General Growth Properties Pays $48 Million to Settle California Lawsuit
Company hasn't paid mortgages on two Las Vegas properties, lenders waive nonpayment
Last updated Wednesday, January 7, 2009 3:43 PM CST in Business
By Lana F. Flowers
THE MORNING NEWS
SPRINGDALE -- Chicago-based General Growth Properties Inc. is paying $48 million -- a settlement amount that is roughly half of court-ordered damages -- to settle a California lawsuit regarding a mall joint venture.
General Growth Properties owns a stake in and was a partner in developing Pinnacle Hills Promenade, an outdoor mall with about 1 million square feet in western Rogers.
Anchors at the Rogers mall include Dillard's, JCPenney and a Malco theater. Pinnacle Hills Promenade opened in October 2006 and cost about $84 million to construct, according to building permits issued by the city of Rogers.
Caruso Affiliated Holdings LLC sued General Growth Properties about Glendale Galleria, a California mall owned by the General Growth Properties/Homart II joint venture.
General Growth won't be reimbursed for the lawsuit settlement out of its partnership with Homart II and must pay $5.5 million of lawsuit settlement costs to the joint venture, according to a Tuesday filing with the U.S. Securities and Exchange Commission.
General Growth Properties was appealing the lawsuit after a court ordered the company in December 2007 to pay $89.2 million in damages.
The company paid the lawsuit settlement with cash collateral held as security for the appeal, General Growth said in the SEC filing.
Previously recorded expenses equal to the judgment amount and related expenses will be reversed and recorded in the fiscal fourth quarter of 2008 to reflect the settlement.
"Settlement allows us to put this matter behind us and focus on the company's ongoing operations and strategic evaluations," said Adam Metz, General Growth Properties interim chief executive officer.
General Growth is a publicly traded real estate investment trust with ownership interest in or management responsibility for more than 200 regional shopping malls in 44 states.
The firm also owns master planned community developments and commercial office buildings.
General Growth's real estate portfolio includes about 200 million square feet of retail space and 24,000 retail stores nationwide.
However, the company faces headwinds as retail stores go out of business and retail consolidation continues, in the midst of declining retail values nationwide.
General Growth on Dec. 16 filed SEC documents indicating some lending firms were waiving mortgage defaults under previous credit agreements.
"These defaults included, among others, the failure to timely repay the mortgage loans" of about $900 million for the Fashion Show and Palazzo shopping centers in Las Vegas.
Mortgage lenders agreed to waive nonpayments of the mortgages until Feb. 12, the December SEC filing stated.
Shares of General Growth (NYSE: GGP) closed Tuesday at $1.60, up 25 cents, or 18.52 percent, from Monday's close. The volatile share price ranged from a peak of $44.23 to a low of 24 cents in the past 52 weeks.
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