So, anybody out there in the market for a mall?

November 01, 2008|By JAY HANCOCK | JAY HANCOCK,

Bernard Freibaum, chief financial officer for General Growth Properties, began dumping his company stock six weeks ago.

As the shares plunged from $25 to $4, he was forced to unload them to repay loans, selling stakes worth more than $85 million, according to documents filed with the Securities and Exchange Commission.

Two weeks later, he resigned. Five days ago, General Growth demoted its chief executive and its president, replacing them with independent board members.

Then it announced it would sell some of its most famous shopping malls. Then it revealed that the family of Chairman John Bucksbaum had lent tens of millions to Freibaum and another executive to finance company stock ownership. The loans "did not follow internal company policy," General Growth said.

So it goes at one of metro Baltimore's biggest landlords.

It's too early to say how the General Growth disintegration will affect the town of Columbia, The Mall in Columbia, Towson Town Center, Mondawmin Mall and Harborplace in Baltimore, White Marsh Mall and other real estate owned by the Chicago-based company.

But malls are likely to be hawked for sale. Capital projects are likely to be delayed. Whether General Growth jettisons Baltimore properties or not, the people calling the shots are likely to be different a year from now. Don't count on General Growth being the future caretaker of Columbia.

"Everything at the company is up for sale. In pieces or the whole thing," says Mark Millman, an Owings Mills-based retail consultant.

General Growth, which got its Baltimore portfolio by buying Columbia-based Rouse Co., won't exactly confirm this but doesn't deny it, either. While it announced this week that Fashion Show Mall and other Las Vegas shopping centers are for sale, it hasn't said anything about Baltimore.

"We're certainly happy to discuss other properties" with qualified buyers, General Growth spokesman Jim Graham said. "We've had plenty of inquiries about properties all over the country."

General Growth's Village of Cross Keys, a hotel, retail and office complex in North Baltimore, has been on the block for months.

"A number of people thinking about buying it have called me," said retail consultant Rene Daniel, whose office is based there. He wouldn't identify them.

Contractors who built Towson Town's new luxury wing (including Louis Vuitton, Burberry's and Lacoste stores) are still owed hundreds of thousands of dollars. The cases seem more like disputes among contractors than anything to do with General Growth's cash crunch. But it sounds as if General Growth is just as eager as the construction companies to wind up the cases so it can have a clear Towson Town title to flash at potential buyers.

The quicker General Growth can sell anything, the better. Like so many others, it bought more real estate than it could afford.

It paid $7.2 billion for Rouse in 2004, took on another $5.4 billion in debt in that deal and owes a total of $27 billion. It faces a balloon payment of nearly $1 billion, due Nov. 28, which it doesn't have the cash to pay and which it will have extreme difficulty refinancing in this credit market.

An attempt to sell up to $2 billion in preferred stock flopped.

Hence the need to sell malls, quick.

The earliest repercussions are likely to be delays in any possible real estate upgrades, including a huge retail, condo and office makeover planned for downtown Columbia.

Baltimore County officials hope new ownership would lead to investment in the languishing Owings Mills Mall.

While General Growth does a good job with the White Marsh and Towson malls, County Executive James T. Smith has "complained vociferously" to the company about the lack of tenants at Owings Mills, said David Iannucci, county economic development director.

"I don't think you would find a lot of tears being shed if you got somebody new in here," Iannucci said.

But even a new landlord won't be flush with cash to upgrade.

The credit crunch has spread from banks to commercial real estate. General Growth's recent improvements to Mondawmin and Towson Town came just in time for a slump.

Consumer confidence hit an all-time low last month. General Growth's retail tenants aren't expecting the greatest holiday season. Boscov's, which helped anchor White Marsh and Owings Mills, is closing those department stores in bankruptcy proceedings.

Families across the country have postponed home expansions and renovations because of the economic slowdown. Others have been forced to sell houses at increasingly lower prices because they can't pay their mortgages.

Now mall owners are following them over the cliff.

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