General Growth Properties, the Chicago-based owner of area malls such as Tysons Galleria in McLean and Harborplace in Baltimore, sought protection from creditors early Thursday, in one of the biggest real estate bankruptcies in U.S. history.
General Growth, like many homeowners, bought many properties at high prices earlier in the decade and now finds them sinking in value and paying less rent as stores close.
Weakness in retail spending has caused stores to press for lower rents and pushed up commercial loan delinquencies, which has caused banks to restrict lending.
General Growth built up $27 billion in debt during an aggressive expansion that made it the second-largest mall operator in the nation and is no longer able to make its payments.
General Growth’s area mall properties also include The Shops at Georgetown Park, Landmark Mall in Alexandria, Lynnhaven Mall in Virginia Beach, Gateway Overlook in Columbia, Md., The Mall in Columbia, Laurel Commons in Laurel, Mondawmin Mall in Baltimore, the Owings Mills Mall in Owings Mills, Md., and the Whitemarsh Mall in Whitemarsh, Md.
The Chapter 11 bankruptcy protection filing will not affect shoppers at those malls but puts the company in a better position to negotiate the restructuring of its debt. General Growth - whose bankruptcy filing was expected as early as December - was unable to reach agreement with creditors in the ensuing months.
General Growth also owns Baltimore -based property developer Rouse Co., having bought it in 2004 for $11.3 billion as part of its spending spree. Rouse developed the planned community of Columbia, Md., as well as Harborplace and the Mondawmin Mall in Baltimore.
Retail analysts have suggest that Simon Property Group, the nation’s largest mall owner, will benefit from General Growth’s troubles if the latter is forced to sell properties on the cheap.
Simon owns the Arundel Mills Mall in Hanover, Md., and Potomac Mills Mall in Woodbridge, Va., having purchased the distressed Mills Corp., of Chevy Chase, with other investors
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