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Blogging GGP's Media Call

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11:53 AM: General Growth Properties executives are doing a call with the media at noon. I'll be updating this post as the call goes along with tidbits and observations.

12:02 PM: Still waiting for the call to get going.

12:04 PM: Senior Vice President of Marketing & Communications Wally Brewster is running the call. President and COO Tom Nolan is now speaking--reading off the basics of what General Growth has done so far including reminding people that not all of its assets are included in the filing and stressing that all of its centers will run as normal.

12:06 PM: Nolan is putting the blame squarely on the credit markets--saying the company's operational model is sound.

12:08 PM: His prepared remarks are over. Q&A is now starting.

12:09 PM: First question is about whether the Rouse deal was a mistake. Nolan is saying the portfolio is still "incredible." The debt taken on was large--but Nolan says that until recently, the company had been able to refinance much of the debt. "It wasn't so much the Rouse acquisition as it was that credit markets shut to any refinancing." That made it impossible to get any financing since October.

12:12 PM: There's a question about William Ackman's role going forward. Nolan says that Ackman was selected to provide DIP financing after a "very competitive process" and the company thought Ackman's proposal offered the best financing to allow the company to restructure. Nolan says, "He's been a vocal proponent of this company and views the company as being challenged by credit crisis but with such a valuable platform" he believes in the company. A follow-up asks how Chairman John Bucksbaum is taking things and how involved he's been in the process. Bucksbaum was at the Board meeting discussing bankruptcy and Nolan says the vote was unanimous.

12:15 PM: Nolan says it is conceivable that non-strategic assets will be sold. That can include land and some properties. However, the emphasis is to try and keep the portfolio intact. GGP does not want to do wholesale transactions trimming the portfolio.

12:17 PM: There are a lot of questions coming from local media outlets asking about specific properties. Nolan is stressing that the company will consider looking at all strategic opportunities and will consider selling individual assets. But he's trying not to be too specific on individual properties. He did say, however, that the company is not looking to close any malls.

12:19 PM: There's a question about why properties are on the filing list vs. companies not on the filing list. Nolan explains that the primary consideration was the capital structure of the individual properties. Properties in joint ventures with other firms were not part of the filing today. The idea is to restructure indebtedness by extending maturities on properties and dealing with company-level debt. Properties that have longer-term maturities were not included in the filing.

12:25 PM: A question is asked about how it will pay employees and operate going forward while in Chapter 11. Nolan acknowledges that the firm needs court consent. But he thinks the court will look favorably upon that request because the operations remain strong and because the firm has DIP financing in hand.

12:28 PM: A question is asked about how close the company came to avoiding bankruptcy and what was the major stumbling point. Nolan says there wasn't one particular catalyst. The company has mortgages at properties and corporate-level debt. It had asked for long-term forbearance agreements so it could negotiate a long-term restructuring of its balance sheets. It solicited approvals and got a majority, but it didn't get the level it needed to push the holistic restructure. Nolan admits the company has a complicated structure and realizes that to make the restructure efficient Chapter 11 is the best recourse. ... A follow-up on possible layoffs prompts Nolan to say that the company is doing ongoing reviews of its size. However, the proceeding is not going to precipitate any imminent changes in its head count.

12:33 PM: Asked for a picture of the national retail climate and how that will affect the reorganization, Nolan explains the sales environment has not been good and the company recognizes that. He rightly points out the firm is not directly dependent on sales because of long-term leases. The company has done "hundreds of leases" in the past 60-90 days because "we have centers the retailers want to be in." The company's occupancy rates remain healthy, as well.

12:37 PM: Is filling a space a challenge now? Nolan says, "At the end of the day, our retailers want to be in shopping centers where they can get sales. We have some of the highest production shopping centers in the United States. ... We take comfort from the fact that they are prioritizing our malls. ... We want to be invisible to our shoppers. ... We got DIP financing so we can invest in our properties and with our tenants."

12:39 PM: Nolan says the company did get interest on some of the properties it put on the market in recent months. But the lack of available capital to fund large acquisitions has affected the firm's ability to sell assets at the prices that would help the company out.

12:43 PM: A question is raised about issuing equity. The company will look into converting some of its bondholders into shareholders to reduce debt. Nolan says, "There are a host of ways that can be restructured. We can issue equity and effectuate it that way. Holders of debt could equitize. ... They value the platform. That will be one of the initial dialogues we will have with them." For unsecured debt, Nolan says the company intends not to pay the interest as part of Chapter 11 protection.

12:47 PM: Company is only taking one last question--which includes whether the company will be smaller. Nolan responds, "We have over 200 properties. Our top 25 properties--some of the best in the country--could we sell 1 of those or 2 of those? Certainly that's possible. But we think ... relative to business plan we're putting forward that's not going to be integral part of the restructuring.... We believe we can maintain those."

I think there are more questions out there. Specifically, I want to know in terms of restructuring whether it has a preference for carrying debt on its properties vs. corporate level debt. Moreover, will the restructuring include rethinking how it's set up the firm with so many individual subsidiaries structured around individual properties. I'll have to pursue those questions directly with the firm.

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Elaine Misonzhnik

Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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