General Growth Properties and Bankruptcy

General Growth Properties, an owner of shopping malls, filed bankruptcy in 2009.

General Growth Properties is a public real estate investment trust that trades on the New York Stock Exchange under the symbol GGP. Burdened by debt, the company was forced to file for bankruptcy protection in 2009 while the United States was in a recession. It was the largest real estate bankruptcy in U.S. history at the time.

Company Background

General Growth Properties is based in Chicago, Illinois and was established in 1986. As of 2011, its entire portfolio contained about 200 million square feet of retail space with more than 24,000 retail stores. The company became the number-two U.S. mall owner in 1989 when it acquired the assets of The Center Companies and had an initial public offering in 1993. The company struggled following its $11.3 billion purchase of commercial property developer Rouse Company in 2004.

Bankruptcy Filing

The U.S. real estate market suffered rising vacancies and falling property values in the years leading up to General Growth's bankruptcy filing. The company struggled to pay back loans. It attempted to negotiate with creditors and refinance its debt, but the frozen credit markets at the time made the task nearly impossible. It succumbed to filing Chapter 11 bankruptcy in April 2009, with $29.5 billion in assets and about $27.3 billion in debts.

Surviving Bankruptcy

There were signs that General Growth might survive the bankruptcy despite its long list of creditors, which included a unit of Germany's Commerzbank, Wilmington Trust and the Bank of New York Mellon. One day before filing for bankruptcy, General Growth Properties received financial help from a $375 million debtor-in-possession loan from one of its owners, Pershing Square Capital Management LP. There was also a bidding war to help fund its exit from bankruptcy between rival Simon Property Group and Brookfield Asset Management that eventually favored Brookfield.

Reorganization

With the help of $6.8 billion in equity from Brookfield Asset Management, Fairholme Capital Management LLC and Pershing Square Capital Management LP, and the restructuring of about $15 billion in debt, General Growth Properties emerged from bankruptcy on Nov. 9, 2010. As part of the reorganization, the company spun off a new publicly-traded company, The Howard Hughes Corporation, which includes properties that were previously in General Growth's portfolio.

References

• General Growth Properties: Company Overview
• Bloomberg Businessweek: General Growth Files Biggest U.S. Property Bankruptcy
• Yahoo! Finance: GGP Profile
• Retail Traffic: Observers Think General Growth Properties is Likely to Survive Chapter 11
• The New York Times DealBook: General Growth Properties Files for Bankruptcy

Resources

• TheStreet: Simon Property Drops General Growth Bid
• RetailTraffic: GGP's Emergence From Bankruptcy a Watershed Moment for Industry
• GeneralGrowthProperties: Restructuring Overview