General Growth bankruptcy may revive property deals

By Ilaina Jonas

NEW YORK (Reuters) - Shopping malls sold in bankruptcy by General Growth Properties may finally set prices in a stalled market and release billions of dollars stockpiled for good buys in U.S. commercial real estate.

On Thursday the No. 2 U.S. mall owner, along with 158 of its properties, filed for Chapter 11 bankruptcy protection, ending months of speculation as to when, not if, that would happen. Company executives said they intend to sell some properties.

"The public companies we think are best positioned to capitalize on General Growth's unraveling are Simon Group Inc, Taubman, Westfield, and Vornado," J.P. Morgan real estate investment trust (REIT) analysts wrote in a research note.

Representatives from Vornado and Westfield declined to comment. A Taubman representative was not immediately available for comment.

Taubman, which is known for its luxury malls, has one of the healthiest balance sheets among REITs, but its high-end retailers have been among the hardest hit in the U.S. recession.

However, the other three have each raised or retained vast amounts of cash, either through equity offerings, debt issuances or retaining earnings.

"I can see the biggest global players like Simon, possibly some of the specialist pension funds like Calpers or Teachers, Westfield and maybe some opportunistic money like Area Property Partners (formerly Apollo Real Estate) taking a look at this portfolio," Bruce Nutman, UK head of retail capital markets at CB Richard Ellis Group Inc.

But Simon Chief Financial Officer Stephen Sterrett reiterated what his boss David Simon has said earlier: that Simon $1.2 billion cash and equity raised plus nearly $1 billion in cash savings from a change in its dividend policy was strictly to ensure Simon will navigate the credit crisis.