Mall Owner Posts Gains, Warns About Debt

By Dana Hedgpeth
Washington Post Staff Writer
Tuesday, February 24, 2009

General Growth Properties said last night that its fourth-quarter funds from operations rose on a series of one-time gains, but the shopping mall owner reiterated warnings that it may be forced to seek bankruptcy protection if it cannot rework the terms of billions of dollars in loans coming due this year.

The Chicago company said that funds from operations -- a key measure of performance for real estate investment trusts -- rose 17 percent, to $222.2 million from $190.4 million in the fourth quarter a year earlier.

Excluding one-time items, core funds from operations fell 14.8 percent, to $231 million, or 72 cents per share. Analysts polled by Thomson Reuters had projected core funds from operations of 85 cents per share.

General Growth said it was continuing discussions with its lenders and that it was "considering all strategic alternatives." Yesterday's earnings release came after a two-week delay, and company executives said they would not hold a conference call this quarter. General Growth also said it would not provide earnings forecasts for upcoming quarters.

General Growth is one of the biggest mall owners in the country. It owns and manages more than 200 regional shopping malls in 44 states. It owns Fashion Show in Las Vegas, Water Tower Place in Chicago, Faneuil Hall in Boston and Ala Moana Center in Honolulu, plus Landmark Mall in Alexandria, Tysons Galleria in McLean and Laurel Commons in Laurel.

The 50-year-old company was started by the Bucksbaum brothers, who were in the grocery store business. In the real estate market's boom years, General Growth used debt to aggressively buy up properties. Its biggest acquisition came in 2004, when it paid nearly $13 billion for the Rouse Co., known for creating Columbia and building Baltimore's Inner Harbor.

General Growth now has about $27 billion in debt and has struggled over the last few months to get loan extensions. The company said last night that it has $1.18 billion in past-due debt and $4.09 billion in loans that could be called in by creditors. Last week, it said it was in default on two Las Vegas properties. It is trying to raise cash by selling off some of its malls. The Harborplace mall in the Inner Harbor is among the properties up for sale.

Its stock price had plunged by 99 percent, from a 52-week high of $44.23 in May to a low of 24 cents in November. It closed yesterday at 36 cents.

The company has reduced its workforce by 20 percent, replaced its chief financial officer and suspended its dividend. Fitch and other ratings services have downgraded its credit ratings.

Some retail analysts have said the company could be close to filing for bankruptcy protection. If it seeks court protection from its creditors, analysts said, the move would be among the largest real estate downfalls in history.

The company said revenue fell 3 percent, to $900.9 million, as the economic downturn reduced rental income.

For the full year, General Growth said its funds from operations fell 22 percent, to $858.9 million from $1.1 billion. Excluding one-time items, funds from operations rose 1.2 percent, to $891.8 million.

© 2009 The Washington Post Company