Tuesday, November 11, 2008

GGP publicly warns of default

Mall Owner Is Warning of Default
General Growth has $900 million in debt coming due Nov. 28 on two luxury malls on the Las Vegas strip. It has another $58 million in bonds due on Dec. 1. The company is attempting to meet those obligations by selling those two malls as well as another on the Las Vegas Strip. It also is negotiating with its lenders to gain an extension on its deadline to pay those debts.

Since the CMBS financing fell through, this has become more and more likely. GGP has loans in a lot of CMBS deals, most are longer-term loans, but some shorter term loans are due this year. They also have a bridge loan, which was used to pay down the CMBS loan on Fashion Show Mall last year, which comes due any day now.

Most of the assets are strong assets and cover their debt well. Its highly likely that CMBS servicers (and others) will extend the maturities on loans that are performing well. Any properties that do get foreclosed on may see longer recovery periods than usual (just given the lack of credit available), but losses will be minimal, or 0%, on the senior CMBS mortgages.

Simon is next in line. They have a fair amount of debt due over the next 18 months, but keep in mind it only seems like a fair amount due to current market conditions - in reality we're talking about $1 or $2 billion. In fact, if you lump all the REITs together, and look at senior mortgage debt maturing each year, it's less than $20 billion in '09, less than $25 billion in '10, and then hovers around $25 billion per year for the next several years - its not that much in the grand scheme of things, but could be devastating if there is no money to refi with.

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