Commercial Real Estate: General Growth may divide Rouse assets
Chapter 11 plan calls for split into two new companies
The Mall at Columbia, Baltimore's Harborplace and other retail properties developed by James Rouse would be assigned to one company while Columbia Town Center would go to another company in its plan to emerge from the bankruptcy filing of General Growth Properties.
The Chicago company's reorganization is fueled by new outside investors that it said would vastly improve its balance sheet after it sought Chapter 11 protection last year, swamped by debt taken on in the $12 billion acquisition of the former Rouse Cos. in 2004.
General Growth would split itself into two separate publicly traded companies New GGP and Spinco with the latter holding General Growth's master planned communities.
Those communities include Columbia, for which Howard County in February approved a 30-year master plan that would allow up to 13 million square feet of new development in addition to the 26 million square feet of existing commercial space. But the Columbia mall and the Gateway Overlook business park would become part of New GGP.
"Spinco will hold a diversified portfolio of properties with little debt and with near-, medium- and long-term development opportunities, including [General Growth's] master planned communities segment and a series of mixed-use and mall development projects in premier locations," Adam Metz, General Growth's CEO, said in a press release.
The reorganization plan, if approved by the U.S. Bankruptcy Court for the Southern District of New York, could allow General Growth to emerge from Chapter 11 in October.
Since December, the company said it has restructured about $15 billion in project-level debt and the new plan would allow it to satisfy creditors in full, provide a substantial recovery for shareholders and implement a recapitalization with $7 billion to $8.5 billion of new capital.
The plan is based on investment agreements with affiliates of Brookfield Asset Management, Fairholme Capital Management and Pershing Square Capital Management, which together have committed to provide $8.55 billion in capital. Also General Growth has executed an agreement with the Teacher Retirement System of Texas, a public pension plan, for an investment of $500 million in shares of New GGP common stock at $10.25 per share.
In the meantime, General Growth continues to market various entities under its restructuring process. The company also announced plans for Jones Lang LaSalle to acquire its third-party management of Laurel Commons, Towson Commons and 16 other regional shopping centers totaling 11 million square feet across 11 states.
Lender moves to foreclose
on Towson Commons
Some of the retail centers General Growth manages for other owners are themselves under financial distress, including Towson Commons, whose lender filed for foreclosure Monday.
Capmark Financial of New York sued Towson Commons owner Western Development of Washington, D.C., citing default on loans with a balance of $59 million, according to the motion filed on the lender's behalf by Rosen Hoover of Baltimore.
Western Development and the former General Motors Acceptance Corp. bought the complex in 2005 but their announced $30 million redevelopment plan, including a new residential tower, stalled amid the financial market collapse.
The property, completed in 1990, consists of 322,000 square feet, including a thriving 220,000-square-foot office tower.
But much of the 102,000 square feet of retail space is empty.
Montgomery nonprofit begins
rehabilitation of Maple Towers
Montgomery Housing Partnership of Silver Spring, a private nonprofit housing developer, has begun work on Maple Towers Apartments and plans to complete the $5.25 million renovation project by next spring.
The 44-year-old, eight-story brick building at 7610 Maple Ave., Takoma Park, was purchased after it had sat vacant for nearly three years. It is now being gutted and renovated with environmentally friendly technology and products, according to information from the nonprofit.
Plans include reconfiguring the one-, two- and three-bedroom apartments and adding a 2,000-square-foot community center with computer lab and business center. Seventy-eight percent of the planned 36 units will be rented to low- and moderate-income families, with the rest offered at market rate.
Industrial market leasing
improves in Baltimore
Healthy leasing activity in the Baltimore warehouse market through the first half of the year points to a recovery, as tenants signed 14 warehouse deals exceeding 100,000 square feet, according to CB Richard Ellis.
Seven of those big lease deals were new, helping create a "sense of cautious optimism" in an industrial market that had seen construction activity, asking rental rates and vacancy rates fall during the recession.
The overall industrial vacancy rate rose slightly from 12.6 percent to 12.7 percent during the second quarter, due to the 124,000 square feet that was returned to the flex market. The lack of tenant demand over the past couple of years led to a 9.6 percent decline in the average warehouse asking rate from the $4.90 per square foot at the beginning of 2008 to the second quarter 2010 rate of $4.43.
But the weak demand has put a lid on new construction and the warehouse project in the pipeline is a 355,000-square-foot redevelopment at Candlewood Road in Harford County. In the long run, the Pentagon's base realignment program should "have a significant positive effect on the manufacturing, construction and logistics industries over the next few years," the report said.
Hanna Paper Recycling
renews lease in Savage
Hanna Paper Recycling (Mid Atlantic) Inc. renewed its 58,825-square-foot lease at 8840 Greenwood Place, Savage, according to Cassidy Turley, which represented the company.
"We understood the market well in advance and were able to compare which opportunities would possibly work, Cassidy's Michael Bosica said in a statement. "In the end, with justifying capital costs and a more than suitable location, the renewing of the current lease just made sense."
REI opening store
Real estate investment company Madison Marquette announced that REI has signed a lease to occupy 24,000 square feet in its newly acquired center in Columbia, bringing the property to 96 percent occupied.
"In the past six weeks we have leased nearly all of the property's vacant space to two strong national retailers that have signed long-term commitments to serve the highly coveted Columbia, Maryland market," said Jay Lask, managing director of investments for Madison Marquette in Washington, in a statement.
Acquired in conjunction with MCB Real Estate, the property spans 10 acres and is part of Columbia Center II, a retail center at the northwest corner of Snowden River Parkway and Dobbin Road, about 2 miles west of Interstate 95.
REI is expected to join the previously announced Toys "R" Us/Babies "R" Us combination store in opening by the end of the year.
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