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Before the Fall

As 2008 draws to a close, it seems likely it will take with it one of the REIT industry's oldest stalwarts, General Growth Properties. More than a month after announcing it was seeking financial and strategic alternatives, including the sale of its Las Vegas properties, the Chicago-based firm has yet to secure refinancing commitments for approximately $1.5 billion in debt maturities that will expire this year.

As of Nov. 12, General Growth's stock was trading at $0.30 per share, down more than 99 percent from the 52-week high of $51.24, and the company was contemplating filing for Chapter 11 bankruptcy. On Nov. 11, the Standard & Poor's rating agency dropped the REIT from its S&P 500 stock index.

“They are like a wounded animal that's been backed into a corner,” says Chris Cunning, vice president of investment with Marcus & Millichap Real Estate Investment Services, an Encino, Calif.-based brokerage firm.

Meanwhile, with everyone in the industry aware of General Growth's precarious status, even those buyers who have the funds to purchase its Las Vegas assets (the 1.75-million-square-foot Fashion Show Mall, the 510,285-square-foot Grand Canal Shoppes at the Venetian and the 450,000-square-foot Shoppes at the Palazzo) are waiting for the bankruptcy, when they can buy the assets off the auction block or take ownership through the purchase of General Growth shares, says Cunning. “A buyer could come in and acquire all their properties for just over $100 million, plus the debt,” he says.

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