General shrinking? Critics warn Seaport firm has no dough
By Julie Shapiro
The developer planning a massive overhaul of the South St. Seaport faces money problems.
General Growth Properties’ falling stock and large debt have caused the company to shelve projects in Las Vegas and some think it could mean the hotly debated redevelopment of the Seaport won’t even get off the ground.
The stock of General Growth Properties fell nearly 50 percent in the past year, and the company has $18.4 billion in debt coming due in the next 3½ years, according to the Wall Street Journal. Earlier this month, Bob Michaels, G.G.P.’s president and C.O.O., was forced to sell half his shares in the company because of the dropping stock price, the Journal reported.
General Growth hopes to demolish the touristy mall on Pier 17 and replace it with low-rise retail, a boutique hotel and a public plaza. They also hope to build a 495-foot condo-hotel tower just north of the pier, and they want to move the landmarked Tin Building to the pier’s tip. The project is set to run a gauntlet of city, state and federal approvals, starting with a city Landmarks review this fall.
Community Board 1 has begun debating the project, weighing the amenities they hope to get a new school, a large community center and more open space against the height of the tower. Recently, G.G.P.’s consultants launched a population growth study to examine the need for a school.
But all the give-and-take negotiations could be for naught if General Growth doesn’t have the money to build the project.
“They’re dead broke and in extreme financial hardship,” said Reggie Middleton, a former real estate investor who runs a hedge fund and publishes the results of his private research on his Web site, Boombustblog.com. “I can’t see them doing [a new project]…. They definitely can’t afford a redevelopment of this size.”
Middleton traced General Growth’s expansion over the last decade, in which the company aggressively acquired property around the country, riding the top of the credit bubble. In 2004, General Growth bought the Rouse Company, the former owner of the Seaport mall. Then the credit bubble popped, and Middleton thinks General Growth won’t be able to refinance its debt and will have to either sell off properties or foreclose on them.
Earlier this month, the Las Vegas Review-Journal reported that General Growth is backing out of a deal to co-develop a $4.8 billion resort on the strip, called Echelon. General Growth is also delaying development of a 1.4 million-square-foot mixed-use project in Las Vegas called the Shops at Summerlin Centre, the Review-Journal reported.
Middleton sees these Las Vegas delays as an indication of what could happen at the Seaport.
General Growth executives declined interview requests for this article, but the firm released a statement defending its ability to complete the Seaport project and indirectly addressing the Las Vegas delays.
“G.G.P. conducts business throughout the nation,” a General Growth spokesperson wrote in an e-mail to Downtown Express. “Our decisions in any individual market have no bearing whatsoever on our plan for the Seaport.”
The statement continued, “General Growth Properties has a 50-year track record of successful developments. This is a long-term project and G.G.P. remains 100 percent committed to realizing its vision for the Seaport’s future. We are moving forward without hesitation in our mission to reconnect the Seaport to the Lower Manhattan community and to bring important benefits to the neighborhood.”
Middleton said the statement sounded like public relations “fluff” and he would want to know how General Growth planned to pull itself out of its financial straits. Even when the market improves, which could take years, Middleton does not think General Growth will fully recover.
“They’re not going to come out of this the same company they went in,” Middleton said.
The credit crunch is slowing other projects in the city, as developers try to make a good return on their investments.
Community Board 1 has raised serious concerns about G.G.P.’s plan, particularly the height of the tower. C.B. 1 chairperson Julie Menin said that if the Seaport redevelopment falls through, she will still fight for amenities like a new school and community center elsewhere in the district.
The city has expressed support for General Growth’s project and if it moves forward, Menin said the city has an interest in seeing it through to the end.
General Growth is working closely with the city Economic Development Corporation on the project, since the city owns the waterfront land G.G.P. wants to develop. Neither side would comment on whether General Growth has asked for government subsidies to complete the project, but if so, the financial assistance would likely take the form of property tax breaks.
General Growth has a history of requesting and receiving government subsidies and tax abatements, according to Good Jobs First, a group that researches development subsidies. Good Jobs First released a report last year called “Growing At Whose Expense?” which calls G.G.P. “one of the biggest drains on local government revenues in the United States.” The report looked at 50 of General Growth’s other malls, about a quarter of its U.S. properties. Fourteen of the 50 malls have received a total of $200 million in government subsidies and $9 million in tax savings from assessment appeals.
Allison Lack, a research analyst who co-wrote the report, said she did not know enough about the Seaport project to say whether it deserved a subsidy, but she did not think that the tough economic climate would be a good enough reason.
“In good economic times and bad economic times, they always ask [for subsidies],” she said.