Tuesday, November 11, 2008

Will Downtown Turn To Potterville?

In the business world, there is one no spin zone, one place relatively free of marketing bluster, and that is in the paperwork companies file with the Securities and Exchange Commission.

General Growth, the owner of the mall and so much else in Columbia, is uncharacteristically blunt in its latest SEC filing, painting a bleak picture for the company and the retailers it serves around the country.

And that's probably not good for the wonderful life we so recently enjoyed.

So grab a stiff cup of joe and read on:

The Company has $900 million of property secured debt and $58 million of corporate debt that is scheduled to mature by December 1, 2008. The Company is working with its syndicate of lenders to extend the November 28, 2008 maturity dates for its property secured debt (related to Fashion Show and The Shoppes at The Palazzo, both in Las Vegas, Nevada). In addition, we have undertaken a comprehensive examination of all the financial and strategic alternatives to generate capital from a variety of sources, including, but not limited to, both core and non-core asset sales, the sale of joint venture interests, a corporate level capital infusion, and/or strategic business combinations. Given the continued weakness of the retail and credit markets, there can be no assurance that we can obtain such extensions or refinance our existing debt or obtain the additional capital necessary to satisfy our short term cash needs on satisfactory terms. Even if we are successful in addressing these 2008 maturities, an additional $3.07 billion of property and corporate debt is scheduled to mature in 2009. In the event that we are unable to extend or refinance our debt or obtain additional capital on a timely basis and on acceptable terms, we will be required to take further steps to acquire the funds necessary to satisfy our short term cash needs, including seeking legal protection from our creditors. 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.

That last sentence usually means the company may have little choice but to file for bankruptcy protection.

The future looks and reads gloomier by the day..Read what General Growth says about its planned communities division, which include our town.

The Company has deferred construction, development or the opening of certain near and intermediate term new development and redevelopment projects and has deferred all future development expenditures other than expenditures for projects that are near completion and projects that have been approved at our jointly owned properties.

It sounds like stores in the mall are also suffering:

The decrease in overage rent is primarily due to declining tenant sales at The Grand Canal Shoppes, The Mall in Columbia and Saint Louis Galleria in the three months ended September 30, 2008 compared to the three months ended September 30, 2007.

More bad times to come?

General and retail economic conditions continue to weaken, and we expect this weakness to continue and worsen in 2009 as the economy enters a recessionary or near recessionary period. Consumer spending recently declined for the first time in 17 years, the unemployment rate is expected to rise, consumer confidence has decreased dramatically and the stock market remains extremely volatile. Given these expected economic conditions, we believe there is a significantly increased risk that the sales of stores operating in our centers will decrease, negatively affecting their ability to make minimum rent payments and increasing the risk of tenant bankruptcies. In addition to the direct adverse effect of tenant failures to pay minimum rents and tenant bankruptcies on our operations, these events also negatively affect our ability to attract and maintain minimum rent levels for new tenants. These circumstances negatively affect our revenues and available cash, and also reduce the value of our properties, reducing the likelihood that we would be able to sell such properties, on attractive terms or at all.

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