Real Estate Crisis Hits American Malls

Staff Writer, April 23, 2009

The global credit crisis has begun to hit home for many thousands of American consumers. The most recent failing has been the nation’s malls and shopping centers. Last week, General Growth Properties, the second-largest mall owner in the country was forced to file for bankruptcy. It holds about 200 shopping centers with over 24,000 tenants, which include smaller chains and stores.

Because of the company’s decision to rely on short-term mortgage debt- a practice which is generally frowned upon by public real estate companies- it was unable to refinance the $3.3 billion that it owed in November. It was also expected to owe an additional $6.4 billion, which will mature next year.

A New York research company, Real Capital Analytics, assessed this information and concluded that Japan, Australia and Spain are seeing many of their businesses fail, while in America, the real problems occur at the property level. Many homeowners are able to refinance their mortgages, but this option is not available to all of those individuals who hold properties.

Many high-earning private companies, including malls and shopping centers, are finding it difficult to refinance their expenses, causing them to declare bankruptcy or to close their doors to the public.