New York City Real estate investment trust General Growth Properties Inc., the second-largest U.S. mall owner, has replaced its chief executive and president with two directors, and puts its Las Vegas property portfolio on the selling block in an effort to raise capital to pay down its debt.
The company replaced CEO John Bucksbaum, son of General Growth founder Matthew Bucksbaum, with Adam Metz. Thomas Nolan has taken over the role of president, formerly held by Robert Michaels. However, John Bucksbaum remains chairman, and Michaels will remain COO.
General Growth also said it will sell its three luxury malls in Las Vegas: Fashion Show Mall, Grand Canal Shoppes and The Palazzo. Goldman Sachs and Eastdil Secured will be jointly responsible for marketing the Las Vegas properties to potential buyers.
The management shuffle comes after the company learned about loans that were made that did not follow company policy. General Growth had recently learned that an affiliate of a Bucksbaum family trust made unsecured loans to Michaels and Bernard Freibaum, former director and chief financial officer, the St. Louis Business Journal reported.
The loan was made “for the purpose of repaying personal margin debt relating to company stock,” according to a company press release. Michaels’ loan, of $10 million, was repaid. But Freibaum, who was let go before General Growth knew of the loan, still owes $80 million on his $90 million loan. General Growth said no company assets were involved in the loans, but that the loans did represent a break with corporate policy.
General Growth has expanded aggressively through acquisitions in recent years. It now owns more than 200 U.S. shopping centers throughout the United States. But its mortgage-financed strategy has left it extremely vulnerable, with few resources to pay debt that is coming due in the middle of the credit crisis.
Fashion Show Mall and The Palazzo are General Growth's most pressing problem, with $900 million on their mortgages coming due Nov. 28, the Wall Street Journal reported. The company is negotiating for an extension with its lenders on that debt, but without an extension or new funding, General Growth doesn't have the cash on hand to pay that debt, according to the report.