July 18, 2010|By Andrea K. Walker, The Baltimore Sun
The corporate owner of most Baltimore-area malls plans to emerge from bankruptcy this year under a restructuring plan that analysts say would put it in a stronger position to attract new tenants and reinvest in faltering properties.
General Growth Properties, which filed for bankruptcy protection last year with $27 billion in debt, unveiled its reorganization plan during the past week. The new plan, if approved by a judge, would place the company on a better financial footing by wiping out mounds of debt.
The Chicago-based company's emergence from bankruptcy also ends uncertainty over who would own such Maryland properties as Baltimore's Harborplace and The Gallery, as well as The Mall in Columbia. General Growth rejected buyout offers, including an aggressive pursuit by rival Simon Property Group, in favor of continuing to operate as a mall owner.
"GGP is coming out of bankruptcy as a company with significantly lower debt that is better capitalized and more focused," said Nate Isbee, an analyst with Stifel Nicolaus in Baltimore. "It's going to be back to business as usual. To the extent there is a need to spend money to keep the properties fresh and to keep them going, you're going to see that money being spent."
The impact on Baltimore-area malls, however, may be minimal or largely unnoticeable to consumers, Isbee and other industry analysts said. There has been a wide disparity between the quality of the stores and infrastructure investment at many of General Growth's malls, and that's likely to continue, they said.
General Growth invested in some malls across the country despite financial woes in recent years. In fact, it has restructured loans on many of the properties, which have already individually emerged from bankruptcy.
But other properties languished. Several were put up for sale. And the company has said in bankruptcy court filings that it plans to sell strip shopping centers and explore options for underperforming malls.
"Ultimately, the fact that this company is going to survive and now has some financial backing to move the company forward has got to be good for the malls," said George Whalin, founder of Retail Management Consultants in California.
Nonetheless, he added, General Growth executives are "going to divest themselves of some of those malls that are not profitable." He said: "I don't think there is any doubt they will have to pare some of this down and get rid of those that are not performing well."
At Towson Town Center, the company built a 110,000-square-foot luxury wing that opened in 2008, attracting high-end stores such as Louis Vuitton and Burberry. And Tiffany & Co. recently announced that it plans to open one of its jewelry stores at the mall in the fall.
General Growth also updated Mondawmin Mall. The renovation, begun in 2006, included a total overhaul of the interior as well as an expansion. It resulted in the addition of a Target and a Shoppers grocery store.
Meanwhile, the company tried unsuccessfully to sell the Village at Cross Keys, a once-popular outdoor mall that has lost anchors, including clothing retailers Ann Taylor and J. Jill, and has struggled with an identity crisis in recent years. Likewise, a walk through Owings Mills Mall, also owned by General Growth, reveals empty stores throughout the center.
Isbee said both malls have obstacles that an end to bankruptcy probably won't solve. The properties would be hard to run even under new ownership, he said.
Owings Mills Mall was once positioned to the be the region's premier mall. But it has lived in the shadows of Towson Town Center ever since it lost Saks Fifth Avenue in the early 1990s and Towson signed Nordstrom around the same time.
Cross Keys faces much more competition than in its heyday two decades ago, Isbee said. Retail experts have long said that the property is outdated, and Isbee said the property doesn't necessarily fit into General Growth's "long-term business plan."
"It had been on the market. If there are any takers, they would sell it," Isbee said. "I don't think it's easy to sell. It's a matter of finding a willing buyer."
Isbee also said that bankruptcy could have put the company at a disadvantage when trying to sell properties. "Anybody that is negotiating with you if you're in a bankruptcy situation might feel they can better negotiate and get a better pricing," he said.
General Growth had put Harborplace and The Gallery on the market, but officials recently said those locations are no longer for sale.
Harborplace has struggled to find the right tenant mix that would appeal to both tourists and residents, though officials recently indicated that they are on the verge of signing new leases with national retailers. The Gallery has been hindered by a multilevel design that made it difficult to attract tenants for the top floor.
