General Growth Properties made history last week with the largest real estate bankruptcy in history, and CEO Tom Nolan appeared on CNBC to explain the move (see video below).
According to Nolan, everything is basically fine. They're able to make their interest payments and tenants aren't leaving. The entire problem is the company's inability to rollover its $27 billion debt load it accumulated acquiring the properties that helped make it the second largest mall operator in the country.
Nolan told CNBC that its "fundamental business model remains strong" and "the business model is sound," and he added that "We haven't lost a lot of tenants. ... Retail sales are down and some of our retailers are struggling, but we also have some retailers that are doing exceptionally well."
I guess that's true. Anytime that you have 400 shopping centers, you will have "some retailers" doing well.
To be fair, Mr. Nolan took over as CEO long after the company's fate had been sealed by a series of overly ambitious debt-fueled acquisitions. But he just doesn't seem like he's providing a realistic explanation for the company's situation. If General Growth owns great malls that are functioning fantastically, why couldn't it just sell a few to pay down its debt? We're used to optimistic "forward-looking statements" from CEOs going through tough times, but it's a little bit strange to see a guy go on TV and proclaim that everything is "sound" after he's just made history with a bankruptcy filing of record size.
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Reader Comments (Page 1 of 1)
4-19-2009 @ 4:14PM
Elizabeth said...
Mr. Nolan, who pays for you filing for bankrupcy....the taxpayer? Your past and present company's CEO's salaries are what figures, Mr, Nolan? Please disclose if you dare. Arrogance personified!!!
4-19-2009 @ 6:52PM
william lindblad said...
During the great depression there was a cartoon depicting two fellas sitting in front of a pot belly stove. One had just acquired a paper and was reading to the other that the government says things are getting better. The other responded with " that's good" - and while you are up - thrown another corn cob on the fire.
In other words - bankruptcy being good is a matter of opinion.
4-19-2009 @ 11:46PM
Dan said...
This article is really lame. "Sell a few to pay down its debt"? Well, when you have $27B in liabilities and a significant portion of that due or coming due, why would you sell into a heavily depressed market? They would have to liquidate to cover their debt, and would wipe out the shareholders in the process. If they can refinance on even reasonable terms they will be able to emerge from BK as a huge success story and *hopefully* leave the equity mostly intact.
At least SOME research should be required prior to writing an article.