The owner of several Maryland shopping centers on Monday said it was considering selling some of its properties to raise capital and boost its tumbling stock price.
General Growth Properties, a Chicago-based real estate investment trust and the country’s second-largest shopping center owner, has several billion dollars of debt that it must refinance in the coming months. Commercial real estate relies heavily on debt to finance properties.
Turmoil in the U.S. credit markets and slowdowns in consumer retail spending and the real estate market have complicated refinancing efforts. GGP’s share price has felt the pressure, sinking to a 52-week low last week.
Timothy Goebel, director of investor relations for GGP, on Monday said the company was leaning toward the sale of “non-core” assets, such as its planned community developments and commercial office buildings. Goebel, though, didn’t rule out the sale of GGP’s mall properties.
“I don’t want to pull anything off the table,” Goebel said. “I can’t comment specifically on what assets are for sale.”
GGP’s ownership and management portfolio includes more than 200 regional shopping malls in 44 states. In Maryland, GGP owns eight properties, including Harborplace & The Gallery in downtown Baltimore.
The properties were previously owned by The Rouse Co. of Columbia, which GGP purchased for $12.6 billion, including $5.4 billion of existing debt, in 2004.
“They’ve got some properties that they probably want to unload,” said Tom Saquella, president of the Maryland Retailers Association.
“The problem is it’s not the best time to sell. Capital is hard to get, and there aren’t too many buyers out there.”
Of GGP’s Maryland properties, Saquella said Owings Mills Mall might be a logical property to move.
“You always hear a lot of things about Owings Mills,” Saquella said. “They’ve had a lot of turnover in their stores. It’s just tough to fill retail vacancies in this environment.”
Though retail vacancies have increased at Harborplace & The Gallery, including three restaurant vacancies, Saquella said he’d be surprised if GGP tried to sell the Baltimore tourist attraction.
“Harborplace is an icon,” Saquella said. “It’s a big tourist draw.”
Consumers straying from malls
Shopping centers across the country are struggling during the current economic slowdown, losing business to “big-box” retailers and discount stores, said Jie Zhang, an assistant professor of marketing at the University of Maryland’s Robert H. Smith School of Business.
About 10 years ago, mall sales accounted for about 35 percent of retail spending, Zhang said. Today, that number is down to about 20 percent.
“The big-box retailers like Wal-Mart and Home Depot are increasing their assortments and discounting products, drawing consumers from malls,” Zhang said.
Malls have also suffered from the struggles of department stores, oftentimes the anchor of a shopping center.
In August, department store chain Boscov’s filed for bankruptcy and announced the closure of three Baltimore-area locations, including stores at GGP-owned Owings Mills Mall and White Marsh Mall.
“Malls used to depend on department stores to attract customers,” Zhang said. “Now, people are looking for more things from a mall than just a place to go buy things. You’re seeing malls add entertainment elements like restaurants and movie theaters to attract customers.”
August retail sales down
Retail sales slumped toward the end of summer, according to the U.S. Commerce Department. August retail industry sales, which exclude automobile sales, gas stations and restaurants, decreased 0.3 percent from month to month and increased just 1.1 percent from last year.
“Retailers weren’t able to sustain the momentum they saw in the first half of the summer, when families’ spending was being buoyed by the rebate checks,” said Rosalind Wells, chief economist for the National Retail Federation.
In a statement released Monday, GGP said it was “developing a comprehensive, strategic plan to generate capital from a variety of potential sources,” including asset sales.
GGP said it “anticipates that it will be in a position to offer a long-term fixed-rate portfolio mortgage financing to lenders in mid- to late November.”
At the end of the second quarter, GGP said it was facing $2.42 billion in refinancing for the rest of the year.
The company said its property occupancy reached a record high of 93 percent in the second quarter of 2008, while core funds from operations increased by $11.8 million.
GGP IN MARYLAND
Chicago-based General Growth Properties owns the following Maryland shopping centers:
• Harborplace & The Gallery (Baltimore)
• Mondawmin Mall (Baltimore)
• The Village of Cross Keys (Baltimore)
• White Marsh Mall (Baltimore)
• The Mall in Columbia (Columbia)
• Laurel Commons (Laurel)
GGP STOCK
General Growth Properties’ share price took a hit Monday on news the company will consider asset sales and mergers to shore up its debt.
• Ended trading Monday down $5.34, or 25 percent, to close at $16.08 per share.
• Stock price is down 61 percent since the beginning of the year.
• Reached 52-week low of $13.37 per share Thursday.
• Hit 52-week high of $57.84 per share last Oct. 11.
