GGP's Growing Debt Problem

That mount of debt that GGP's dealing with is becoming more of a sticky subject the longer the credit crunch goes on. Today there was a story in the Wall Street Journal describing how the REIT is out actively looking for joint ventures to help it raise capital as a way to deal with its $27 billion debt load with $18.7 billion of that coming due in the next four years. Refinancing the debt looks to be a challenging proposition. So instead, joint ventures may be a good solution. General Growth has a higher debt-to-capitalization ratio than most other retail REITs in part because of the debt it took out to fund its 2004 acquisition of Rouse Co.

If you don't have a sub to the Journal, you can see Reuters summation of the story here.

The story meshes with something we reported a couple of weeks ago--about how REITs were increasingly turning to joint ventures in the current market.

Chicago-based General Growth, which owns more than 200 malls, said the ventures would likely target some of the 165 malls the company owns outright, a category that includes such high-profile properties as Fashion Show Mall and the Grand Canal Shoppes in Las Vegas and Ala Moana Center in Honolulu. Malls that already are part of joint ventures, including Water Tower Place in Chicago, are unlikely to take on additional investors.

Bernie Freibaum, General Growth's chief financial officer, said in an interview that the company is approaching pension funds and life-insurance companies to first determine if they are interested in a deal before hashing out which properties would be involved. "It's not going to be that people can cherry-pick and just ask for the best assets," Mr. Freibaum said. "If it's multiple assets [in a deal], it will be a good cross-section of our portfolio."

In addition to seeking joint-venture partners, General Growth said it is considering other ways to whittle down its debt load -- which totals $27 billion -- including mortgaging some shopping malls and divesting itself of office buildings. "We're telling the market that we're going to reduce our leverage," Mr. Freibaum said. But, he added "there are no distress sales going on."

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