Properties has made strides
since emerging from Chapter 11.
CHICAGO-In March 2009, General Growth Properties Inc. (GPP) filed for Chapter 11 bankruptcy. Weighed down by maturing loans and an economy that was particularly cruel to the retail sector, the mall owner relied on help from the courts for help with debt restructuring, while finding equity partners to help out.
In November, 2010, the company emerged from bankruptcy. And two years later, it presented a couple of pieces of news to demonstrate it’s moving toward profitability and reasonable success. The strategic focus of the company involves 1) the sale of non-core assets; 2) conversion of temporary leases to permanent spaces; 3) delivering and 4) executing its redevelopment plan. A recent earnings call demonstrated that the company is moving forward on the first two strategies.
On Nov. 14, GGP restructured a series of loans totaling $1.2 billion, which carry a weighted average interest rate of 3.65% and an average term of 8.4 years (compared to a rate of 4.62% and a remaining term-to-maturity of approximately one year). The loan restructuring also yielded $545 million of net proceeds.
And the day before, on Nov. 13, the company filed an 8K report with the Securities and Exchange Commission (SEC) in conjunction with its presentation at NAREIT, presenting a $1.6 billion redevelopment and expansion plan among 51 regional malls in the GGP portfolio. The report noted that approximately $1 billion of redevelopment would be underway by early 2013 on projects including the Ala Moana Center at 1450 Ala Moana Blvd., which will be completed by late 2015. GGP will invest approximately $543 million for the addition of new anchor pads and 300,000 of in-line mall space.
GGP already commenced $115 million in redevelopment on the Glendale Galleria, at 100 W. Broadway in Glendale, CA, in which it has a 50% stake. That activity is scheduled for completion by late 2013. With 80% of the $1.6 billion committed to the class A and class A-plus malls, GGP anticipates unlevered, stabilized returns of 10%.
Though representatives from GGP were not available for interviews, a recent Wall Street Journal article about CEO Sandeep Mathrani pointed out that when Mathrani first came on board in the early part of 2011, investors were skeptical – but since that time, the company’s share price has increased 28%. The company’s portfolio has also improved; GGP malls were 95.5% leased in Q3 2012, which was up 1.3% from the year before – and that’s led to higher rental rates. Furthermore, the article went on to say, GGP is starting to consider making acquisitions.