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Saturday, March 21, 2009

Economy The Vanishing

Posted by Charles Mudede on Sat, Mar 21, 2009 at 11:18 AM

From WSJ:

Citigroup Inc. and two other lenders have filed court papers to foreclose on General Growth Properties Inc.'s Oakwood Center mall in New Orleans, which has a $95 million mortgage that came due Monday and wasn't paid.

Comments (13) RSS

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awww...tommy friedman's wife is poor now!

Posted by bing on March 21, 2009 at 11:34 AM

I don't get it - why is this important or interesting enough to post on the SLOG? This has to be happening all over the country.

I felt it was more interesting to learn that tenants were still bound by terms of their leases even after the landlord of the building had abandoned the property.

Posted by John Galt on March 21, 2009 at 11:35 AM

The tremendously overleveraged GGP owns downtown's Westlake Center (mall and office tower) and Alderwood Mall yonder in Lynnwood, among a few others in this state. They own hundreds of other malls across the country as well.

Its bankruptcy is now all but certain-which can bring lots of degradation in operations, bad news for their thousands of already struggling tenant stores. However, the difficulty of securing financing for GGP to continue at all during bankruptcy makes it quite possible their creditors will force liquidation. If you or a friend or family member own or are employed by a store at one of these local malls, even unhappier changes loom large.

Thanks for posting this, Mr. M.

Posted by gloomy gus on March 21, 2009 at 12:34 PM

@3--

Thanks for the info.

Mr. M-- thanks for the pointer.

Posted by mudling on thru on March 21, 2009 at 3:09 PM

Is that a normal way for a corporation to borrow that kind of money? To have a $95 million dollar mortgage that becomes due in full on a certain date? Those sound like scary loan terms, doomed to fail from the start.

Posted by Diana on March 21, 2009 at 4:42 PM

@5

I suspect there are thousands of enormously over-leveraged companies out there. Remember, back in the "old economy," EVERYONE was over-leveraged because "the entire economy can't fail...it just can't."

Surprise!

Posted by Clarity on March 21, 2009 at 5:10 PM

@2 Actually GGP also has close ties to Seattle's design community: Callison, one of the largest retail architects in the country, and MKA, one of the best engineering companies around, did lots of work for GGP. Both of these companies have laid off quite a few people and, as we all know, that trickles down.

I'm guessing GGP thought they could pay back such a loan since they had projects like Ward Neighborhood (http://hcdaweb.org/october-15-2008-publi…) and Summerlin Centre (http://summerlin.com/shops/location.php) going.

Posted by Keith on March 21, 2009 at 5:23 PM

@3 and @7, i knew GGP were big but i did not know how significant they were to the local economy. and this is indeed the ideal of a blog: a real community of shared information. i learned a hell of a lot about the local economy from your comments. thank you.

Posted by mudede on March 21, 2009 at 5:59 PM

Alexander Cockburn has a good short piece on shopping malls (including those owed by GGP) in a recent edition of Eat the State.

http://eatthestate.org/13-14/NaturePolit…

Posted by radical on March 21, 2009 at 6:24 PM

@3 - not the only firm in such trouble.

Posted by Will in Seattle on March 21, 2009 at 8:38 PM

This is not a bad posting by Charles; even though I'm guessing he put it on the Slog to bolster his "capitalism = evil" doctrine. Capitalism as it now stands IS evil. Does not have to be.

If people were made -personally responsible- for the success or failure of whatever deal they made, then they would actually have to think about their actions. What caused the big mess is 'drive-by' capitalism; assholes making deals using other people's money, taking their cut up front, and getting the fuck outta town. I've seen it everywhere, even in the relatively small company I'm associated with. Payment & Bonuses should be based on -actual future- results, and not just raked off the top. Crap deals would cost the idiots who make them; imagine that? Perhaps they'd actually pencil out the actual business prospects.

Yeah. I know it's bullshit, ain't gonna happen.

Posted by Karlheinz Arschbomber on March 21, 2009 at 10:25 PM

Here's a thought: Maybe local business people in the places where these malls - which are probably still profitable on a certain level - could buy these foreclosed properties, and run them? Then they could maybe bring in local stores?

I know that sounds pipe-dreamy, but Northgate was built by The Bon Marche, and Bellevue Square was built by Kemper's daddy. And Kemper seems to make a good living off that monstrosity.

In fact, just about any mall that was built in the "golden age" of malls was built by local businesspeople. I'm old enough to remember when malls were mostly local stores. Even one of two of the anchor stores would be local.

Posted by Catalina Vel-DuRay on March 22, 2009 at 8:10 AM

What happened to GGP is also happening to other companies involved in commercial real estate markets and the lending to these markets.
Please realize this is not just an issue with shopping malls. Commercial real estate also includes multi-family housing, factory, hotel, commercial office, resort and warehousing properties. It encompasses property that are considered non-residential. It is plausible to assume that many properties built within the last five or so years at a cost of $5mil or more were likely built using leveraged financing.

Think about the potential counterparty issues and who are those counterparties.......

BTW, before anyone loses their breakfast over this, just beacuse Citi and the other two lenders filed for foreclosure doesn't mean they and GGP won't eventually find a settlement thru some sort of loan restructuring or other means.

Posted by Cranky Old Man on March 22, 2009 at 9:29 AM