Thursday, April 16, 2009

GGP files Ch. 11

Well, it happened, but not without making a good run at trying to stop it. General Growth Properties filed for Chapter 11 bankruptcy protection this morning. I am reading this: "The filing affects properties owned by the company but does not impact its third-party-management business and some centers owned in joint ventures." Here is the press release that says "broken credit markets" require this filing. (Well, that and levering yourself to the hilt. Wonder how certain former CFOs feel today.)

Now, not all the malls are in this 11:

Of the 158 regional centers included in the filing, some high-profile properties stick out, such as Ala Moana Center, in Honolulu; Faneuil Hall Marketplace, in Boston; and the Grand Canal Shoppes at the Venetian and Fashion Show Mall, both on the Las Vegas Strip. Of the about 60 properties that aren’t part of the filing, some big-name centers are Water Tower Place, in Chicago; Oakbrook Center, in Oak Brook, IL; and Glendale [CA] Galleria.
What next? Perhaps a mega-restructuring of debt, together with the sales of some properties to others at a good price. The sales may bring some cash out of the wood works and maybe some lenders to go along with it. Apparently 20% of the workforce has already been dropped previously, and I hope for people I know who are still there the axe does not cut at all or too deeply. What troubles me about this one is that real estate deals can sometimes be very complex, and this BK might take time and a lot of money to sort out. I was hoping not to have to test this theory, but here we go. The NYT shows a copy of the petition and the organizational charts, which themselves make for entertaining reading. I wonder whether those charts were made internally or if GGP paid $500/hour for a law firm associate to create them. Yes, folks, that happens. Take my word for it.


David Bodamer said...

Those organization charts are incredible. I'm trying to decipher them.

Is this standard for big real estate companies? I've never seen anything like this. Centro had some complicated organization charts as well, but I don't think they were quite like this.

David Stejkowski said...

This is not atypical from my experience. The org charts can look like Rube Goldberg drawings sometimes.

Will said...

Some of those org charts are mesmerizing! If you look at some of them, like Chart E (partnership with NYSRS), you can understand the complexity of trying to wrangle a group of SPE within the larger investment JV.

I would imagine that for financial reasons, they would have retained the existing ownership structure for acquisitions, even if they replaced various boards or entities within the structure. It makes for a complicated filing, no doubt.

Nevertheless, it pales in comparison to most LIHTC structures whivh are far less elegant.