe, today.

  14. 14 A Probable Forced Sale October 15, 2008 at 11:08 am

    Unfortunately, General Growth will either be a forced sale or a bankruptcy. Either way, a deep, and bitter humiliation, and disappointment. Executives major mistakes: 1)Taking on Too Much Debt. By biting off more than they could chew with the 2004 acquisition of Rouse, GGP sealed their fate in a down market by plunking down 12 billion for Rouse; 2) Not having a conservative downside approach to their portfolio (you’d think they’d know better being in this business for long enough, real estate goes up, and real estate goes down, consumption goes up, and consumption goes down); 3) The mega million dollar Caruso lawsuit regarding Americana, Glendale Galleria, and The Cheesecake Factory. Not training their leasing staff to watch what they say to retailers when negotiating renewals and new deals. Even though many Landlords use ties and insinuations (i.e. if you don’t play ball this time on this deal you may not get that deal on our other mall, or we’ll halt your growth and your deals will get killed in committee) to get what they want, it’s technically not kosher, or even, legal.

  15. 15 PMS October 15, 2008 at 4:06 pm

    GGP is not the only developer who has lost site of reality…..And Reality is the retailers need to generate a positive ROI if they are to remain in business, with minimum rents and ancillary charges at a level that is in line with their ability to produce a sales volume level that is realistic ….based on the type of products being sold……not all retailers generate above average SPSF and GM’s in excess of 60+% which is what is necessary for most to justify total occupancy cost in many of todays Malls, Life Style Ctr’s and Point Pad Positions in front of Power Centers.

  16. 16 MallMaven October 23, 2008 at 11:25 am

    Perhaps John Bucksbaum would have been better served had he spent less time hanging out cycling with Lance Armstrong, and more time assessing risk at his company.

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