Earlier this summer, I wrote about the proliferation of empty malls around the world. Now it seems, in North America at least, that problem could soon get worse. General Growth Properties Inc., the USA’s second-largest mall operator, is close to bankruptcy.
Chicago-based General Growth Properties said in an SEC filing late Monday that it has $900 million of property secured debt and $58 million of corporate debt coming up for renewal by Dec. 1. It also faces another $3.07 billion in debt that matures in 2009. But “given the continued weakness of the retail and credit markets,” the mall operator fears it may not be able to refinance its loans at lower rates to meet its short-term cash needs … “Our potential inability to address our 2008 or 2009 debt maturities in a satisfactory fashion raises substantial doubts as to our ability to continue as a going concern,” the company said in the filing. Shares of General Growth Properties tumbled 66% to 46 cents on Tuesday.
General Growth properties are in 44 States, including the Paramus Park Mall in New Jersey, Cumberland Mall in Atlanta, Water Tower Place in Chicago and the Glendale Galleria in California. And they are not alone in this time of trouble as several other large mall operators have significant debt coming up for renewal at the end of 2008 and early 2009. Store vacancies at regional malls are up 6.6%, the largest increase since early 2002, according to real estate research firm Reis.
We could well be facing the prospect of some major city malls becoming empty echoing hangars. The real problem is what do you replace them with? Most downtown malls, at least, are huge spaces embedded in the physical infrastructure on and below our streets. We cannot simply knock them down and replace them with parks or other amenities. Maybe we could at least use them as homeless shelters in the winter.