GGP Makes Moves to Strengthen Its Appeal to Lenders (1/13)
Jan 13, 2009 12:29 PM
With a series of small announcements, embattled regional mall REIT General Growth Properties Inc. is little by little getting its house in order as its Feb. 12 loan extension deadline approaches. Last week, in a transaction that did not involve the firm directly, Holliday Fenoglio Fowler, L.P., a commercial real estate capital intermediary, disclosed it had sold two loans secured by General Growth Properties' malls and totaling approximately $380 million to pension fund advisors. Meanwhile, on Jan. 5, the troubled Chicago-based owner of a 180-million-square-foot portfolio settled a five-year-old lawsuit with developer Caruso Affiliated and switched its bankruptcy counsel to New York City-based Weil Gotshal & Manges from Chicago-based Sidley Austin LLP.
The two loans, one secured by the 1.2-million-square-foot Fox River Mall in Appleton, Wis. and the other by the 910,000-square-foot Oaks Mall in Gainesville, Fla. and the 1.2-million-square-foot Westroads Mall in Omaha, Neb., were sold by Principal Commercial Funding II LLC, a joint venture of Principal Financial Group, a Des Moines, Iowa-based financial company, and U.S. Bank N.A., a Minneapolis-based commercial bank.
“They were originated for securitization and they did not fit into the [lenders’] general account and securitization was no longer a viable exit,” says Stuart Salins, senior managing director and head of loan sales in the Chicago office of Holliday Fenoglio. Both loans, closed in recent years, were interest only and featured five-year terms.
As to the Caruso settlement, the move is a positive, says Jason Lail, senior real estate research analyst with SNL Financial LLC, a Charlottesville, Va.-based research firm, but far from helping the firm avoid a possible bankruptcy.
“It’s helpful, but minimally, considering the settlement was $48 million. I guess you would consider it a step in the right direction, but it’s really a drop in the bucket considering the grand scheme of things. And regardless of who their bankruptcy counsel is, they’ve got nearly $4 billion in debt coming due in 2009 and 2010.”
A spokesman for General Growth Properties says the change in bankruptcy advisors simply made the most sense at the moment and should not be taken as a reflection on Sidley Austin. The firm hired Sidley Austin in November as advisors. The settlement with Caruso, the spokesman notes, will allow General Growth to focus on its pursuit of strategic alternatives. “We didn’t have to come out of pocket to settle in terms of cash, we had already posted bond in excess of that amount,” he says.
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