Downtown Express file photo by Elisabeth Robert
General Growth Properties has new investors and a plan to exit bankruptcy. The firm is also talking about reviving its plans to demolish the Pier 17 mall and redevelop the Seaport.
Emerging from bankruptcy, firm revives Seaport tower talk
By Julie Shapiro
General Growth Properties is emerging from bankruptcy and is looking to resurrect its plans to redevelop the South Street Seaport.
Before declaring bankruptcy in April 2009, General Growth intended to demolish the Pier 17 mall and replace it with a new hotel and retail complex, including a 500-foot tower. The company’s $27 billion in debt, along with the city Landmarks Preservation Commission’s dislike of the designs, put those plans on hold indefinitely.
But that could be changing now that G.G.P. has submitted a reorganization plan based on a $6.55 billion investment from Brookfield Asset Management, Pershing Square Capital Management and Fairholme Capital Management.
As part of that plan, G.G.P. would divide into two companies: General Growth Properties would retain most of the company’s core asset, its shopping malls, while a new company, General Growth Opportunities, would take the mixed-use properties and those with future development potential. The South Street Seaport mall would become part of General Growth Opportunities, suggesting that the new company would seek to redevelop it.
“It is an unusual property because of its location and the visitor experience there,” said Jim Graham, corporate spokesperson for G.G.P. “And it has such potential — what we’ve been talking about the last couple years — for developing a hotel and residential [units]…. That’s why it would go to General Growth Opportunities.”
That new company would ultimately decide the future of the South Street Seaport. Of the nine directors of the G.G.O. board, three would come from Brookfield and two would come from Pershing, a hedge fund with a large ownership stake in the Target retail chain. Graham said he would expect the chairperson and C.E.O. of the new company to come from General Growth Properties, and he thinks the new board would likely pick up the plans G.G.P. had for the Seaport.
“Presumably the new company would continue to pursue the highest, best use of that property, which we felt was the proposal we put out,” Graham said in a phone interview this week.
In addition to demolishing the Pier 17 mall, G.G.P. planned to restore the historic Tin Building and move it from the pier’s base to its tip; add a boutique hotel, retail and open space to the pier; and build a 500-foot hotel and condo tower just north of the pier.
The city Landmarks Preservation Commission panned the project at a hearing in November 2008, calling the new 120-foot-tall retail buildings “inappropriate” and opposing the Tin Building’s move. The commission did not formally vote against the project but asked G.G.P. to return with revisions. Before G.G.P. could do so, the company declared bankruptcy and shelved the plan.
The development proposal divided Community Board 1, with many members opposing the height of the tower, which is outside of the South Street Seaport Historic District and is not under the L.P.C.’s purview. C.B. 1 ultimately supported the parts of the project within the historic district, but the board reserved the right to object to the plans later during the land-use review. C.B. 1 Chairperson Julie Menin said in 2008 that she would not support the land-use application unless G.G.P. added a school to the plans.
G.G.P.’s bankruptcy exit proposal, unveiled March 31, requires court approval and is not final. Another company, such as the Simon Property Group, which has expressed interest in the past, could still make an offer.
The current deal would give Brookfield, Pershing and Fairholme a combined 65 percent stake in General Growth, which they are buying at $15 a share. Brookfield previously bought nearly $1 billion of G.G.P.’s outstanding debt.
If the deal goes through, Brookfield will have a large stake in two shopping centers Downtown just a few blocks apart: Brookfield Properties, a subsidiary of Brookfield Asset Management, already owns the World Financial Center in Battery Park City.
“This could be a match made in heaven,” said Faith Hope Consolo, a New York retail broker. “Brookfield knows Downtown intimately…. It’s a great fit.”
Consolo said the Seaport and the Winter Garden are so different that they would not compete — the Seaport caters to tourists while the World Financial Center shops are mostly targeted to office workers, she said.
Katherine Vyse, spokesperson for Brookfield Asset Management, declined to comment on specific properties but said General Growth is “an attractive company with strong assets” and Brookfield is pleased to have the opportunity to invest in it.