Biggest real estate bankruptcy in U.S. history

[mfyahya]

http://www.latimes.com/business/la-f...,1032608.story

General Growth Properties Inc., owner of some of the nation's most prominent malls, including the Glendale Galleria, filed for Chapter 11 protection from creditors Thursday, marking the biggest real estate bankruptcy in U.S. history.

The filing, anticipated for months, comes as cash-strapped consumers turn away from shopping as a favorite pastime and the role of the mall in American culture is losing its charm.

The real estate investment trust amassed $27 billion in debt during an ill-timed acquisition spree that turned the Chicago-based company with Iowa roots into the nation's second-largest shopping mall company, behind Simon Property Group Inc.

[flintlock]

Re: Biggest real estate bankruptcy in U.S. history

I think there is a lot more of this to come. Retail RE busts I mean. For some reason, they are still building retail around my area like gangbusters. And most of these new buildings are sitting empty. I make a habit of counting the empty store fronts as I drive around. Most strip malls are about 40% vacant I'd venture to guess. I can't figure it out, why are they continuing to build more? Is it because the banks lending the money know the government will just bail them out regardless?

[charliebrown]

Re: Biggest real estate bankruptcy in U.S. history

hey flintlock!

you're in texas right? which metro area? i'm in the chicago metro area, and have been watching the retail vacancy too. I drive through a roughly 10 mile stretch of strip malls on the way to work every day.

I would estimate the vacancy rate of around 20%. There is no new retail going up. vacancy rate seems to be slowly climbing. We have lost a lot of car delearships. I think there was about 6 on the way, and we lost 2. (Buick, Ford/Mercury). We have also lost a lot of used car lots. Just a few years ago there was a lot of converted standalone retail, like a former tire store converted to a used car lot in the last few years. I would say there were about 8 used car lots, i think we are down to about 4 now.
Car dealers seem to cluster, there is something about the business model that makes the dealers set up shop close to each other. Anyhow I dont know where the tipping point will be when all the dealers leave because there is no longer a critical mass.

I'm sure a lot of high margin gross profit retail has also been replaced by lower margine retail. What once were electronics stores, boutique furniture etc has been replace with karate studios, and nail salons.

Two things I cant get over is banks and cell phone stores. They are still putting up banks. They are breaking ground for a new one right now. There must be 30 banks on my drive. When do I go into a bank? Once a year to have my kids piggy bank counted up. Everything else can be handled over the internet or atm. Is the bank model to build a nice secure looking edifice where they can make you feel comfortable when the push their over-priced, crumby financial products on you?

More cell phone stores are moving into empty retail. There must be about 6 of these. My two phones I bought at target. Why do we needed dedicated stores to cell these commodity products? When I actually did stop into and AT&T store to ask about plans, i got a know-nothing kid basically parroting the same thing the glossy brochure said. There was no-one in the store either at 6:00 PM drive time

And how about GGP?? How does the second largest mall operator go bk and there are no shock waves? SPG is actually up are they really in much better shape? How is the CDS market going to shake out? How many CDS were writtin on GGP? Who wrote them? AIG? If so that may explain why we have not seen any ripples, the tax payer is there to pay out on the swaps.

Anyone jump in on this. Maybe we can start a thread "driving around my metro area and counting the number of vacanant stores"

[cjppjc]

Re: Biggest real estate bankruptcy in U.S. history

Look at Vornado today! Shorted it @ 40. Ouch:mad:

[santafe2]

Re: Biggest real estate bankruptcy in U.S. history

Two things I cant get over is banks and cell phone stores. They are still putting up banks. They are breaking ground for a new one right now. There must be 30 banks on my drive. When do I go into a bank? Once a year to have my kids piggy bank counted up. Everything else can be handled over the internet or atm. Is the bank model to build a nice secure looking edifice where they can make you feel comfortable when the push their over-priced, crumby financial products on you?

Great observation, I should have realized that when I first saw new banks opening around town. Americans are again becoming net savers. After they pay down their revolving debt a bit, they'll have savings and the banks are going to find a way to skim as much profit off that savings as possible. That's also a great idea for a new thread: Scamerific Financial Products at my Bank!

[c1ue]

Re: Biggest real estate bankruptcy in U.S. history

Does this mean Friedman has to write twice as many ridiculous articles as before?

He must be already pretty pissed about focus shifting from Palestine to Afghanistan/Pakistan.

[don]

Re: Biggest real estate bankruptcy in U.S. history

I live in a SF Bay Area burg where the mall's demise is concentrated in the last (foolish) act of a long local retail story. Two generations ago a wildly successful roadside stand grew into a restaurant/kids entertainment stopoff. It even had its own post office and a small airport and had to add another restaurant across the highway to absorb the overflow. We always stopped by (I lived in SF then) on our way to or from Tahoe for a meal and to soak up the unique ambiance. Then the founding generation retired or died. Enter the kids.

Since then its been a steady, and rocky, dismemberment, with bits and pieces of the original stuck hither and yon until now we have a major glorified strip mall that has never had more than 50% vacancy. Both restaurants have been bulldozed and all the unique provisions pitched by the owners and the city have evaporated with the lack of tenancy. The 50+ year arc of this establishment says much about our larger economy.

Most of the family's energies now go to suing one another. It's a little version of a Big Picture from the movie era of Giant that has even outlived its screenplay potential. A sad expensive failure for just about everyone in this town and those driving by that remember the original.

[flintlock]

Re: Biggest real estate bankruptcy in U.S. history

hey flintlock!

you're in texas right? which metro area? i'm in the chicago metro area, and have been watching the retail vacancy too. I drive through a roughly 10 mile stretch of strip malls on the way to work every day.

I would estimate the vacancy rate of around 20%. There is no new retail going up. vacancy rate seems to be slowly climbing. We have lost a lot of car delearships. I think there was about 6 on the way, and we lost 2. (Buick, Ford/Mercury). We have also lost a lot of used car lots. Just a few years ago there was a lot of converted standalone retail, like a former tire store converted to a used car lot in the last few years. I would say there were about 8 used car lots, i think we are down to about 4 now.
Car dealers seem to cluster, there is something about the business model that makes the dealers set up shop close to each other. Anyhow I dont know where the tipping point will be when all the dealers leave because there is no longer a critical mass.

I'm sure a lot of high margin gross profit retail has also been replaced by lower margine retail. What once were electronics stores, boutique furniture etc has been replace with karate studios, and nail salons.

Two things I cant get over is banks and cell phone stores. They are still putting up banks. They are breaking ground for a new one right now. There must be 30 banks on my drive. When do I go into a bank? Once a year to have my kids piggy bank counted up. Everything else can be handled over the internet or atm. Is the bank model to build a nice secure looking edifice where they can make you feel comfortable when the push their over-priced, crumby financial products on you?

More cell phone stores are moving into empty retail. There must be about 6 of these. My two phones I bought at target. Why do we needed dedicated stores to cell these commodity products? When I actually did stop into and AT&T store to ask about plans, i got a know-nothing kid basically parroting the same thing the glossy brochure said. There was no-one in the store either at 6:00 PM drive time

And how about GGP?? How does the second largest mall operator go bk and there are no shock waves? SPG is actually up are they really in much better shape? How is the CDS market going to shake out? How many CDS were writtin on GGP? Who wrote them? AIG? If so that may explain why we have not seen any ripples, the tax payer is there to pay out on the swaps.

Anyone jump in on this. Maybe we can start a thread "driving around my metro area and counting the number of vacanant stores"

I'm in the North Atlanta suburbs. In one of the most affluent counties in the US. But that hasn't stopped the same stuff you describe. The highway I live near is now being massively developed all of a sudden. Gas stations, strip malls, grocery stores, fast food, etc. I've noticed most of the grading was done, a few buildings were started, then things have slowed down almost to a stop in the last two weeks. I can drive the two miles to a major hwy and count probably 30 vacant retail spaces. All brand new. I've noticed most of the used car lots out of business also. Hard to sell cars without that EZ financing I guess.

[Digidiver]

Re: Biggest real estate bankruptcy in U.S. history

Las Vegas braces for commercial foreclosures

http://www.lasvegassun.com/news/2009...-foreclosures/

[raja]

Re: Biggest real estate bankruptcy in U.S. history

Look at Vornado today! Shorted it @ 40. Ouch:mad:

SRS down to 29 today :eek:

[charliebrown]

Re: Biggest real estate bankruptcy in U.S. history

tell me about it, im getting my face ripped off. I thought a buy @ 55 was a good deal. I've been buying on every $5.00 drop and writing otm calls behind me. I have an average cost of 39.00. ouch! my options expire today. lets hope for a rally on monday.

[cjppjc]

Re: Biggest real estate bankruptcy in U.S. history

SRS down to 29 today :eek:

C1ue kept me out of that one. Thank you.

[GRG55]

Re: Biggest real estate bankruptcy in U.S. history

Las Vegas braces for commercial foreclosures

http://www.lasvegassun.com/news/2009...-foreclosures/

Who could have known...

...Brokerages are reporting record office vacancy rates as high as 20 percent to 25 percent, when including subleases. Retail vacancy is approaching 10 percent and in some cases has doubled over the past year. One brokerage reported industrial vacancies have surpassed 11 percent.

Consulting firm Applied Analysis reported a vacancy rate of 65 percent of offices opened in the past year, many in the southwest valley...

...“We are seeing all the indications that lead to default,” said Michael Campbell, managing partner of Colliers International. “A lot of these past loans were predicated on growth and 100 percent occupancy and rent increases.”...

What kind of idiot lends based on 100% occupancy?

So, who you gonna call? Didn't take long to condition just about everyone in the Union, did it? So long America's "market based" economy...:rolleyes:

...That would add to the credit crunch and prompt calls for a greater government bailout of the banking industry...

But then why should we be surprised...

...“I think we are just getting our feet wet from a commercial standpoint,” said Kevin Higgins, senior vice president of Voit Commercial, a brokerage firm. “We are not even at our ankles yet. I think the general public for sure has no idea. People on Wall Street aren’t even talking about it publicly. This isn’t just the local banks’ money. This is big money, Wall Street money that lent on this stuff.”...

LOL. Who could have known? Just as EJ predicted after his Hard Money conference presentation in Vegas in Sept 2007... :cool:

Unfortunately, our [iTulip] prognosis is that Las Vegas becomes a ghost town. First it gets hit with the depression, then an anti-gambling moral movement. State lotteries will be abolished, too.

The Ruins of Vegas

[cmalbatros]

Re: Biggest real estate bankruptcy in U.S. history

To Flintlock, I too live in the north metro (NW) Atlanta area and have seen the same things, who is going to rent all that new commercial property? I have not seen much sign of a recession in my area with Walmart always busy and lots of cars parked outside the bigger chain restaurants. I also work for a company that services power tools and equiment for the countries biggest DIY store and business is down by about 30% from last year and 95% of the equipment is "made in China" which is really depressing. I believe that the banks lending this money are thinking their loans will be backed up by bail out money so they go ahead anyway. Sooner or later we're all going to be on "the Dole" in one form or another.

[flintlock]

Re: Biggest real estate bankruptcy in U.S. history

To Flintlock, I too live in the north metro (NW) Atlanta area and have seen the same things, who is going to rent all that new commercial property? I have not seen much sign of a recession in my area with Walmart always busy and lots of cars parked outside the bigger chain restaurants. I also work for a company that services power tools and equiment for the countries biggest DIY store and business is down by about 30% from last year and 95% of the equipment is "made in China" which is really depressing. I believe that the banks lending this money are thinking their loans will be backed up by bail out money so they go ahead anyway. Sooner or later we're all going to be on "the Dole" in one form or another.

That's what I think too. Banks feel their loans are guaranteed to a certain extent. "Too big to fail" now runs our country.

My next door neighbor was considering opening one of these antique shopping malls. ( bad Idea in these times I think). He said he was being offered retail space in one of these old grocery stores for 30% of the going rate a few years ago.