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Co-owner of TWDC facing bankruptcy
  
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By T.L. HAMILTON
Bankruptcy looks likely for the co-owner of The Woodlands Development Company and owner of The Woodlands Mall.
Officials believe, however, it won’t have much of an impact on the mall or on sales tax revenues in The Woodlands Township.
General Growth Properties Inc. shares plummeted 40 percent Nov. 11 after the company warned it faces solvency trouble and may be forced to file for bankruptcy if it can’t refinance or extend nearly $1 billion in debt due next month.
It is the nation’s second-largest mall owner, with big-name holdings that include Chicago’s Water Tower Place and Fashion Show in Las Vegas. The company also co-owns The Woodlands Development Company along with Morgan Stanley Real Estate Fund II.
TWDC officials released a statement saying that they will not be affected specifically by the financial issues GGP is facing.
“While we will be impacted by the same national and regional business issues that impact everyone, those issues regarding General Growth Properties are not directly altering any of our plans for 2009 and beyond,” the statement said.
Local officials with The Woodlands Mall, owned by GGP, deferred comment to a company spokesperson who provided a written statement from the company.
The statement maintains that GGP malls will stay open and remain “vibrant” in the holiday season.
“We continue working with our advisors to develop a comprehensive, strategic plan to generate capital from a variety of sources including, but not limited to, core and non-core asset sales, joint venture interests, a corporate level capital infusion, and/or strategic business combinations,” the statement said. “Regardless of our situation, our properties and company will continue to operate.”
Nelda Blair, chairwoman for The Woodlands Township, said she doubts the company’s bankruptcy will have much of an effect on the new municipality.
The township began collecting sales taxes in April and has seen flagging revenue from sales taxes in recent months due to a downturn in consumer spending.
“Unless they shut the mall down I don’t see it affecting the sales tax,” she said. “The likelihood of the mall closing is very small because it’s a successful business. You close down a business that’s going broke, and the mall is not.”
Blair said if the company needs to sell the mall or The Woodlands Development Company she is confident that both will find new buyers.
“We’re extremely successful and profitable here,” she said.
Jeff Beard, owner of The J. Beard Real Estate Company in The Woodlands, agreed with Blair.
“They’re very desirable assets,” he said of GGP’s share of the development company and the mall. “When you look at the performance of the mall in relation to others in the area, it’s one of the top performers in the city.”
With no shortage of prospective buyers, the only obstacle in place could be getting the capital to buy in this credit-tightened market.
“But I’m sure someone will be able to work out a strategy,” he said. “There are still transactions taking place; they’re just under different parameters.”
Looming debt
The company also disclosed in a regulatory filing Nov. 10 that it may default on certain debt obligations.
Making matters worse is another $3.07 billion in property and corporate debt slated to come due next year.
“Given the continued weakness of the retail and credit markets, there can be no assurance that we can obtain such extensions or refinance our existing debt or obtain the additional capital necessary to satisfy our short-term cash needs on satisfactory terms,” the Chicago-based GGP said in filing with the Securities and Exchange Commission. “... Our potential inability to address our 2008 and 2009 debt maturities in a satisfactory fashion raises substantial doubts as to our ability to continue as a going concern.”
General Growth, beset by falling funds from operations and plagued by a tightening global credit market that’s making it difficult for companies to obtain financing, is trying to sell off properties and cut costs to weather the rocky economic climate. It’s also suspended its dividend and ousted a cadre of top executives. But that hasn’t calmed investors, who’ve sent the company’s shares into a virtual free-fall since September.
After filing the quarterly report late Monday, the company’s shares shed another 64 percent Tuesday, reaching an all-time low of 33 cents per share before recovering slightly.
Citigroup analyst Michael Bilerman said General Growth’s equity holders may still be at risk, even if the company opts not to file for bankruptcy protection.
“There is no quick fix in the current capital-constrained environment,” he told investors the night of Nov. 10.
Ensuing litigation
Keller Rohrback LLP announced on Nov. 12 that it is investigating the company for potential violations of the Employee Retirement Income Security Act of 1974. The investigation focuses on investments in company stock in the General Growth 401(k) Savings Plan.
The investigation is based on the allegation that the company failed to manage the assets of the plan “prudently and loyally” by investing the assets in company stock when it was no longer a prudent investment for participants’ retirement savings.
Officials believe, however, it won’t have much of an impact on the mall or on sales tax revenues in The Woodlands Township.
General Growth Properties Inc. shares plummeted 40 percent Nov. 11 after the company warned it faces solvency trouble and may be forced to file for bankruptcy if it can’t refinance or extend nearly $1 billion in debt due next month.
It is the nation’s second-largest mall owner, with big-name holdings that include Chicago’s Water Tower Place and Fashion Show in Las Vegas. The company also co-owns The Woodlands Development Company along with Morgan Stanley Real Estate Fund II.
TWDC officials released a statement saying that they will not be affected specifically by the financial issues GGP is facing.
“While we will be impacted by the same national and regional business issues that impact everyone, those issues regarding General Growth Properties are not directly altering any of our plans for 2009 and beyond,” the statement said.
Local officials with The Woodlands Mall, owned by GGP, deferred comment to a company spokesperson who provided a written statement from the company.
The statement maintains that GGP malls will stay open and remain “vibrant” in the holiday season.
“We continue working with our advisors to develop a comprehensive, strategic plan to generate capital from a variety of sources including, but not limited to, core and non-core asset sales, joint venture interests, a corporate level capital infusion, and/or strategic business combinations,” the statement said. “Regardless of our situation, our properties and company will continue to operate.”
Nelda Blair, chairwoman for The Woodlands Township, said she doubts the company’s bankruptcy will have much of an effect on the new municipality.
The township began collecting sales taxes in April and has seen flagging revenue from sales taxes in recent months due to a downturn in consumer spending.
“Unless they shut the mall down I don’t see it affecting the sales tax,” she said. “The likelihood of the mall closing is very small because it’s a successful business. You close down a business that’s going broke, and the mall is not.”
Blair said if the company needs to sell the mall or The Woodlands Development Company she is confident that both will find new buyers.
“We’re extremely successful and profitable here,” she said.
Jeff Beard, owner of The J. Beard Real Estate Company in The Woodlands, agreed with Blair.
“They’re very desirable assets,” he said of GGP’s share of the development company and the mall. “When you look at the performance of the mall in relation to others in the area, it’s one of the top performers in the city.”
With no shortage of prospective buyers, the only obstacle in place could be getting the capital to buy in this credit-tightened market.
“But I’m sure someone will be able to work out a strategy,” he said. “There are still transactions taking place; they’re just under different parameters.”
Looming debt
The company also disclosed in a regulatory filing Nov. 10 that it may default on certain debt obligations.
Making matters worse is another $3.07 billion in property and corporate debt slated to come due next year.
“Given the continued weakness of the retail and credit markets, there can be no assurance that we can obtain such extensions or refinance our existing debt or obtain the additional capital necessary to satisfy our short-term cash needs on satisfactory terms,” the Chicago-based GGP said in filing with the Securities and Exchange Commission. “... Our potential inability to address our 2008 and 2009 debt maturities in a satisfactory fashion raises substantial doubts as to our ability to continue as a going concern.”
General Growth, beset by falling funds from operations and plagued by a tightening global credit market that’s making it difficult for companies to obtain financing, is trying to sell off properties and cut costs to weather the rocky economic climate. It’s also suspended its dividend and ousted a cadre of top executives. But that hasn’t calmed investors, who’ve sent the company’s shares into a virtual free-fall since September.
After filing the quarterly report late Monday, the company’s shares shed another 64 percent Tuesday, reaching an all-time low of 33 cents per share before recovering slightly.
Citigroup analyst Michael Bilerman said General Growth’s equity holders may still be at risk, even if the company opts not to file for bankruptcy protection.
“There is no quick fix in the current capital-constrained environment,” he told investors the night of Nov. 10.
Ensuing litigation
Keller Rohrback LLP announced on Nov. 12 that it is investigating the company for potential violations of the Employee Retirement Income Security Act of 1974. The investigation focuses on investments in company stock in the General Growth 401(k) Savings Plan.
The investigation is based on the allegation that the company failed to manage the assets of the plan “prudently and loyally” by investing the assets in company stock when it was no longer a prudent investment for participants’ retirement savings.
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