Stonestown parent company goes bankrupt
April 24, 2009 10:22 PM
The company that owns Stonestown Galleria has filed for bankruptcy, but employees will not be losing their jobs any time soon, the company said in a recent statement.
General Growth Properties, a company that owns and manages shopping malls, filed for bankruptcy on April 16 due to an inability to pay its $27 billion debt.
"GGP's retail centers, office properties and master planned communities will be open for business as usual as the company restructures our debt," said GGP in a recent statement. "Our properties will continue to operate, our employees will continue to come to work and get paid, and shoppers will continue to shop."
The GGP is the second largest owner of shopping malls in the country and according to their Web site, they own shopping malls in 44 states.
Stonestown Galleria is one of the malls in the Bay Area that is owned by GGP. The other malls include Southland Mall in Hayward, Eastridge in San Jose and NewPark Mall in Newark.
Ken Leonard, a shopping mall expert who advises on leading shopping center development and management firms, said that GGP "will be forced to sell" and if malls are going to sell their properties, it's going to be for a lot cheaper than before the recession.
Jeffrey Wang, a psychology and German major, works at the Starbucks in Stonestown. He didn't even know about the bankruptcy until he was asked for his reaction.
"I'm really shocked," said Wang, who also lives in Parkmerced. "I thought they were building a lot of new stores."
Andrea Maylor, 22, an art history major, said that though she doesn't shop at Stonestown, she is not surprised of the bankruptcy.
"Obviously with the economic crisis going on, people are more concerned with paying for their housing, groceries and other things," Maylor said.
Leonard said that this bankruptcy will mean "absolutely nothing," to other shopping mall owners.
"This whole thing has nothing to do with [GGP] not doing a good job of selling their products, but (it's) because they over financed," Leonard said.
GGP began going into debt when they started merging and buying companies, according to Malachy Kavanagh, staff vice president communications and external relations of the International Council of Shopping Center, the global trade association of the shopping center industry.
In 2004, the company bought Rouse, another shopping malls owner, for $14 billion, all financed through debt, said Kavanagh.
"The credit markets are frozen because of the recession and all the bad debt that banks and financial institutions are holdings," wrote Kavanagh in an e-mail. "So any shopping center owner that has debt coming due this year will have a hard time refinancing their loans."
Leonard said the reason why so many malls are closing is because a lot of them are marginal shopping centers, which shouldn't have been built in the first place.
He also added that Wall Street has put a lot of pressure for companies to further expand their business.
"Wall Street believes that if companies don't increase their sales every year, then they are not a good company," Leonard said.
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