Would You Take (At Least) $3.5M to Fix GGP?

That’s what Adam Metz, interim chief executive officer of the debt-laden mall REIT is getting in base salary and fixed bonuses, according to Crain’s. Metz could also see a $1 million discretionary bonus and has options to buy one million shares.

His counterpart, interim president Thomas H. Nolan Jr., gets a $1.25-million base annual salary, a $1.6-million fixed bonus, and a discretionary bonus of $800,000. He has the option to buy 800,000 shares.

Granted, these guys will have their hands full. They’re trying to salvage (or sell) a company with $27.4 billion in debt. Executives also intend to sell the REIT’s high-end Las Vegas portfolio in a climate where buyers aren’t exactly snapping up trophy malls left and right.

But are these salaries fair, especially when a group of shareholders is unhappy about losing money on General Growth’s beleaguered stock? Or is it just another example of excess?


18 Responses to “Would You Take (At Least) $3.5M to Fix GGP?”

  1. 1 michael November 5, 2008 at 9:55 am

    if anyone can clean up the mess that young Bucksbaum made, they are worth the reward

  2. 2 Dave November 5, 2008 at 10:03 am

    I fully realize that if you want top quality CEOs, you need to offer top level pay. My problem is the paying of millions of dollars to someone that does not produce what they were hired to accomplish. Such happenings as WAMU’s CEO that received a sign on bonus and a exit bonus of around $19 million for 3 weeks work. To me that is unacceptable use of finances. In sales they do not reward you the big dollars unless you bring in a much larger amount and I think that that type of pay system is a more responsible CEO package approach.

  3. 3 James November 5, 2008 at 10:47 am

    That’s peanuts!

  4. 4 kin powell November 5, 2008 at 11:04 am

    Ian, you obviously don’t know Adam Metz or his accompolishments in our industry & when coupled with his ability to lead as I do, I’d say GGP got a bargain. Find a new subject to exploit!

  5. 5 iritter November 5, 2008 at 11:13 am

    Just asking the question.
    If that’s a “bargain,” then so be it.
    Gotta go now, plenty out there to exploit…

  6. 6 James November 5, 2008 at 11:16 am

    Let me revise that, I’ll do it in less time for only $6M. Still peanuts!

  7. 7 JT November 5, 2008 at 8:35 pm

    There are two important issues here. First, Mr. Metz could get at least 3.5M in a comparable position somewhere else. But the kicker: this job may only last a year or less – so there’s none of the security he would have working for, say, SL Green. Add this to the fact that, if the divestment goes badly, Metz takes the “blame” for sinking the ship.
    Just because someone gets paid doesn’t mean he’s stealing. GGP could offer me the position for 400K, and I would most likely botch the job, leaving everyone worse off. We should never make these judgments in a vacuum, applying only our jealousy to the situation. Real decisions are made when consdering the alternatives, and here the alternatives are quite bleak.

  8. 8 Mark November 6, 2008 at 10:26 am

    Michael – Are you REALLY gonna lay it all on “young Bucksbaum”? There was a guy named Bernie Freibaum that had everything to do with their collapse.

  9. 9 Tom November 6, 2008 at 11:02 am

    I think you can shake a tree and a qualified CEO and President would fall out that could do the job at less than half of these numbers!

  10. 10 MrPotter November 6, 2008 at 11:27 am

    There should be a ceiling on ALL executive and CEO pay. No one should make more than 20 times the average salary of the average worker, STARTING TOMORROW!!!!

  11. 11 TeenyTiny November 6, 2008 at 11:35 am

    There is no need to blame JUST one person at GGP, let’s not forget THE BOARD who is supposed to OVERSEE what’s going on. And, don’t forget the top EVP’s and VP’s who never spoke out (like scared little sheep worried about their positions and not wanting to make waves).

  12. 12 MallMaven November 6, 2008 at 11:49 am

    Essentially, there is no arms-length distance in negotiations of executive compensation between the executives and the boards. Executives are, essentially, the fox in the henhouse.

  13. 13 ShareholderUnion November 6, 2008 at 11:52 am

    Boards are insulated from shareholders, this, too, is a major problem. Shareholders need more direct voting power on issues relating to their assets.

  14. 14 MallMaven November 6, 2008 at 11:59 am

    “In judging whether Corporate America is serious about reforming itself, CEO pay remains the acid test. To date the results aren’t encouraging.”

    Warren Buffett, letter to shareholders of Berkshire Hathaway, Inc, February 2004.

    I recall debating the issue of CEO Compensation in my Ethics course in MBA school, back in 1993. At that time, CEO compensation was 116 times the average worker in a corporation. Today, that has jumped to over 360 times the average worker. In comparison to other countries: Britain 16 times the average, Germany 20 times the average and Ireland 12 times the average. Something is clearly very wrong in the USA and is a main factor which led us to the excesses in our economic system.

  15. 15 Gwen November 7, 2008 at 12:10 pm

    Surely the stockholders and lenders should have noted the “Board” consisted of mainly GGP employees who financially benefitted from their high-risk, hare brained schemes? The fox was guarding the hen house.

    The compensation for the “clean-up” team is actually very low. Qualified managers don’t need to take on a major disaster like this. They could make more money and have less stress elsewhere. GGP stockholders should be happy for honest, hard working executives as that would be a major change for them.
    Contrast the paltry salary of the new execs with the tens and perhaps hundreds of millions of loans to cover the former CFOs margin calls. This disaster was predictable and a result of executive greed and bad decisions, not the economy.

  16. 16 rocker November 7, 2008 at 12:59 pm

    For the employees, it’s too bad that GGP is on the ropes, but it is not the least bit surprising. The Bs have always wanted to be the biggest in the industry and they let that quest cloud their judgement as they acquired properties over the past 10 years.

    As for Freibaum, it looks like he beat GGP at it’s own game. The firm has a reputation of exploiting its employees for fun and profit. Bernie just did them one better.

    Take $3.5M for the job? Sure, I admit there would be a bit of personal satisfaction associated with dissolving the firm, especially given its history in employee relations.

  17. 17 Top Real Estates November 8, 2008 at 2:46 pm

    I have looked over your blog a few times and I love it.

  18. 18 Insider Information December 28, 2008 at 12:53 pm

    The GGP issue also goes deep down into the companies operating mall regions and it’s appointed Group Directors and Regional VP Asset Managers. At Natick for instance and in the New York/New Jersey Region (by far their most productive NOI properties in this country) including new development work,they simply squandered major monies estimated at a cool $150 million! Much of it directly related to regional management simply not being qualified, having no real prior or very limited mall management experience, and it running pervasive in hiring of friends in higher positions and in securing team members that would never challenge their bosses. There were also significant performance and corporate culture issues with many former ‘left-over’ Rouse Company executives and those that were absorbed as part of the earlier TRC acquisition. Most of these Columbia based shopping center executives were not able to get jobs anywhere else and thus stuck with Rouse, happy to have GGP coming along to prolonging their salaries and positions.

    As we all know the Rouse Company in its final years was known to be harboring very mediocre management people, as the good ones all left for other better jobs years before knowing the Rouse-End was near. So in this regard I hope the Mr. Metz a former URBAN finance guy will get the message that not only Bernie had his run with the company, but that field management which currently still maintains to be much too decentralized, being bloated with bad executive management, is still at this writing draining the company.

    Also big questionable issues prevail in the field with real ‘honest’ leasing projections, renewals and the making of new deals. Bad people do not like to bring bad news? Further with no monies available for the improvement of the properties (Capital Expenditures) and the imminent stark curtailment of security, janitorial and other such R/M operating expenses, the properties will further be suffering questionable operating futures. As such a complete in-field executive restructuring, operating changes and slimming-down is long overdue. Naturally this will almost be as hard as getting the re-financing done. If not harder. I still predict however that GGP will ultimately be eaten-up between SIMON, Westfield and perhaps Vornado and not exist anymore in its former glory. I would also say if it was not for the Rouse acquisition and poor regional management practices throughout the US, that GGP would still be sitting pretty all things considered.

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