Posted on 04/17/2009 5:42:32 PM PDT by FromLori
CBS) The recession has already taken its toll on retailers across the country. Now shopping malls themselves are in big trouble. One of the largest mall owners in this country filed for Chapter 11 bankruptcy Thursday.
General Growth Properties, which owns more than 200 malls, is more than $27 billion in debt - another sign that the meltdown in residential real estate is now spreading to the commercial sector as well, as CBS News correspondent Kelly Cobiella reports.
From New York's South Street Seaport, to the 100-store Fanieul Hall in Boston, to the Lincolnshire Mall in Chicago, shoppers are apparently just not spending like they used to. The bankruptcy filing by the Chicago-based GGP is the largest bankruptcy filing in the history of the American real estate business.
"Today there isn't enough capacity in the credit markets to refinance the debt for companies such as ourselves," said Tom Nolan, GGP's chief operating officer.
And GGP is not alone. Commercial real estate is on the verge of collapse --just like the housing market before it. Stores are closing at a pace not seen since 2001: 148,000 last year, with nearly that many predicted again this year.
Behind every empty storefront is a property owner like Yves Barroukh in Miami. He says his vacancy rate has shot up to 20 percent this year from 5 percent last year.
(Excerpt) Read more at cbsnews.com ...
Credit Cards and municipalities yet to come. Then foreclosures and bankruptcies all over again. What a spiral death we are suffering.
Well, there goes the neighborhood!
OK—I take total responsibility for this one==I visit a mall maybe twice a year. I really hate “malling.”
Moodys downgraded the entire nation already I agree it will be so bad.
http://www.businessinsider.com/moodys-puts-all-munis-on-negative-outlook-2009-4
It’s beginning! Ronald Reagan got us out of the recession from Carter from cutting taxes and Capital Gains. This is not going to happen with Obama. Just the opposite. More and More spending of our tax money and printing more money on top of this. Prepare to grab hold to wherever you can! It is going to be a rough ride! God Be With Us!
So, what we have in effect is a direct subsidy to the share holders in the form of loans or facilitative financing that costs them nothing and benefits their Shareholders while we, the Public, are saddled with more long term debt that will accrue interest and burden this and future generations.
The same thing has been done over and over again. Case in point is Citi. Why is there any value to it's Common Stock - And there probably wouldn't be save for Gov’t subsidies. The same goes for GM.
IMHO this is all basically a theft from Taxpayers to large investors who have connections with Treasury and the Fed. Goldman is just such a beneficiary along with Buffet and the rest of our Financial Elites.
Glenn Beck had Gerald Celente on his show in Feb. talking about the commercial real estate market being the next big shoe to drop and it will be bigger than the housing crisis:
Gerald Celente on Glenn Beck “Global Katrina” 02/10/2009
http://www.youtube.com/watch?v=XioU6pJEmv0
>> Credit Cards and municipalities yet to come.
The municipality crisis will be interesting. Lots of wealthy people have significant investments in muni bonds, paying interest free from Federal income tax.
Not quite - it's just changing owners. General Growth Properties (owner of flagship Glendale Galleria in California, among others) has been on acquisition binge in the last 3-4 years, buying properties at the top of the market prices and getting heavily into debt. They are still profitable (positive cash flow) but they have too much debt to service at this point. Other big mall operators (Westfield, Simon, Taubman, Caruso etc.) are doing OK, while not as well as in recent boom times of full capacity. Mall concept is viable, more so than ever, for good or bad.
Mall Bankruptcy Is New Domino In Commercial Property
The activist investor -- whose hedge fund Pershing Square Capital Management amassed a 25 percent stake in General Growth Properties -- yesterday watched the Chicago-based shopping-mall giant go bankrupt. In an unusual move, Ackman in recent weeks had actually lobbied for the Chapter 11 filing. His risky bet: that the market value of General Growth's malls exceeds its staggering $27 billion debt load, creating a huge upside to the mountain of shares he bought on the cheap. "It's an educated gamble," said Erik Kaiser of REMI Cos., a New York real-estate consulting firm, noting that "there are a lot of eyes" among real-estate investors looking to bid for General Growth's assets. Among more than 200 malls nationwide, General Growth owns the South Street Seaport and Staten Island Mall. ..... To bolster his chances, Ackman has seized a central role for himself in the effort to restructure General Growth by supplying $375 million in debtor-in-possession financing. As soon as the DIP loan is approved by a bankruptcy judge, Ackman is expected to take a seat on General Growth's board. ..... In the bombed-out world of commercial real estate, Bill Ackman has placed himself at ground zero.
Glendale Galleria owner files for Chapter 11 Saddled with billions in debt, shopping mall giant General Growth Properties Inc. sought protection from its creditors in Bankruptcy Court on Thursday, marking the largest Chapter 11 filing for a real estate company in U.S. history. The bankruptcy filing by General Growth, owner of the Glendale Galleria, Northridge Fashion Center and other Southland malls, had been expected for months. In recent years, Chicago-based General Growth went on an ill-timed buying binge that left it with $27 billion in debt as shoppers and lenders turned stingy. .....
Several of my Realtor friends, two of whom concentrate in commercial real estate, have been saying for three months or so that a crash in the commercial sector was coming.
They maintain this will be worse than the housing crisis because the money in commercial is much greater than in housing.
Bearing this in mind, I was shaking my head during a recent visit to Louisville, KY. As I drove around town there were many, many commercial places for rent. More than I’ve seen before.
At the same time, new commercial real estate was being built all over town.
Amazing.
When this happens many many people will lose their houses as municipalities price them out of their homes via tax increases, increased fees and eliminating services. It will be less than interesting IMO we will be well on our way to serfdom—just as BO wants.
Celente predicted all of this
http://www.freerepublic.com/focus/news/2186575/posts
The Collapse of ’09
Example: (with what I am familar with)
Bankruptcy unlikely to affect mall The Maine Mall's owner seeks protection from creditors to buy time to refinance $27 billion in debt.
Not to worry. The mall probably isn't going anywhere.
In fact, it's unlikely that Maine Mall shoppers and retailers, or the local retail real estate market, will be affected by Thursday's filing, industry experts said.
Chicago-based General Growth Properties, which owns and manages 200 malls nationwide, had been fighting off bankruptcy for months.
Company officials said Thursday that the collapse of the credit market made it impossible for the company to refinance its debt .
General Growth Properties owes $27 billion from a buying spree earlier in this decade that made it the second-largest mall owner in the country.
The company said it will continue to operate its malls as usual while working to restructure its debt.
"The mall is open for business. There are going to be no visible changes for the customers or the businesses," said Maine Mall Manager Craig Gorris.
Chapter 11 bankruptcy is designed to let a company stay in business but keep creditors at bay while the company develops a financial reorganization strategy.
General Growth spokesman David Keating said the Maine Mall is one of the company's strongest performers and there are no plans to try to sell it, although the company has a list of other properties that it would like to sell to help pay down debt.
"It is a really strong mall,"(and it is!!) Keating said.
He said he is unaware of any plans for layoffs of mall employees. The number of people employed by General Growth at the mall was not immediately available.
The Maine Mall is South Portland's largest taxpayer, with a tax bill this year of $3.56 million. In the bankruptcy filing, the company said it will continue to pay property taxes.
"They have paid their taxes all along. I don't see any reason why they won't now," said Erik Carson, assistant city manager and economic development director in South Portland.
Industry watchers expect the bankruptcy filing to have little or no effect on retailers or consumers.
"Most people don't know who owns the mall and they will continue to shop there," said Malachy Kavanagh, spokesman for the International Council of Shopping Centers, a trade association for the shopping mall industry.
Kavanagh said General Growth Properties' holdings perform well and its mall occupancy rates have held steady, despite the recession.
He said it was not store closings or the sagging retail sector that led to the filing.
"They did build and have a good collection of centers, and that is not going to change," said Kavanagh.
Similarly, the filing shouldn't deter national chains from continuing to seek space at the mall, said Joe Malone of Portland-based Malone Commercial Brokers.
"This is all about location, and they have the best mall in southern Maine or in Maine, period," Malone said.
Maine Mall officials have declined to disclose their rental rates, but rates have fallen an average of about 10 percent across the region in the past year, Malone said.
Rates in some of the choicest locations in Portland's Old Port shopping district, which soared to $50 to $60 a square foot two years ago, have fallen to $35 to $40 a square foot today, Malone said.
Some mall merchants said that they were not surprised by the bankruptcy filing, and that they are confident the mall will continue to thrive.
Michelle Wissemann, who has owned Downeast Art & Framing at the mall for 12 years, said she expects little or no change. More
That refi money out there that Obama and his experts say is available--whether this instance or home refi is total BS. Some games are being played for whatever reason I can't rationally decipher! Too many irons in the fire?
Besides the economy hurting retail. I think there’s something
else. People are not spending money at malls like they use too.They visit and walk the malls but there leaving without bags in there hands.
Depression ping!
Old folks walking, gangsta wannabes, gum cracking tweens, over priced gee-gaws.
Tell me again why I should shop at the Mall?
From the Sierra Vista Herald, Sierra Vista, Arizona
Mall, owner file for bankruptcy
SV mall manager says ‘it will have no impact’ on operations
There is so much quasi-news BS out there. People stop drinking the Kool aid. There is a mentality out there that seems to enjoy feeding of twisted tag words like Chapter 11, etc.
It makes for great media news and/or commentator ratings. Na na na... "I called if first.." rhetoric. Predicted doom feeds the media megalomaniacs and their biased agendas $$$$.(Don't forget to buy my book or my website is www.___.com) Obama loves everyone scampering around frenzied and in feverish despair; and same goes for the "talk media darlings" people become have become addicted to parroting each day. All dancing to the new hit song: "Why Waste a Good Crisis?
Was a guy at a Tea Party event I attended. He was spouting off streaming radio sites, etc. He had no more clear thoughts of his own; but had become a sponge for whatever thoughts were being spoon fed him by whatever talk show host across America. He couldn't get enough of it. He just kept repeating himself..I felt sorry for him. I could picture him just ear to his computer streamin' radio 24/7. He just believed everything he was being "entertained" with. I think some people have gone crazy and lost all sense of logic and completely lost reality.
Meanwhile, the economy continues to strive to do better and adapt itself. People can control their destiny!
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