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General Growth reaches split decision

Galleria owner will add a 'New GGP' branch to escape bankruptcy.

July 14, 2010|By Bill Kisliuk, bill.kisliuk@latimes.com

The owner of the Glendale Galleria plans to emerge from Chapter 11 bankruptcy as two companies in October, officials announced Monday.

General Growth Properties Inc., which filed for bankruptcy last year, also announced that it had received assurances for as much as $8.5 billion in new capital, which would pay its debts in full.

Out of the two-firm split, one called the "New GGP," would continue to own and operate shopping malls. The other, Spinco, would oversee master-planned and mixed-use communities, as well as mall development projects.

An Aug. 19 U.S. Bankruptcy Court hearing has been scheduled to consider the plan.

"The New GGP will remain the second-largest shopping mall owner and operator in the country," Adam Metz, the Chicago-based firm's chief executive, said in a statement. "With our restructured balance sheet and clear strategic focus, GGP will emerge from Chapter 11 well-positioned to build on our leadership position in the industry."

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The Glendale Galleria will be part of New GGP, David Keating, a General Growth spokesman, said in an e-mail.

"Our Chapter 11 bankruptcy has had no impact on any of our properties, including Glendale Galleria," he said. . "I believe we've had nearly two dozen new stores open there within the past two years. So to say we're impressed with Glendale Galleria would be an understatement."

For properties that are managed but not owned by General Growth, such as the Burbank Town Center, those operations were acquired by real estate services firm Jones Lang LaSalle, although the existing management teams would remain in place, according to the announcement.

Both centers lost a major tenant when Mervyn's ceased operations in 2008.

Retail experts have long said that getting out from underneath the shadow of bankruptcy protection could free up much-needed capital for upgrades at General Growth properties, including the Galleria.

"The Galleria is great for Glendale and has been a huge asset, but a lot of people feel it needs to be upgraded and connected more to the downtown," said Judee Kendall, executive director of the Glendale Chamber of Commerce. "If they can accomplish that through emerging from bankruptcy, that would be great."

While working through bankruptcy, General Growth has shaken off several takeover offers from the nation's largest mall operator, Indianapolis-based Simon Properties Inc.

Keating said Monday's announcement signals "no change" in the company's response to Simon.

Shares in General Growth, which owns or operates 200 malls in the United States, have risen since bottoming out in early 2009. Trading for about $2 a share a year ago and about $12.50 on July 5, General Growth closed at $13.89 Wednesday on the New York Stock Exchange.

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