General Growth may be forced to sell mall

General Growth Properties Inc., the bankrupt real estate investment trust, is faced with a motion in the U.S. Bankruptcy Court in Manhattan by Citicorp North America Inc. to lift the automatic stay and allow a foreclosure sale on property owned by one of its bankrupt units, court files said. The Citicorp lenders want to foreclose on a $95 million first mortgage, according to court files.

The automatic stay protects a debtor from foreclosure while the bankruptcy case is ongoing, absent a court order.

Citicorp, which is an agent for a group of lenders, yesterday asked Judge Allan Gropper to allow the lenders to go ahead with the foreclosure sale of the Oakwood Mall in Gretna, Louisiana. The mall is owned by Oakwood Shopping Center Ltd., a single-asset real estate company, one of General Growth's debtor units, according to court papers.

The debtor has no equity in the property because a recent appraisal shows it is worth less than the amount of the mortgage, Citicorp said in court papers. At the time of the Chapter 11 filing in April 2009, the "lenders were undersecured by more than $10 million" and the property is "now worth approximately $75.7 million," Citicorp's lawyers said in a court filing.

Citicorp said it has met the basic requirements to lift the stay because Oakwood Shopping has no equity in the property, it would be unable to confirm a plan of reorganization over Citicorp's objections because of the size of Citicorp's unsecured debt, and the property has declined in value since the time of the bankruptcy filing.

General Growth has not yet responded to the motion.

The case is In re General Growth, 09-11977, U.S. Bankruptcy Court, Southern District of New York (Manhattan).