General Growth: It’s Weird How Things Change

What’s going on with General Growth Properties is only a small part of this now global financial crisis we’re facing. But the situation has certainly made us reflect.

Sure, plenty of people were skeptical of the $13-billion acquisition of the Rouse Co. in 2004, especially with the amount of debt attached to the deal and Rouse’s portfolio of master-planned assets, a non-core property type for GGP. But did anyone expect it would come to the resignation of CEO John Bucksbaum and the intention to sell its dazzling Vegas portfolio?

Geez. It doesn’t seem like all that long ago when this company was at the top of its game. Only last year, Bucksbaum was chairman of the International Council of Shopping Centers, the spokesman for the industry around the globe.

So what happens next? An analyst in one article says: “What they need to do is to sell the crown jewels, and with John Bucksbaum in control they were reluctant to do that.”

But will they find buyers of those high-profile Las Vegas properties, and high-end assets in other markets, in this economic climate? And if so, who is interested?


8 Responses to “General Growth: It’s Weird How Things Change”

  1. 1 Mark October 28, 2008 at 3:32 pm

    I’m sure Inland would take them off their hands…

  2. 2 Debt Kills October 29, 2008 at 11:25 am

    GGP’s plight is no different than the plight of any person, corporation or country, who takes on too much debt. Everything seems to be fine, running well, with no signs of despair, until the tide rolls in, and those who are swimming naked are exposed.

  3. 3 LackofJudgment October 29, 2008 at 2:50 pm

    Good leaders are judged by how well they do in and out of crisis. John Bucksbaum and the other senior executive who was let go, lost their good judgment by giving loans to Bernie Freibaum, and others, to cover their margin calls. The Bucksbaums have probably lost 90+% of their wealth in the last few weeks, poor John will have to live with it the rest of his life.

  4. 4 WhatStaysinVegas October 30, 2008 at 10:28 am

    Selling the “dazzling Vegas portfolio” is, indeed, the best move. Summerlin is a very expensive outdoor mall/lifestyle project (one of only a handfull of new ground up mall projects of the last five years)counting on significant rooftop growth on the west side (which has materialized, somewhat), and counting on $100k+ incomes, which may disappear, or not materialize, altogether). Additionally, Broadway and Meadows require significant capital infusion to continue the redevelopment of the properties, while they, and Fashion Show, are battling significant overdevelopment inside the loop and near the casinos from other high end retail development in the casinos and at least 5 more lifestyle centers near downtown. Couple all of this, with the declining Vegas economy so reliant on tourists (who don’t have a lot of disposable income) and an employment base highly service oriented, and a non-diverse economic base with virtually no industrial base. Given the Las Vegas housing foreclosure rate, that is five (5) times the national average, it is no wonder they want to sell this portfolio which faces significant losses.

  5. 5 steve felix October 31, 2008 at 8:51 am

    hindsight sure is 20/20 and especially these days when it seems it’s getting easier than ever to point a finger at people and say either ‘you’re to blame’ or ‘what were you thinking?’ or ‘do you know what you’ve done?’or even’ha-ha.’ i’ve known GPP for many years; i think that the senior guys that i’ve known the best, john bucksbaum and bernie freibaum are very bright guys who not only knew the shopping center business well and created a culture that was second to none, but also just went along with the flow of things in the last 10 years. didn’t hundreds or thousands do the same? so whether it’s extending your personal credit line too far or expanding your company and using the financial engineering that was de rigeur, it doesn’t matter much what we’ve done in the past, it matters what we’re going to do in the future. as paul volcker said in his speech at ULI this week in miami beach, “we’ve created too many financial engineers and not enough structural engineers’ (referring to both the state of the finance world and also to the sad state of U.S. infrastructure). anyway, what we’re going through is unprecedented and as from other cycles we can learn from this one too. pointing fingers does no one any good at all.

  6. 6 Excuse Me Steve, But... October 31, 2008 at 11:10 am

    Sure hindsight is 20/20, but I don’t think GGP deserves a mulligan here. They didn’t follow through on certain promises they made when they acquired Rouse and now many innocent investors, employees and even their senior management team have lost billions. The failure of GGP management to execute their plan is directly responsible for this. Perhaps finger pointing does no good as the damage is done, but the management team deserves to be branded for their failure.

  7. 7 BillyGoat October 31, 2008 at 1:46 pm

    Being accountable, does a world of good, for all. If we dare win, in the spotlight, than we must also lose, in the spotlight.

  8. 8 MrPotter October 31, 2008 at 4:21 pm

    Steve: “Knowing the shopping center business well” and succeeding in business, are two entirely different things.

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