Continuing loan talks boost General Growth
General Growth Properties Inc., the U.S. mall owner that has lost 99 percent of its market value, rose after announcing that lenders have not asked for full repayment of $1.18 billion in past-due debt.
General Growth reported a net loss of $965,000 for the fourth quarter, compared with net income of $58.7 million a year earlier, the Chicago-based company said in a statement released yesterday after the close of New York trading. Funds from operations were 70 cents a share, less than the 87-cent median estimate of 10 analysts surveyed by Bloomberg.
"The company is holding it together, lenders don't seem to want to foreclose and investors are thinking maybe something will happen," said Rich Moore, managing director of RBC Capital Markets in Solon, Ohio, who rates the shares "outperform." "The company will do several dollars of earnings for 2009 and when you have that level of earnings you should trade at a lot higher level than you are now."
General Growth reiterated a statement it made in November that it may seek bankruptcy protection if it's unable to extend or refinance loans. The mall landlord said it cut its workforce by 20 percent, suspended its cash dividend and is trying to unload properties such as South Street Seaport in Manhattan, Faneuil Hall Marketplace in Boston, and Harborplace & the Gallery in Baltimore to pay debt.
"The refinancing market remains at a standstill," the company said in the statement. "We are considering all strategic alternatives and are continuing our discussions with lenders."
In addition to the past-due loans, about $4.09 billion of debt could be accelerated, the company said. An additional $1.44 billion of mortgage debt and $595 million of unsecured bonds scheduled to mature this year still need to be refinanced, paid or extended, the company said.
Net operating income in the three months ended Dec. 31 fell 2.4 percent from a year earlier, comparable tenant sales on a trailing 12-month basis fell 3.8 percent, and its sales per square foot on a trailing 12-month basis fell 4.2 percent. Retail-center occupancy dropped to 92.5 percent from 93.8 percent a year earlier.
The real estate investment trust manages or has ownership stakes in more than 200 malls in 44 states, making it the second- largest U.S. shopping-mall owner after Indianapolis-based Simon Property Group Inc. Like other mall owners, General Growth is contending with a recession that pushed sales at U.S. retailers down for six straight months before January.
The company last week won an extension on a Louisiana shopping-center mortgage and said it's in default on loans backed by two Las Vegas malls. It's offering to sell both the Las Vegas Fashion Show Mall and the Shoppes at the Palazzo in Las Vegas.
General Growth earlier this month delayed the release of its fourth-quarter earnings by two weeks and said it won't hold a conference call to discuss the results. The delay was the result of an "ongoing strategic review of alternatives," the company said on Feb. 6.
In the fourth quarter of 2007, the company had a non-cash expense of $77 million to write down the estimated fair market value residential land. It also paid $89.2 million for a lawsuit in which Caruso Affiliated Holdings LLC accused the real estate investment trust of trying to thwart a retail project Caruso was building.
In October, General Growth turned over day-to-day management of the company to someone outside its founding family for the first time, replacing Chief Executive Officer John Bucksbaum with interim CEO Adam Metz. John Bucksbaum remains chairman.
Also in October, the company replaced Chief Financial Officer Bernard Freibaum after he sold 2.95 million shares to meet margin calls. An affiliate of a Bucksbaum family trust had loaned Freibaum $90 million to pay margin debt. Bucksbaum's failure to disclose the loan violated company policy, a review by General Growth's independent directors found.