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Shopping as usual this holiday season at General Growth malls
By Anna Marie Kukec | Daily Herald Staff

Spring Hill Mall in West Dundee is one of eight General Growth Properties malls in Illinois.

 

Brian Hill | 2006

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Published: 11/11/2008 1:25 PM | Updated: 11/11/2008 6:15 PM

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Since the postwar boom years that spawned both the shopping mall and the suburbs, the two have been tightly intertwined.

Now, the owner of the some of the suburbs' premiere shopping malls, including Oakbrook Center in Oak Brook, Spring Hill Mall in West Dundee and Lincolnshire Commons, faces financial woes. Chicago-based General Growth Properties Inc., owner of 200 shopping malls, said this week in a filing with the U.S. Securities and Exchange Commission that it may be unable to refinance about $1 billion in debt and is considering bankruptcy. Its filing didn't indicate what type or when any bankruptcy could be filed.

It's another sign of the economic problems of Wall Street coming to Main Street, but it doesn't spell an end of our love affair with malls, experts said.

Shoppers and towns that depend on mall-generated sales tax dollars shouldn't be too concerned about General Growth's trauma, experts said Tuesday. Even if General Growth sells some properties to help pay its debt, those malls are likely to remain open.

"The malls are healthy, not the owners," said analyst Neil Stern, senior partner of McMillan/Doolittle LLP in Chicago.

General Growth said nothing will change in the short term.

"Regardless of our situation, our properties and company will continue to operate, remain vibrant and look forward to a prosperous holiday season," General Growth said in a statement Tuesday.

General Growth, started in 1954 by brothers Martin and Matthew Bucksbaum, is the nation's second-largest owner of shopping malls, behind Simon Property Group. General Growth owns about 200 malls in 44 states, including eight in Illinois. Along with Oakbrook Center, Spring Hill Mall and Lincolnshire Commons, they are Golf Mill Shopping Center in Niles, Northbrook Court, Water Tower Place and Ford City in Chicago and Marketplace Shopping Center in Champaign.

In its SEC filing, the company said it has $900 million in property-secured debt and $58 million in corporate debt that is due Dec. 1. It is also working with lenders to extend the Nov. 28 due date for loans on its Las Vegas properties, which could go up for sale. Even if General Growth could satisfy the 2008 debt, it also faces an additional $3.07 billion of property and corporate debt maturing next year.

"It could be very difficult for them to refinance in this tough economic climate," said John Melaniphy III, retail analyst with John Melaniphy & Associates in Chicago. "But each of their properties is strong and they could sell off their trophy properties, like Northbrook or Oak Brook."

Oak Brook Village President John W. Craig is confident in Oakbrook Center's future, saying it would be sure to attract buyers if it went up for sale. The mall brings about $11 million a year in sales tax to the village and is the centerpiece of a shopping district that also includes numerous restaurants and hotels. About 20 million people visit the mall every year, he said.

General Growth competitors such as Simon Property Group "know that this is a premier mall, one of the best outdoor malls in the United States," Craig said.

"If the malls are sold, I think the change would be seamless to the consumer," said Shirlanne Lemm, president of the Greater O'Hare Association/Elk Grove Chamber. "The last time I walked in to a mall I really never gave who owned the place a thought."

General Growth, in its SEC filing, said that "in the event that we are unable to extend or refinance our debt or obtain additional capital on a timely basis and on acceptable terms, we will be required to take further steps to acquire the funds necessary to satisfy our short-term cash needs, including seeking legal protection from our creditors."

General Growth's financial crisis also crushed its shares on Tuesday, closing at 49 cents, down 88 cents, or about 65 percent, on the New York Stock Exchange.

Mesirow Financial Chief Economist Diane Swonk said we're already in a "real-time recession, the likes of which we have never seen, particularly in retail. A crunch in credit is pulling the rug out from under already struggling retailers, and forcing bankruptcies and store closures at a time retailers are usually hiring up," she said.

Some suburban chamber officials believe General Growth will survive any possible bankruptcy filing and could re-emerge even stronger.

"Some corporation out there is ready to purchase some of the trophy properties at a bargain price to help infuse some cash into General Growth, so that it can retain ownership of at least some of the malls they currently own," said Jim Uszler, executive director of the Mount Prospect Chamber of Commerce.

"This is just a case of a company that took on too much debt and no capabilities to pay it back in a tough credit market," analyst Stern added. "This is not a story about the malls themselves."