General Growth Properties Fails, Domino Effect Begins

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Commercial property developer General Growth Properties Inc. filed for bankruptcy today. Bloomberg has more:

General Growth Properties Inc. filed the biggest real estate bankruptcy in U.S. history after amassing $27 billion in debt during an acquisition spree that turned it into the second-largest shopping mall owner.

The owner of Boston’s Faneuil Hall and the South Street Seaport in New York City ended a seven-month effort today to refinance its debt. The company listed $29.5 billion in assets and debts of about $27.3 billion in the Chapter 11 filing. General Growth will continue operating its more than 200 properties.

General Growth collapsed after spending $11.3 billion to buy commercial-property developer Rouse Co. in 2004 only to get caught in the credit crunch and a U.S. recession that has cut spending and property values. General Growth’s filing is the “beginning of the distress cycle” and may lead other companies to fail.

“This is kind of the beginning of the end,” Fasulo said. “This bankruptcy will drive down the values of mall assets in the United States. It’s going to put, I believe, more supply on the market than can be absorbed by investors.”

Reuters has a list of General Growth Properties’ creditors and holdings, in which you can see the extent of the damage.

If this is the beginning of the end for commercial real estate, who’s next?

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