With a series of small announcements, embattled regional mall REIT General Growth Properties Inc. little by little got its house in order as a Feb. 12 loan extension deadline approaches. On Jan. 5, the troubled Chicago-based owner of a 180-million-square-foot portfolio settled a five-year-old lawsuit with developer Caruso Affiliated and switched its bankruptcy counsel to New York City-based Weil Gotshal & Manges from Chicago-based Sidley Austin LLP. Meanwhile, later in January, in a transaction that did not involve the firm directly, Holliday Fenoglio Fowler, L.P., a commercial real estate capital intermediary, disclosed it had sold two loans secured by General Growth Properties' malls to pension fund advisors, totaling approximately $380 million.

The two loans, one secured by the 1.2-million-square-foot Fox River Mall in Appleton, Wis., and the other by the 910,000-square-foot Oaks Mall in Gainesville, Fla., and the 1.2-million-square-foot Westroads Mall in Omaha, Neb., were sold by Principal Commercial Funding II LLC, a joint venture of Principal Financial Group, a Des Moines, Iowa-based financial company, and U.S. Bank N.A., a Minneapolis-based commercial bank.

“They were originated for securitization and they did not fit into the [lenders'] general account and securitization was no longer a viable exit,” says Stuart Salins, senior managing director and head of loan sales in the Chicago office of Holliday Fenoglio. Both loans, closed in recent years, were interest only and featured five-year terms.

A spokesman for General Growth Properties says the change in bankruptcy advisors simply made the most sense at the moment and should not be taken as a reflection on Sidley Austin. General Growth retained the firm in November. The settlement with Caruso, the spokesman notes, will allow General Growth to focus on its pursuit of strategic alternatives. “We didn't have to come out of pocket to settle in terms of cash, we had already posted bond in excess of that amount,” he says.

The lawsuit with Los Angeles-based Caruso Affiliated involved the Glendale Galleria, a 1.5-million-square-foot mall in Glendale, Calif. In February 2004, Caruso filed a lawsuit that claimed General Growth intimidated potential tenants for the Americana at Brand, its 900,000-square-foot mixed-use project close to the Glendale Galleria. In December 2007 a judgment against General Growth required the REIT to pay Caruso $89.2 million in compensatory and punitive damages. General Growth settled the suit for $48.0 million.

All these developments happen at a time when General Growth needs to demonstrate to lenders it deserves a credit lifeline, says Robert McMillan, industry analyst with New York City-based rating agency Standard & Poor's. In late November, the firm arranged a two-week extension on $900 million in mortgages secured by its Las Vegas assets, including the 1.9-million-square-foot Fashion Show Mall and the 900,000-square-foot Shoppes at the Palazzo. In December, banks granted the firm another extension, until Feb. 12. The company has a long-term debt load of $24.8 billion. As part of the terms of the extension, the company signed forbearance agreements temporarily protecting the company against defaults. The senior credit lenders agreed to take no action until Jan. 30 in return for General Growth's consent to allowing no change in control or sale of assets without their consent. General Growth also will not incur debt or buy subordinated debt without the lenders' consent. “I would say bankruptcy is [still] a distinct possibility,” McMillan says.

Over the past several months, General Growth has been trying to raise cash by putting some of its assets on the market. In November, the company announced its Las Vegas properties were up for sale. It also is marketing South Street Seaport in New York, Faneuil Hall Marketplace in Boston, Harborplace & the Gallery in Baltimore and Providence Place, in Providence, R.I.