General Growth Properties

  • Overview
THE SCOOP

Mall madness

General Growth Properties, Inc. (GGP) is a real estate investment trust engaged in the ownership, operation, management, leasing, acquisition, development, expansion and financing of regional mall shopping centers in the United States.  Ranked the second-largest owner/operator of malls behind Simon Property Group, GGP owns or operates more than 200 shopping malls covering 200 million square feet of space in 44 states, home to more than 24,000 retailers, including Old Navy, J.C. Penney and Sears.  In addition, GGP employs more than 4,200 workers and owns roughly 110 office, mixed-use and industrial properties and manages holdings for institutional owners.  Dreadful results in the retail sector in late 2008 and early 2009 brought on by the recession forced many stores to close.  With revenue drying upâ€"and with $25 billion of debt on the booksâ€"General Growth filed for bankruptcy protection in April 2009.

A family business

After brothers Martin and Matthew Bucksbaum decided to expand the family grocery operation in 1954, their resulting Town & Country Center in Cedar Rapids, Iowa, became one of the earliest shopping centers in the Midwest.  Within a decade, the Bucksbaums owned five properties and became majority stockholders in General Management Corporation.  In 1970, they exchanged their stock for shares in a real estate investment trust (REIT) called General Growth Properties; GGP was first listed on the NYSE in under two years’ time.  The company liquidated its REIT with the 1984 sale of 19 malls to Equitable for $800 million, though General Growth Management Inc., the management company of General Growth, continued to oversee operations on a third-party basis.  The company’s 1989 acquisition of The Center Companies made GGM the nation’s second-largest regional shopping management company, and a second REIT was established in 1993 using 55 percent of General Growth’s holdings.

“Growth†indicators

During the rest of the decade, the company made good on the “growth†portion of its name, acquiring Homart Development Co. for $1.85 billion in conjunction with four partners; U.S. Prime Property Inc. for $625 million; and the domestic subsidiaries of MEPC, a British company, for $871 million.  John Bucksbaum, son of Matthew, became CEO in May 1999, with Matthew remaining as Chairman of the Board.  At the start of 2000, GGP announced its 16th consecutive quarter of double-digit Funds From Operations (FFO) growth, and, later in the year, opened the Stonebriar Centre in Frisco, Texasâ€"the most successful mall opening in company history, with more than 300,000 visitors during the first three days of business.  In January 2002, Forbes magazine awarded GGP one of only two A+ ratings for all REIT companies, based on performance and ability to deliver high yield growth rate in comparison with peers.  Two months later, GGP purchased JP Realty for $1.1 billion, gaining 18 regional malls, 26 community centers and 1.3 million square feet of industrial space, followed by the April 2002 acquisition of Victoria Ward, Ltd., a privately held real estate corporation with prime property in Hawaii.  GGP rounded out an impressive year with back-to-back purchases of malls in Monroe, La.; San Francisco; and Los Angeles.  Overall on the year, GGP added 21.1 million square feet to its portfolio for a 24-percent increase on 2001, while spending a combined $567 million on property improvements for 2001 and 2002.

Transforming company history

Expansion continued into 2003 and 2004, with the purchase and expansion of malls in Texas, Georgia, Missouri, New Mexico, Virginia, Hawaii, Maine, Indiana, Arkansas, Colorado, California, Vermont, North Carolina, Alabama, Louisiana, Nevada, Massachusetts and Oregon.  By the 10th anniversary of GGP’s public stock issue, it had increased its holdings from 21 malls covering 13 million square feet to 160 malls encompassing 141 million square feet.  By March 2004, 2 billion shoppers were passing through GGP-operated centers on an annual basis.  That August, the company established its first international joint ventures in Brazil and Costa Rica.  GGP ended the year with its biggest business transaction ever (and the largest retail real estate merger in U.S. history).  For a whopping $12.6 billion, GGP gained 100-percent ownership of the Rouse Company, a premier real estate development and management company, in a deal then-CEO (now chairman) John Bucksbaum called, “without question, the single largest transforming event in our company’s history.â€

Let’s begin a new chapter

The company was hit hard by the recession; instability in residential property prices and sales moved into both the commercial property market and retailers.  Sales decreased for most chains, and other mall staples (like Sharper Image, Linens N Things and Circuit City) went belly up.  Storefront vacancies skyrocketed (to 7.1 percent at the end of 2008, compared to 5.8 percent in December 2007), and General Growth’s income took a major hit.  After months of press releases involving loan updates and refinancing deals, the company filed for Chapter 11 protection in April 2009.  The failure was not a surprise to Wall Street investors: Since April 2007, its stock price fell to $1.05 from $35.  General Growth financed its long-term acquisitions with short-term debt (mortgages), a tactic which goes against one of the generally accepted rules of good business, and which inflated the company’s liability tally to $25 billion.  The company dumped Bernard Friebaum, the longtime chief financial officer who formulated the approach, in October 2008.

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General Growth Properties


110 North Wacker Drive
Chicago, IL 60606
Phone: (312) 960-5000
Fax: (312) 960-5475
www.generalgrowth.com

STATS


  • Employer Type: Public
  • Stock Symbol: GGP
  • Stock Exchange: NYSE
  • CEO: Adam Metz
  • 2009 Employees: 3,500

Major Office Locations

  • Chicago, IL