Commercial Real Estate and Shopping Centers and Simon Property Group and Real Estate & Retail

Simon competitor General Growth files reorganization plan

July 13, 2010

Mall owner General Growth Properties Inc. said Tuesday that it filed a proposed reorganization plan with a federal bankruptcy court and expects to emerge from Chapter 11 protection this fall as two separate companies.

The real estate investment trust filed the nation's largest real estate bankruptcy case in U.S. history 15 months ago. At the time, it owned about 200 shopping malls, including Faneuil Hall in Boston, the Glendale Galleria in Southern California and the South Street Seaport in Manhattan.

On Tuesday, the Chicago company said it expects to emerge in October with a "significantly improved balance sheet and substantially less debt." So far, General Growth says it's restructured about $15 billion in project-level debt. It plans to satisfy debt and other claims in full and provide a "substantial recovery" to shareholders. It also plans to have between $7 billion and $8.5 billion of new funds.

The company on Monday said it is getting a $500 million infusion from a Texas teachers' pension fund. The Teacher Retirement System of Texas will receive shares priced at $10.25 per share in the reorganized company in exchange for the cash.

When it exits Chapter 11 protection, shareholders will own stock in both General Growth and the newly formed Spinco.

General Growth expects to come out of bankruptcy court with 180 properties, making it the second-largest shopping mall owner behind Indianapolis-based rival Simon Property Group Inc., which decided this spring to drop its efforts to acquire the struggling company. General Growth earlier this week agreed to turn over management responsibility for 18 malls in 11 states to Jones Lang LaSalle.

Spinco will manage a diverse group of properties with little debt that have development potential. Its holdings also include the company's master-planned communities and mixed-use development projects.

"I am confident that both companies will be extremely well-positioned to succeed," General Growth CEO Adam Metz said in a statement.

A judge is expected to begin considering the plan in mid-August.

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