By Julie Shapiro
The Internet was awash last Thursday afternoon with the news that General Growth Properties was looking to unload South Street Seaport — but those reports are slightly exaggerated.
General Growth did put the Seaport property up for sale, but a General Growth spokesperson said on the condition of anonymity that the firm has been looking for investors for the Seaport for several months, and the company intends to retain the property. But since General Growth would consider selling the property if the right offer came in, the company had to say that the sale is an option, even if it’s not likely, the spokesperson said.
The firm appeared off guard when its broker, DTZ Rockwood, announced Thursday that General Growth was selling three of its highest profile possessions in New York, Boston and Baltimore.
General Growth is planning a massive redevelopment of the Seaport, including a condo-and-hotel tower, but the project faces numerous government approvals before it can get off the ground. The city Landmarks Preservation Commission sharply criticized the plan last month, sending G.G.P. back to the drawing board. Nevertheless, G.G.P. executives promised Thursday that the redevelopment would move forward.
“South Street Seaport is among a group of properties for which General Growth is seeking partners, investors or buyers,” Jim Graham, a different firm spokesperson, said in a statement from G.G.P.’s Chicago headquarters. “We intend to continue working with the City of New York on a plan for the property’s development that they and the community will embrace.”
The anonymous spokesperson put it even more simply: “For the immediate future, this doesn’t change anything.” General Growth will keep working on redesigning the plan to meet the Landmarks Commission’s specifications and will also roll out promised community amenities, including an ice rink and a variety of classes and cultural programs.
The city is also staying on board with General Growth’s plan — even if General Growth leaves the picture.
“We remain committed to the redevelopment of the Seaport, whether with General Growth Properties and new partners or with a different firm altogether should the property be sold,” Andrew Brent, spokesperson for Mayor Bloomberg, wrote in an e-mail to Downtown Express. “The company has indicated its preference is to stay with the project given its unique location and significant potential.”
General Growth began seeking investors for the Seaport project when the credit markets tightened several months ago, the anonymous G.G.P. spokesperson said. It became clear then that the economic environment was very different from the one in which G.G.P. conceived the project.
General Growth, an international mall owner with $27 billion in debt, has suffered greatly over the past several months. Its stock dropped from about $40 six months ago to a low of 24 cents and has since rebounded somewhat to close at $1.23 Tuesday. General Growth had a $900 million loan due last month for its Las Vegas properties and has received two extensions as the company seeks to sell the properties. The new due date for that loan is Feb. 12.
New York broker DTZ is marketing the South Street Seaport along with two other G.G.P. properties — Faneuil Hall in Boston and Harborplace and The Gallery in Baltimore’s Inner Harbor — as a “Festival Marketplace Portfolio,” but it is unlikely that a single buyer would scoop up all three properties in today’s economic climate.
Lawrence Longua, professor at New York University’s Schack Institute of Real Estate, does not think G.G.P. will find buyers for the properties it put up for sale, because potential buyers will worry that the company will go bankrupt. When a company declares bankruptcy, any transactions it makes 90 days beforehand can be reversed, so potential buyers usually wait until after the bankruptcy declaration to make a bid. G.G.P. will likely go bankrupt in the first quarter of 2009, said Longua, who directs N.Y.U.’s REIT (real estate investment trust) Center.
Longua predicted that the Seaport’s future owners would also seek to redevelop the site.
“Clearly you’d want to do something there — it’s underutilized,” Longua said. “A lot of the value of that property is not because of the third-rate restaurants. In better times, the value of the property [comes from its] development rights.”
The Seaport, which G.G.P. executives have alternately described as thriving and struggling, has a 94.3 percent occupancy rate and sales of $598 per square foot. The New York Post reported the asking price as just under $200 million, but G.G.P. did not confirm that. DTZ Rockwood did not return calls for comment.
Any partnership or sale of the Seaport property will take time to go through, so the G.G.P. spokesperson said that General Growth has plenty of time to continue working on approvals for the redevelopment. If G.G.P. gets government approvals, that could raise the value of the property and consequently increase the sale price.
As long as a future developer keeps General Growth’s plan, the new developer would also keep any government approvals General Growth received, a city official said. But if a new developer wanted to make “material changes,” the approvals process would have to start from the beginning, said the official, who spoke on condition of anonymity. The distinction may be moot, as General Growth has not received any approvals yet.
No potential investors or buyers for the Seaport have publicly come forward.
Vornado Realty Trust and Related, both rumored to be interested in the Seaport property, declined to comment. Related made a bid to develop Pier 17 with Cirque du Soleil several years ago, before General Growth acquired the property in its 2004 takeover of the Rouse Company. That takeover also saddled G.G.P. with much of the debt the company is carrying now, and Longua, the professor, said G.G.P. should have refinanced the debt during the takeover.
“They bought Rouse at the wrong time,” Longua said. “That’s coming back to kill ’em.”
The Westfield Group, one of the largest mall owners in the world and another potential contender for the Seaport, did not return a call for comment. A source familiar with Westfield’s operations said it was unlikely the Australian company would snap up the Seaport while the site’s future development is so uncertain.
“Westfield likes to come in when something is pretty much fully baked,” the source said.
Westfield agreed earlier this year to run 488,000 square feet of retail in the rebuilt World Trade Center, and the source thought it was unlikely that the company would want another 285,847 square feet at the Seaport, only a 10-minute walk away.