Associated Press and Herald Staff
It’s business as usual for the Alderwood mall in Lynnwood, despite the announcment Thursday that one of its owners filed for bankruptcy protection.
In its drive to become the second-largest owner of shopping malls in the nation, General Growth Properties Inc. racked up $27 billion in debt. At around 2 a.m. in Chicago on Thursday morning, the retail giant buckled under the weight.
After months of tense negotiations with tightfisted lenders, General Growth filed for Chapter 11 bankruptcy in a bid to protect its 200-plus shopping malls including Lynnwood’s Alderwood shopping center, Seattle’s Westlake Center and Bellingham’s Bellis Fair. General Growth has said it owns Alderwood with other parties, but declines to name them.
But Alderwood assured customers that shopping continues in a statement from General Growth on the mall’s Web site.
“Our properties will continue to operate, our employees will continue to come to work and get paid, and shoppers will continue to shop,” the statement said.
The Chicago-based General Growth is paying the price for its aggressive expansion during the real estate boom, when cheap lending proved an irresistible option for bankrolling prime acquisitions, such as its 2004 purchase of the Rouse Co.
The deal gave General Growth retail gems such as Faneuil Hall in Boston, the Providence Place mall in Rhode Island and the Harborplace waterfront marketplace in Baltimore, but at a hefty price: $7.2 billion plus $5.4 billion in assumed debt.
Rolling over financing for commercial properties is common in the industry, but when lenders all but stopped making loans last fall, it left General Growth without recourse to make its debt payments.
“While we have worked tirelessly in the past several months to address our maturing debts, the collapse of the credit markets has made it impossible for us to refinance maturing debt outside of Chapter 11,” Chief Executive Adam Metz said in a statement.
By placing its fate in the hands of a bankruptcy judge, General Growth hopes to cast off its debt and emerge with its portfolio of landmark retail centers intact, although there are no guarantees the company will be able to do so.
“We will not have to sell substantial amounts of our iconic assets,” Tom Nolan, president and chief operating officer, said during a conference call with reporters. “We believe we can maintain those.”
Nolan acknowledged that the company took on significant amounts of debt to finance its expansion efforts, but stressed that the company didn’t run into trouble trying to refinance until last fall.
“It wasn’t so much the Rouse acquisition as it was the credit markets simply shut to really any refinancing and the company found itself, unfortunately, in the position of having a significant amount of debt come due since last October,” Nolan said.
Chapter 11 protection typically allows a company to hold off creditors and operate as normal while it develops a financial reorganization plan.