Archive | General Growth

Published 10 May 2010

Simon Property Group issued a revised “best & final” offer for General Growth Properties on Thursday, then withdrew it on Friday after the General Growth board preferred Brookfield Asset Management’s offer and got permission for an auction process.

Simon said its $US6.5 billion offer, at $US20/share, represented a 66% ($US2.6 billion) premium over Brookfield’s offer. It was made up of $US5 cash, $US10 in Simon shares & shares in General Growth Opportunities valued at $US5/share. Brookfield’s offer is more complicated, including warrants from the different parties in the bidding consortium.

General Growth said later on Friday the US Bankruptcy Court had approved bidding procedures and the issuing of warrants to serve as compensation for the financial commitments to be provided pursuant to the revised $US6.55 billion equity investment & $US2 billion capital backstop offer from affiliates of Brookfield Asset Management, Pershing Square Capital Management & Fairholme Funds.

General Growth said it would continue to consider competitive proposals and expected to select its plan for emergence from bankruptcy in early July.

General Growth, the second-biggest US-owned mall owner, filed for chapter 11 bankruptcy protection in April 2009 for itself and for 166 subsidiaries – most of the individual mall-owning companies in the group, including The Rouse Co and the Howard Hughes Corp. It currently has ownership interest in or management responsibility for more than 200 regional shopping malls in 43 states, as well as ownership in planned community developments & commercial office buildings.

Earlier stories:

19 February 2010: General Growth tells Simon to get in line

17 February 2010: Simon bids for bankrupt General Growth

17 April 2009: US mall giant General Growth enters bankruptcy protection

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Attribution: General Growth releases, story written by Bob Dey for the Bob Dey Property Report.

Published 19 February 2010

Troubled US mall owner General Growth Properties Inc has told competitor Simon Property Group Inc it will stick to its programme of restructuring itself out of chapter 11 bankruptcy protection and won’t pre-empt that in favour of a Simon takeover bid.

Simon timed the release of a letter outlining its bid for a few hours before General Growth was due to make a foreshadowed statement on its restructure.

General Growth chief executive Adam Metz thanked Simon chairman David Simon for “your indication of interest” but said his board had concluded” it is not sufficient to pre-empt the process we are undertaking to explore all avenues to emerge from chapter 11 and maximise value for all the company’s stakeholders…..

“As we indicated during our meeting, we are about to commence a process to explore several potential options for the company’s emergence from chapter 11, including a sale of the entire company as you have proposed as well as a capital raise. The company & its advisors have been working over the past several months to prepare the company to launch this process.”

In response, Mr Simon wrote: “Given the clear risks of pursuing an alternative plan, the current state of the retail industry and your company’s past history of risky financial choices, your lack of urgency should deeply concern creditors & shareholders. Time is passing and General Growth is inappropriately speculating with creditors’ money – the company’s high leverage means not only that equity value could be destroyed by relatively small market movements, but that the value of the unsecured debt is also at risk. Accordingly, it is not surprising that the official committee of General Growth’s unsecured creditors has publicly stated that it supports our offer and encourages you to engage with us promptly to allow our offer to be considered by your creditors & shareholders.

“We have tried for many months to explore a transaction with you that would give creditors & shareholders an attractive & expeditious exit from your bankruptcy process and have been repeatedly put off. Time & again, serious engagement with us has been pushed off into some indefinite future when you might start to begin to commence a ‘process.’”

Simon made a $US10 billion-plus bid, including about $US9 billion in cash.

General Growth, the second-biggest US-owned mall owner, filed for chapter 11 bankruptcy protection in April 2009 for itself and for 166 subsidiaries – most of the individual mall-owning companies in the group, including The Rouse Co and the Howard Hughes Corp.

The group’s 2008 year-end balance sheet showed it had total assets of $US29.6 billion and total debts of $US27.3 billion. Its share price had fallen from $US40 in early 2008 to $US1.05 when it sought bankruptcy protection.

The Simon offer would deliver more than $US9/share to general Growth shareholders, consisting of $6/share in cash and a distribution of General Growth’s ownership interest in the masterplanned community assets, which General Growth valued at more than $US3/share.

Previous story:

17 February 2010: Simon bids for bankrupt General Growth

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Attribution: Simon release, General Growth website, story written by Bob Dey for the Bob Dey Property Report.

Published 17 February 2010

Simon Property Group Inc released details overnight of a $US10 billion-plus bid for the bankrupt General Growth Properties Inc, including about $US9 billion in cash, as the crippled target went to court seeking support for a refinancing plan that would see it exit bankruptcy.

Simon’s offer would provide a 100% cash recovery of par value plus accrued interest & dividends to all General Growth trade, loan & investment creditors, which Simon chairman & chief executive David Simon said was worth $US7 billion.

General Growth shareholders would receive more than $US9/share, consisting of $6/share in cash and a distribution of General Growth’s ownership interest in the masterplanned community assets, which General Growth valued at more than $US3/share. Alternatively, General Growth shareholders & creditors could take Simon shares in full or part payment. Secured portfolio debt would remain in place.

The official committee of General Growth’s unsecured creditors has advised Simon that it supports the Simon offer, which wouldn’t be subject to a financing condition. It would be financed through Simon’s cash on hand and through equity co-investments in the acquisition by strategic institutional investors, with the balance coming from Simon’s existing credit facilities.

General Growth, the second-biggest US-owned mall owner, filed for chapter 11 bankruptcy protection in April 2009 for itself and for 166 subsidiaries – most of the individual mall-owning companies in the group, including The Rouse Co and the Howard Hughes Corp.

The group’s 2008 year-end balance sheet showed it had total assets of $US29.6 billion and total debts of $US27.3 billion. Its share price had fallen from $US40 in early 2008 to $US1.05 when it sought bankruptcy protection.

At that time it owned or managed more than 200 regional malls in 44 states containing 20 million m² of retail space in 24,000 shops, and had interests in masterplanned community developments & office buildings.

Simon owns or has an interest in 382 properties comprising 24 million m² of gross lettable area in North America, Europe & Asia.

Simon made a written offer to General Growth’s board on 8 February and released the details overnight. Also yesterday, the bankruptcy court was due to hear General Growth’s request for approval to engage UBS Investment Bank to help evaluate potential financial transactions to take it out of bankruptcy protection. General Growth had previously restructured $US11.6 billion of secured mortgages over 112 of its properties.

17 April 2009: US mall giant General Growth enters bankruptcy protection

6 November 2008: US mall giant General Growth reports loss, portfolio on market, but healthier Simon professes disinterest

21 August 2004: General Growth takes out The Rouse Co

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Attribution: Simon release, General Growth website, story written by Bob Dey for the Bob Dey Property Report.

Published 17 April 2009

The second-biggest US-owned mall owner, General Growth Properties Inc, filed for chapter 11 bankruptcy protection on Thursday after warning in February it might have to follow this course.

It also filed for bankruptcy protection for 166 subsidiaries – most of the individual mall-owning companies in the group, including The Rouse Co. and the Howard Hughes Corp. Although the group is based in Chicago, it filed for bankruptcy in the federal bankruptcy court in Manhattan.

General Growth’s year-end balance sheet showed it had total assets of $US29.6 billion at 31 December and total debts of $US27.3 billion. Its share price has fallen from $US40 a year ago to $US1.05 yesterday.

Funds from operations, up 22% to $US1.1 billion in 2007, fell 22% to $US859 million in 2008. Despite hard times, General Growth still paid out 55.1% of diluted funds from operations in dividends in 2008 (with no fourth-quarter payment), up from 49.9% in 2007.

Real estate net operating income was up for the year, from $US2.48 billion in 2007 to $US2.59 billion. Earnings from its masterplanned communities improved from a $US71.5 million loss to a $US11.4 million loss.

Chief financial officer Bernie Freibaum, who had devised the debt-funded expansion programme adopted in 2003, said in April 2008 (he was ousted in October) the reit was looking for buyers of its 200-mall portfolio so it could cut back its debt.

The group has been struggling since it used 100% debt financing to buy out competitor Rouse for $US12 billion in 2004. A high proportion of its debt was in short-term mortgages and major investors have been calling for payments for several months.

Given that position and the current state of the US economy, the statement General Growth chief executive Adam Metz issued overnight looks highly optimistic: “The company intends to work with its constituencies to emerge from bankruptcy as quickly as possible, while executing on a plan of reorganisation that preserves the company’s integrated, national business operations.”

It said all day-to-day operations & business of its shopping centres & other properties would continue as usual – but its masterplanned communities have been making heavy losses, fourth-quarter group earnings were zero and earnings for the year were US10c/share.

In February, the group said it had about $US1.18 billion of overdue debt, about $US4.1 billion of debt that could be accelerated, $US1.44 billion of consolidated mortgage debt & $US595 million of unsecured bonds scheduled to mature this year and needing to be refinanced repaid or extended.

Largest unsecured claims registered with the bankruptcy court were by:

Eurohypo AG, New York branch of Frankfurt-based Commerzbank AG, $US1.9875 billion on a 2006 senior term facility & $US601.5 million on a revolving facilityWilmington Trust FSB $US1.55 billion on 3.98% notes due April 2012, $US798.5 million on 6.75% Rouse bonds due May 2013, and also holder for the LaSalle Bank National Association of $US206.2 million of long-term securities due in 2036, followed byBank of New York Mellon Corp, as successor trustee to JP Morgan Trust Co, with 4 Rouse bondholdings – $US450 million of 5.375% bonds due November 2013, $US400 million of 7.2% bonds due September 2012, $US395 million of 3.625% bonds due last month (15 March) & $US200 million of 8% bonds due 30 April.

Large securityholders are the General Trust Co as trustee (22.9%), FMR LLC 13.4%, Pershing Square Capital Management LP 7.4%, The Vanguard Group Inc 7.01%.

Mr Metz said Pershing had committed to a $US375 million financing facility. He commented: “Our core business remains sound and is performing well with stable cashflows. We believe chapter 11 is the best process for restructuring maturing mortgage loans, reducing the company’s corporate debt and establishing a sustainable, long-term capital structure for the company. While we have worked tirelessly in the past several months to address our maturing debts, the collapse of the credit markets has made it impossible for us to refinance maturing debt outside of chapter 11.”

General Growth owns or manages more than 200 regional malls in 44 states containing 20 million m² of retail space in 24,000 shops, and has interests in masterplanned community developments & office buildings.

Simon Property Group is the largest public US real estate company & leading mall owner & operator, owning 385 properties in North America, Europe & Asia.

Sydney-based Westfield Group has interests in 119 malls containing 23,000 shops in Australia, the US, the UK & New Zealand.

Earlier stories:

27 February 2009: Westfield makes $A2.2 billion loss but portfolio value still up 14% to $A50 billion, operations up 10.4%

6 November 2008: US mall giant General Growth reports loss, portfolio on market, but healthier Simon professes disinterest

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Attribution: Company release, bankruptcy filing, company results, Simon & Westfield websites, story written by Bob Dey for the Bob Dey Property Report.

Published 5 November 2008

One of the biggest US mall companies, General Growth Properties Inc, reported a third-quarter loss today, is due to repay $US958 million of property & corporate debt by 1 December and has its $US27.6 billion portfolio on the market.

The $US15.4 million net loss followed a $US9.4 million net loss for the quarter last year. On the main measure by which US real estate investment trusts gauge their performance, funds from operations, General Growth was down 11% for the quarter to $US185 million and down 30% for the first 3 quarters of the year to $US637 million.

General Growth began a huge debt-funded expansion programme in 2003 and expanded by 60 malls to more than 200 by last year. For one of its biggest purchases, of The Rouse Co in 2004, it debt-financed almost all the $US12 billion price, and by this year had pushed its debt:capitalisation ratio up to 66%, compared to 38% for leading competitor Simon Property Group.

The latest accounts show shareholders’ equity represents only 6.7% of total assets.

Debt on 2 of its premier Las Vegas properties, the 175,000m² Fashion Show and brand-new 42,000m² The Shoppes at The Palazzo, expires on 28 November and both properties are being marketed for sale. The Palazzo is a $US2 billion development opened only at the start of this year.

General Growth’s chief financial officer, Bernie Freibaum, said in April the reit was looking for buyers of its 200-mall portfolio so it could cut back its $US27 billion of debt.

Come 3 October, Mr Freibaum was shown the door after the board found out he’d sold 2.95 million shares to satisfy margin calls and applied all the proceeds to repay outstanding margin debts. But, as he left the building, he still owed $US3.4 million on margin calls and had 1.3 million shares left.

The company’s president, Robert Michaels, was ousted from that job at the same time over margin calls, but remains chief operating officer. Both men had their repayments financed by a trust of the founding Bucksbaum family – Mr Michaels’ $US10 million of loans had been repaid in full while Mr Freibaum had $US80 million still to pay out of $US90 million lent to him against company policy. John Bucksbaum kept his job as chairman.

General Growth has deferred its entire development programme, except for work already under way & projects approved at jointly owned properties.

While General Growth is on its knees, the chairman & chief executive of competitor Simon Property Group, David Simon, was reported this week rejecting takeover speculation – although that sort of stance can change once the 2 biggest mall owners in the world, Simon & Sydney-based Westfield Group, get into competition or co-operative dealing.

In sharp contrast to General Growth, Simon is in good shape. Announcing its third-quarter results on Monday, Mr Simon said funds from operations (the principal performance measure for US real estate investment trusts) increased 10.8% to $US463.9 million, or by 10.3% on a diluted/share basis to $US1.61. Same-store sales in regional malls rose by 0.4% to $US493/ft², sales in Premium Outlet Centres rose by 4.2% to $US520/ft², average rent in regional malls rose 6.3% to $US39.26/m², and by 6.6% to $US27.12 in the Premium centres.

At 30 September the company had $US950 million cash in hand and over $US2.5 billion of available capacity on its corporate credit facility. It has a major development programme under way in the US, Japan & China.

Simon is the largest public US real estate company & leading mall owner & operator, owning 385 properties in North America, Europe & Asia.

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Attribution: Simon & General Growth websites, story written by Bob Dey for the Bob Dey Property Report.

General Growth Properties Inc said on Friday it would buy The Rouse Company for $US12.6 billion, including the assumption of $US5.4 billion of debt for a net price of $US7.2 billion.

General Growth is the 2nd biggest mall owner in the US, behind Simon Property Group.

The agreement the 2 boards of directors announced was for General Growth to pay Rouse shareholders $US67.50 cash/share. It’s still subject to Rouse shareholders’ approval, though with the 2 boards in agreement it read like a fait accompli.

Rouse was founded in 1939 and is based in Columbia, Maryland. It became a public company in 1956 and now has more than 150 properties across the retail, office, research & development and industrial sectors in 22 states.

It owns or has an interest in 37 regional malls, 4 community shopping centres & 6 mixed-use projects, totaling about 3.7 million m².

Sales/ft² at its retail properties average about $US439/ft² and occupancy is about 92%.

Its big-name premises include Water Tower Place and Oakbrook Centre in Chicago, Fashion Show Mall in Las Vegas, Park Meadows Mall in Denver, and Faneuil Hall Marketplace in Boston.

It’s also developed 6 master-planned communities – including Columbia in Maryland, Summerlin along the western edge of Las Vegas, and Bridgelands, a new project on Houston’s western side and has an interest in another planned community in Houston, Woodlands.

Most of Rouse’s 840,000m² of commercial & industrial property is around Baltimore, Washington & Las Vegas.

General Growth has 178 shopping centres in 41 states, containing 14.3 million m² of retail space.

Merger it might be officially, but even on the Rouse website the contact for more information about the deal is at General Growth.

Rouse’s 30 June balance sheet shows $US7 billion of assets, $US5.4 billion of debt. But net earnings took a dive in the 2nd quarter, falling 56% from $US138 million in 2003 to $US61 million this time, earnings/share falling 61% from $US1.50 to US58c.

Still, the “merger” may have been a surprise – Rouse appointed a new director only 3 weeks ago.

Websites: General Growth Properties

The Rouse Company