General Growth Properties (GGP), an owner of shopping malls, has declared Chapter 11 bankruptcy.
The operator of over 200 malls spread all across the country put out a press release this morning declaring business as usual across it its malls, while it reorganizes. The company, which has a crushing $27 billion debt load, had seen its stock fall 97% this year, down to $1.05, so this was all expected, though the company did spend the last month scrambling to come up with an alternative.
WSJ: The bankruptcy will have far-reaching implications for the mall industry, including putting pressure on already declining property values of U.S. malls, and subsequently mall mortgages, if General Growth dumps property to pay creditors. It also could consolidate power in the oligarchic mall industry if major players like Simon Property Group Inc., Westfield Group and Taubman centres Inc. can come up with the capital to pick up choice pieces.
The collapse points to an underlying concern for the commercial real estate industry, too. Developers and property owners that loaded up on debt during the past real-estate boom now face mountains of that debt coming due. But some of those borrowers, like General Growth, lack the cash or the borrowing capacity to refinance or pay those debts. Many lenders are granting cash-strapped borrowers extensions of their payment deadlines, but that only postpones rather than resolves the issue. This year alone, an estimated $248 billion of commercial mortgages will come due, up from $230 billion in 2008, according to real-estate research company Foresight Analytics LLC.