Mall Developer's Shares Soar, but Its Troubles Continue
|
TOOLBOX
   Resize
COMMENT
 Discussion Policy
 CLOSE
Comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. Finally, we will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site. Please review the full rules governing commentaries and discussions. You are fully responsible for the content that you post.
Who's Blogging  |
Wednesday, April 8, 2009
Shares of struggling General Growth Properties, owner of Baltimore's Harborplace, soared yesterday for the second day in a row, but the company said it didn't know of any reason for the spike.
Investors who bought shares at Friday's closing price of 72 cents could have reaped a 46 percent profit if they sold at yesterday's close of $1.05. Investors who bought at last month's low could have more than tripled their money. But the recent rally was small consolation for shareholders who have ridden the stock down from a March 2007 peak of $62.45.
Like many companies whose fate is tied to the frozen credit markets, General Growth is living on borrowed time. Unable to pay its debts as they come due, the giant shopping mall firm could be forced into bankruptcy court at any moment. It has been trying unsuccessfully to renegotiate its biggest debts.
But the more telling fact may be that it has continued to avoid the reckoning. As the company teeters on the brink of Chapter 11, creditors have refrained from giving it the final push. Bankruptcy can always be risky and unpredictable; under current conditions, it's not clear it offers lenders an advantage, because the same shortage of credit that prevented General Growth from refinancing its debts could keep its creditors from liquidating the real estate.
"There's no way for the buyer to get a loan to buy the asset," said analyst Richard Moore of RBC Capital Markets.
"In our view, GGP's creditors are unwilling to force bankruptcy so GGP may have some time to effect a recapitalization or liquidation plan," Wachovia Capital Markets analyst Jeffrey J. Donnelly wrote in a report to investors yesterday.
The rising share price may mean Donnelly's view is becoming the conventional wisdom.
Paradoxically, though, Donnelly yesterday downgraded his assessment of General Growth stock to "market perform" from "outperform," noting that the shares could still be wiped out in bankruptcy.
The same type of cost-benefit analysis has been unfolding throughout the financial system, from Wall Street to Detroit, as businesses and regulators try to avoid capitulating to what they hope are merely temporary market disruptions.
In addition to Harborplace and the Gallery in Baltimore's Inner Harbor, the more than 200 malls that General Growth owns or manages include Boston's Faneuil Hall Marketplace, Alexandria's Landmark Mall, Laurel Commons and Tysons Galleria. General Growth is also developer of the planned community Columbia.
