GLENDALE — General Growth Properties Inc., the fiscally troubled owner of the Glendale Galleria, announced late Monday that it had reached an agreement with its creditors to delay payment on a $58-million debt until Dec. 11.
The announcement comes one day after the company received a two-week extension on $900 million in outstanding mortgage loan payments at two Las Vegas malls that had been due last week and amid persistent questions about General Growth’s long-term financial solvency.
Officials with General Growth could not be reached for comment, and officials at the Galleria declined to offer an opinion, but in a release, the company said it will continue “discussions on a longer-term extension” for outstanding loans.
While officials successfully delayed payments on $900 million that was due Nov. 28 on two Las Vegas retail centers — the Fashion Show mall and the Shoppes at the Palazzo — and $58 million of corporate debt that was due Monday, they still face another $3.07 billion worth of payments due next year, according to filings with the U.S. Securities and Exchange Commission.
The Chicago-based real estate investment firm of more than 200 malls throughout the country has been addled by a national recession in which some of its largest stores have struggled to maintain a strong bottom line. Complicating matters, officials said, is a shaky management structure that has given way to a slew of new executives this winter.
General Growth hired a new chief executive and president to run the company in October, while one of its biggest vendors in the Galleria, Mervyn’s, said it plans to close for good in early January.
The loan extension could help the company stave off bankruptcy while it negotiates a longer-term extension with lenders, but the future of General Growth as it currently stands remains uncertain, said Jack Kyser, head of the Los Angeles County Economic Development Corp.
“This is a period where they would be sorting out financial matters,” he said. “Mall [real estate investment trusts] may step up to the plate.”
A real estate investment trust, commonly referred to as REITs, is a tax designation for corporations investing in real estate that reduces or eliminates corporate income taxes while offering a high yield of their income to investors.
Even if General Growth, the second-biggest mall owner in the nation, is divided, sold or goes bankrupt, the Galleria would not likely be affected, Kyser said.
“The Galleria is one of their prime properties, and there is opportunity out there because of Mervyn’s going out of business,” he said. “[A potential vendor] can have a prime location right down the street from the Americana. Regardless of what happens to General Growth, the Galleria will survive.”
News of General Growth’s loan extension sent its stock value tumbling once again in early trading this week. Since officials announced it will seek to stave off bankruptcy Monday, shares of General Growth declined more than 34% to finish at 93 cents per share Tuesday.
Since January, the company’s stock has lost nearly all of its value from a high of $43.83 per share May 16 to a low of 35 cents Nov. 12. Hoping to stem the bleeding, the mall on Nov. 20 hired corporate law firm Sidley Austin to help facilitate lending negotiations as the company works to restructure its $27-billion debt and outstanding mortgage obligations.