General Growth rises on loan extensions
General Growth Properties Inc. rose as much as 23 percent in New York after the second-largest U.S. shopping mall owner said lenders agreed to extend a deadline to pay or rework $900 million in loans on two Las Vegas properties.
The deadline for the mortgages was extended to Feb. 12. The loans are for the Fashion Show Mall and Shoppes at the Palazzo properties, which house Neiman-Marcus, Nordstrom, Saks Fifth Avenue and Barneys New York stores, the Chicago-based company said in a statement yesterday.
General Growth, the owner or manager of more than 200 malls in 44 states, faced the prospect of defaulting on the loans, and has said if it’s unable to refinance debt it may have to file for bankruptcy protection. In October, General Growth hired Goldman Sachs Group Inc. and Eastdil Securities to sell the two Las Vegas malls along with a third, Grand Canal Shoppes at the Venetian.
“It’s a very, very positive development,” Rich Moore, managing director at RBC Capital Markets in Cleveland, said of the loan extension. He has an “outperform” rating on General Growth’s shares. “The lenders simply don’t want the assets back. They’re saying, â€~Hey, we want you to go out there and sell the assets.’”
General Growth lost 96 percent of its value this year on investor concern that it has too much debt in a global credit crisis that has cut consumer spending and real estate values. The company had $24.8 billion of mortgages, notes and loans as of Sept. 30. Gambling proceeds on the Las Vegas Strip fell 26 percent to $475 million from a year earlier in October, the 10th straight decline, Nevada’s Gaming Control Board said last week.
Shares Rise
General Growth rose 14 cents, or 8.9 percent, to $1.72 at 11:43 a.m. in New York Stock Exchange composite trading. Its shares traded as high as $1.94 this morning.
The loan extension was achieved only after six of the banks involved put pressure on Citigroup Inc. to agree to the deal, the Wall Street Journal reported, citing people familiar with the matter. Citigroup had for some time wanted to extract further concessions from General Growth in exchange for agreeing to the extension, the Journal said.
Moore of RBC Capital Markets said he believes General Growth will find a buyer for the Las Vegas malls by the new deadline.
“They’ve been working on it for three months, and that would be another two months,” Moore said, adding that he thinks a likely buyer for the properties would be Simon Property Group Inc., the largest U.S. shopping mall owner.
Representatives for Indianapolis-based Simon Property didn’t immediately return a telephone call seeking comment today. Simon Chief Executive Officer David Simon said a month ago that the company had no immediate plans to expand through acquisitions.
“We’re just not looking external right now,” Simon said at a real estate investment conference in San Diego on Nov. 19.