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Could General Growth Be Sold?

As the credit crisis drags on, debt-ladened General Growth Properties, the nation’s second largest regional mall REIT, may have no other choice than to sell the company. That move, according to some observers, could even happen before the end of the year.

Last week, the Chicago-based firm announced it was exploring financial and strategic alternatives, including possible sale of the company, as it races to retire all of its 2008 loan maturities, which total $2.8 billion. Beyond that, as of Aug. 29, the company had a total long-term debt load of about $27 billion, according to Columbia Capital Services, Inc. Its long-term debt to capitalization ratio is at 72 percent, according to a report from Wachovia Capital Markets.
On Monday, Standard & Poor’s downgraded General Growth’s corporate credit rating to BB from BB+ and put the company on the watch list for further downgrades.

General Growth has already adopted several extraordinary measures as it tries to work with debtors and calm investors. On Sept. 2, it added seven of its properties to the collateral pool to repay $391 million in near term mortgage maturities. On Sept. 17, it increased the initial repayment guarantee to 50 percent of its outstanding $1.5 billion credit facility. On Sept. 20, two days after the company’s stock plummeted to a 52-week low of $19.50, General Growth was added to the short sell ban list by the Securities and Exchange Commission (SEC). It has also doubled its recourse levels with lenders to 50 percent. . . . more

REIT history bodes well for outlook in current volatile market

Prices said to dip and climb before those of commercial property

Even though commercial- property values are decreasing, equity real estate investment trust prices will likely rise if historical trading trends are an indication, some industry observers predict.

"There's a tendency for people to think that if property values are going down and they own REIT stocks, then that means their REIT stocks will go down — and that, historically speaking, is not the case, because REITs lead the rest of the market," said Brad Case, an economist and vice president of research at the National Association of Real Estate Investment Trusts in Washington. "Returns to REITs lead the returns to real properties."

Equity REIT share prices have tended to decline, trough and rebound a year or two ahead of commercial-property prices shown on the NCREIF Property Index, from the National Council of Real Estate Investment Fiduciaries in Chicago.

If this trend holds up during this cycle, equity REITs, which were up about 2% in the first eight months of 2008, should continue ticking up even though commercial-real-estate values will likely be falling, Mr. Case said. . . . more

Kohl's Makes Grab for Market Share

As Holiday Season Nears, Retailer Opens More Stores And Plans Aggressive Discount Pricing

Kohl's Corp. is opening 46 stores Wednesday as part of an aggressive effort to take market share from competitors just as the holiday season gets under way and U.S. consumer spending is stagnating.

"We've been in a period now for over a year where the customer is shopping less," says Kevin Mansell, who became chief executive of the Menomonee Falls, Wis., retailer in August. "You'd better start figuring out how you're going to take more from the other guy."

The middle-market chain, which competes head-on with J.C. Penney Co. plans to open a total of 75 new stores in 2008, Mr. Mansell says. After the new openings this fall, which include one more in November, the total Kohl's store count will be 1,004, or just shy of J.C. Penney's 1,083. . . . more

Food Lion's Bottom Dollar Scales Down with New Prototype

Food Lion is "right-sizing" its Bottom Dollar Food discount concept with a new prototype unit opening today in Mooresville, N.C., about 40 minutes from Charlotte. The new 20,000 square foot store incorporates significant research and experience into the banner's redesign, Paul LaCroix, vp of Bottom Dollar Food told Progressive Grocer on Tuesday.

"When we approached this project, we first wanted to right-size the store with our variety," LaCroix said. "That meant smaller. We were able to eliminate non-sales floor space and allow for efficient assortment based on the square footage. We carry an efficient variety of branded and store brand products that customers purchase most often. The smaller space also allows for a reduction of energy expense.". . . more

Baltimore: Owner says Columbia Town Center project still on tap

Debt-laden mall owner General Growth Properties Inc. plans to follow through with its proposed Columbia Town Center redevelopment, despite recently announced plans to shore up its finances and refinance its debt by selling off some of its properties.

Greg Hamm, general manager of the Columbia project for General Growth, said the company hopes to submit documents to Howard County outlining its plans for the project.

“We have every intention of moving forward,” Hamm said. “It’s a wild world out there, but we’re very excited about the project.”

Bill Mackey, project manager for Howard County’s planning and zoning department, said General Growth has said it will provide the county with the plans next month. . . . more

Ciena Capital Declares Bankruptcy

NEW YORK CITY-Ciena Capital, a local provider of commercial real estate financing and factoring services, has filed for chapter 11 relief in the US Bankruptcy Court for the Southern District of New York, according to a statement by its major investor, Washington, DC-based Allied Capital. Although it will continue to operate its servicing business and, shielded by bankruptcy will be able to dispose of its assets in an orderly fashion when the markets improve, Ciena Capital joins the growing credit-market-freeze body count--and by extension, Allied Capital will be feeling some heat as well. Ciena did not return a call to GlobeSt.com in time for publication. Allied Capital declined to comment beyond its press release.

Allied Capital’s "unconditional guaranty of the obligations outstanding under Ciena's revolving credit facility may become due," it said in the release. The company intends to pay approximately $320 million to the lenders in connection with Ciena's revolving credit facility and will continue to guarantee a remaining balance of approximately $10 million. To fund the payment, Allied Capital will tap some $150 million it has in cash and may borrow an additional $170 million on its unsecured revolving line of credit. In essence, Allied Capital will become a senior secured lender to Ciena. . . . more